Exhibit 10.2

 
PROMISSORY NOTE

 
$750,000
August 13, 2010

 
THIS PROMISSORY NOTE is a duly authorized and validly issued promissory note of
WILLIAM RAST LICENSING, LLC, a California limited liability company, having its
principal place of business at 1212 South Flower Street, Fifth Floor, Los
Angeles, California 90015 (the "Company").
 
FOR VALUE RECEIVED, the Company hereby promises to pay to the order of MOBILITY
SPECIAL SITUATIONS I, LLC, a California limited liability company ("Mobility"),
or its successors and assigns (together with Mobility, the "Holder"), the
principal sum of Seven Hundred Fifty Thousand Dollars ($750,000) (the "Principal
Amount"), together with interest thereon and other amounts payable hereunder at
the times and on the dates set forth herein and in any event no later than the
Maturity Date.
 
Capitalized terms used herein without definition have the meanings set forth on
Exhibit A hereto.  This Note is subject to the following additional provisions:
 
Section 1.              Advance of Funds: Conditions to Advance.
 
(a)           On the Original Issue Date, the Holder shall advance to the
Company by wire of immediately available funds the Principal Amount less any
amounts that may be deducted therefrom by agreement between the Holder and the
Company or otherwise pursuant to the terms of this Note.
 
(b)           Prior to the Holder having the obligation of making the foregoing
advance, the following shall have occurred to the satisfaction of the Holder in
its sole discretion:
 
i.             this Note shall have been duly executed and delivered by the
Company to the Holder;
 
ii.            the Guaranty shall have been duly executed and delivered by the
Guarantors to the Holder;
 
iii.          the Security Agreements shall have been duly executed and
delivered by the Loan Parties to the Holder;
 
iv.           the Holder shall have received a release agreement executed by the
Loan Parties, in form and substance satisfactory to the Holder;
 
v.            the Holder shall have received proper financing statements in form
appropriate for filing under the Uniform Commercial Code of all jurisdictions
that the Holder may deem necessary or desirable in order to perfect the Liens
created under the Security Agreements, covering the collateral described in the
Security Agreements;
 

 
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vi.           the Holder shall have received evidence of the completion of all
other actions, recordings and filings of or with respect to the Security
Agreements that the Holder may deem necessary or desirable in order to perfect
the Liens created thereby;
 
vii.          the Holder shall have received such certificates of resolutions or
other action, incumbency certificates and/or other certificates of responsible
officers of each Loan Party as the Holder may require evidencing the identity,
authority and capacity of each responsible officer thereof authorized to act in
connection with the Transaction Documents to which such Loan Party is a party;
 
viii.         the Holder shall have received such documents and certifications
as the Holder may reasonably require to evidence that each Loan Party is duly
organized or formed, and that each Loan Party is validly existing, in good
standing and qualified to engage in business in each jurisdiction where its
ownership, lease or operation of properties or the conduct of its business
requires such qualification;
 
ix.           the Holder shall have received a certificate of a responsible
officer of each Loan Party (A) attaching true, correct and complete copies of
each licensing agreement to which such Loan Party is a party and certifying that
each such licensing agreement is in full force and effect on the Original Issue
Date,  and (B) either (1) attaching copies of all consents, licenses and
approvals required in connection with the execution, delivery and performance by
such Loan Party and the validity against such Loan Party of the Transaction
Documents to which it is a party, and stating that such consents, licenses and
approvals are in full force and effect, or (2) stating that no such consents,
licenses or approvals are so required; and
 
x.            the Holder shall have received such other assurances,
certificates, documents, consents or opinions as it may reasonably require.
 
(c)           The delivery of the foregoing documents and the advance of funds
by Mobility to the Company shall occur on the Original Issue Date in accordance
with, and subject to, the terms and conditions hereof, at the offices of
Mobility as follows: Mobility Special Situations I, LLC, 15260 Ventura Blvd.,
Sherman Oaks, CA 91403.
 
Section 2.              Payment of Principal and Interest; Security;
Prepayments.
 
(a)           Payment of Principal.  The Principal Amount shall be paid in full
by the Company on the Maturity Date or, if earlier, upon acceleration of this
Note in accordance with the terms hereof.  Any amount of principal repaid or
prepaid hereunder may not be reborrowed.
 
(b)           Payment of Interest.  From the Original Issue Date until paid in
full, interest on the aggregate outstanding Principal Amount shall accrue at the
rate of 8.00% per annum.  Interest shall be payable by the Company to the Holder
monthly in arrears on each Interest Payment Date (commencing on September 1,
2010) and on the Maturity
 

 
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Date.  Upon and after the occurrence of an Event of Default (as defined below),
the Principal Amount, unpaid interest and other unpaid amounts under this Note
shall, at the election of the Holder in its sole and absolute discretion or
automatically and without further action of the Holder if a Bankruptcy Event has
occurred, bear interest at the lesser of 14.00% per annum or the Maximum Rate
(as defined below).  All accrued interest that is not paid when due (i) shall be
due and payable by the Company on demand (or automatically and without further
action of the Holder if a Bankruptcy Event has occurred), (ii) shall be
capitalized into the Principal Amount on a daily basis and (iii) shall bear
interest at the same interest rate per annum as the Principal Amount.
 
(c)           Interest Calculations.  Interest shall be calculated on the basis
of a 360-day year and shall accrue daily commencing on the Original Issue Date
until payment in full of the Principal Amount (together with all accrued and
unpaid interest and other amounts which may become due hereunder) has been made.
 
(d)           Voluntary Prepayment.  The Company may prepay all or any portion
of the Principal Amount, without penalty or premium, upon at least ten days'
prior written notice to the Holder (the  "Prepayment Amount").  Any prepayment
of the Principal Amount shall be accompanied by all accrued and unpaid interest
on the amount prepaid.
 
(e)           Mandatory Prepayments.
 
i.           If the Company Disposes of any property or asset (other than any
Disposition of inventory, or other assets in the ordinary course of business)
which results in the realization by the Company of Net Cash Proceeds, the
Company shall prepay the Principal Amount by an amount equal to 100% of such Net
Cash Proceeds immediately upon receipt thereof by the Company.
 
ii.          If the Company receives any Extraordinary Receipt, the Company
shall prepay the Principal Amount by an amount equal to 100% of all Net Cash
Proceeds received therefrom immediately upon receipt thereof by the Company.
 
iii.         The Company shall prepay the Principal Amount by an amount equal to
100% of the Gross Proceeds received by the Loan Parties, or any one or more of
them, under or with respect to any and all licensing agreements (including,
without limitation, any license agreement entered into with Viva Optique, Inc.),
whether now existing or hereafter arising, immediately upon receipt of such
Gross Proceeds by the applicable Loan Party.
 
(f)           Application of Payments.  Notwithstanding anything to the contrary
contained herein or in any other Transaction Document, all payments and
prepayments made by the Company shall be applied to principal, interest, fees
and other charges due the Holder hereunder in such order of priority as the
Holder shall elect.
 
(g)           Security.  The obligations of the Company under this Note are
secured by the collateral identified in the Borrower Security Agreement and
guarantied by the Guarantors under the Guaranty (which is secured by the
collateral identified in the Guarantor Security Agreement).
 

 
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(h)           Use of Proceeds.  The proceeds of this Note shall be used by the
Loan Parties for working capital and for general corporate purposes of the
Company.  The proceeds of this Note shall not be used to make or pay any
dividend or distribution or to redeem any common stock or securities
convertible, exercisable or exchangeable into common stock.
 
Section 3.              Representations and Warranties.  The Company hereby
represents and warrants to the Holder as follows:
 
(a)           The Company has been duly organized and is validly existing under
the laws of its jurisdiction of organization, is in good standing or duly
qualified as a limited liability company in all jurisdictions where the conduct
of its business so requires, and has all requisite power and authority to
execute, deliver and perform its obligations under this Note and all other
Transaction Documents to which it is a party.  The Company does not directly or
indirectly own or have any investment in the capital stock of or any proprietary
interest in any Person, except as set forth in Schedule 2 to this Note.  The
Company does not have any subsidiaries except as set forth in Schedule 2 of this
Note.  Each of this Note and all other Transaction Documents have been duly
authorized, executed and delivered by the Company and constitute its legal,
valid and binding obligation, enforceable against the Company in accordance with
the terms hereof and thereof.  The execution, delivery and performance by the
Company of this Note and all other Transaction Documents to which it is a party,
and the incurrence by the Company of the obligations hereunder and thereunder,
do not contravene or conflict with the Company's articles of organization,
operating agreement or any law applicable to the Company or other instrument
binding on or otherwise affecting the Company or give rise to any lien, security
interest or other charge or encumbrance (other than in favor of the Holder) upon
any of the Company's properties.  No consent or approval of or notice to or
filing with any governmental authority or other third party is or will be
required as a condition to the validity or enforceability of this Note or the
other Transaction Documents, other than such consents which have been obtained
and are in full force and effect.
 
(b)           The Company has good and marketable title to the assets disclosed
in its most recent Restated Financial Reports (as defined below).  The Company
is in compliance in all material respects with all laws and regulatory
requirements to which it or its properties are subject.  Except as set forth in
the Restated Financial Reports, there is no litigation pending, or, to the
knowledge of the Company, threatened against the Company that could reasonably
be expected to have a Material Adverse Effect.  The Company's principal place of
business and registered office are the addresses set forth at the beginning of
this Note.  The Company has paid all federal, foreign, state and local taxes
required to be paid by it on or prior to the date they were due.  All documents,
instruments and other written material heretofore or hereafter furnished to the
Holder pursuant to the terms of any Transaction Document contain no
misstatements of a material fact and do not fail to disclose any material fact
and the Company has not failed to disclose to the Holder any material
information.
 

 
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(c)           The Company has delivered to the Holder true, correct and complete
copies of its audited financial statements for the fiscal year ended
December 31, 2009 (as restated), and its unaudited financial statements for the
fiscal quarter ended June 30, 2010 (as restated) (collectively, the "Restated
Financial Reports").  None of the Restated Financial Reports, as of their
restatement date, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.  The Restated Financial Reports comply in all
material respects with applicable accounting requirements as in effect at the
date of such Restated Financial Reports.  Such Restated Financial Reports have
been prepared in accordance with GAAP (except as may be otherwise specified
therein and except that unaudited financial statements may not contain all
footnotes required by GAAP) and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
 
(d)           Since December 31, 2009 and except as set forth in the Restated
Financial Reports, (i) there has been no event, occurrence or development that
has had or that could reasonably be expected to result in a Material Adverse
Effect, (ii) the Company has not incurred any material liabilities (contingent
or otherwise) other than (A) trade payables and accrued expenses incurred in the
ordinary course of business consistent with past practice, (B) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
and (C) $10,000 of unsecured indebtedness in the aggregate, (iii) the Company
has not altered its method of accounting, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock and (v) the Company has not issued any equity securities to
any officer, director or affiliate.  The Restated Financial Reports set forth as
of the date hereof all material outstanding secured and unsecured Indebtedness
of the Company, or for which the Company has commitments, other than $10,000 of
unsecured indebtedness in the aggregate incurred subsequent thereto.  The
Company is not in default with respect to any Indebtedness.
 
(e)           Except as disclosed in the Restated Financial Reports, the Company
is not a party to any written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement, a copy of which would be required
to be filed with the Securities and Exchange Commission (collectively, "Material
Agreements") if the Company were registering securities under the Securities Act
of 1933, as amended (the "Securities Act").  The Company has, in all material
respects, performed all the obligations required to be performed by it to date
under the foregoing agreements, has received no notice of default and is not in
default under any other Material Agreement now in effect, the result of which
could cause a Material Adverse Effect.
 
(f)           Except as disclosed in the Restated Financial Reports, there are
no material loans, leases, agreements, contracts, royalty agreements, management
contracts or arrangements or other continuing transactions between (a) the
Company or any of its customers or suppliers on the one hand, and (b) on the
other hand, any executive officer,
 

 
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5% or greater stockholder (other than another Loan Party), director or employee
of the Company or, to the knowledge of the Company, any member of the immediate
family of such persons or any corporation or other entity controlled by such
persons or their immediate family members.
 
(g)           The Company is not, and is not an affiliate of, and immediately
after the transactions contemplated hereby, will not be an affiliate of, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
 
(h)           The Company has not received notice of a default and is not in
default under, or with respect to, any contractual obligation, nor does any
condition exist that with notice or lapse of time or both would constitute a
default thereunder.
 
(i)           The Company, by reason of its own business and financial
experience or that of its professional advisers, has the capacity to protect its
own interests in connection with this Note, the Transaction Documents and the
transactions contemplated hereunder and thereunder.
 
Section 4.             Covenants.  As long as any portion of this Note remains
outstanding or any obligation under any Transaction Document remains
outstanding, the Company agrees as follows:
 
(a)           other than Permitted Liens, the Company shall not enter into,
create, incur, assume or suffer to exist any Lien on or with respect to any of
its assets now owned or hereafter acquired or any interest therein or any income
or profits therefrom.  For the avoidance of doubt, the Company shall not enter
into, create, incur, assume or suffer to exist any Lien, other than the Liens in
favor of Holder, on any  license agreement (including, without limitation, any
license agreement entered into with Viva Optique, Inc.) or on the proceeds or
product of any of the foregoing (including, without limitation, any account
receivable arising therefrom or related thereto);
 
(b)           the Company shall not amend its organizational documents,
including without limitation, its articles of organization or operating
agreement, in any manner that adversely affects any rights of the Holder;
 
(c)           the Company shall comply with its obligations under this Note and
the other Transaction Documents;
 
(d)           the Company shall comply with law and duly observe and conform in
all material respects to all valid requirements of governmental authorities
relating to the conduct of its business or to its properties or assets;
 
(e)           the Company shall not declare or pay any dividends or make any
distributions to any holder(s) of shares, membership interests or other equity
security of the Company;
 
(f)           the Company shall not (i) merge or consolidate with any Person or
sell all its assets or any substantial portion thereof, (ii) Dispose of any
property or assets (other
 

 
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than inventory in the ordinary course of business for fair value), (iii) in any
way or manner alter its organizational structure or effect a change of entity,
(iv) purchase or otherwise acquire any equity interests in any other Person or
all or substantially all of the property of any other Person; or (v) make any
investments other than in the form of cash equivalents;
 
(g)           the Company shall promptly pay and discharge, or cause to be paid
and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company except for such failures to pay that, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Material Adverse Effect; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any Lien
which may have attached as security therefor;
 
(h)           the Company shall maintain in full force and effect its limited
liability company existence, rights and franchises and all licenses and other
rights to use property owned or possessed by it and reasonably deemed to be
necessary to the conduct of its business;
 
(i)           the Company shall conduct its businesses in a manner so that it
will not become subject to the Investment Company Act of 1940, as amended;
 
(j)           the Company shall not make any payment on any indebtedness owed to
any member, manager, officers, directors or affiliates of the Company, except
that the Company may make regularly scheduled payments of principal and interest
with respect to such indebtedness (on the existing terms of such indebtedness as
of the Original Issue Date without further amendment or acceleration), provided
no Event of Default has occurred and is continuing or would result therefrom;
 
(k)           within 30 days of the Original Issue Date, the Company shall cause
the landlord under the lease of the premises comprising its principal place of
business to execute a collateral access agreement, in form and substance
satisfactory to the Holder in its sole and absolute discretion, subordinating
such landlord's lien on the personal property assets of the Company located on
such premises and granting the Holder reasonable access to the premises;
 
(l)           the Company shall assure that the properties of the Loan Parties
are insured with financially sound and reputable insurance companies not
affiliates of the Loan Parties, in such amounts, with such deductibles and
covering such risks as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where the Loan Parties
operate.  Promptly, but in any event not later than 30 days after Holder's
request for the same, the Company shall deliver to Holder evidence that all
insurance required to be maintained pursuant to the Transaction
 

 
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Documents has been obtained and is in effect, together with certificates of
insurance, naming Holder as an additional insured or loss payee, as the case may
be, under all insurance policies maintained with respect to the assets and
properties of the Loan Parties that constitute collateral;
 
(m)          the Company shall pay, no later than September 1, 2010, all
out-of-pocket expenses incurred by the Holder (including the fees, charges and
disbursements of counsel for the Holder), in connection with the preparation,
negotiation, execution, and delivery of this Note and the other Transaction
Documents;
 
(n)           promptly but in any event within 5 Business Days after the
Original Issue Date, the Company shall cause the delivery to the Holder of the
certificates representing the pledged equity interests referred to in the
Borrower Security Agreement and the Guarantor Security Agreement accompanied by
undated stock powers executed in blank;
 
(o)           the  Company shall deliver to the Holder:
 
i.           as soon as available or prepared, all balance sheets and all
statements of income or operations, changes in shareholders' equity, and cash
flows prepared by the Company or its subsidiaries or management of the Company
and its subsidiaries, and all such financial statements shall be certified by
the chief executive officer, chief financial officer, treasurer or controller or
similar officer of the Company as fairly presenting the financial condition,
results of operations, shareholders' equity and cash flows of the Company and
its subsidiaries in accordance with GAAP, subject only to normal year-end audit
adjustments and the absence of footnotes;
 
ii.          promptly upon the Holder's request, a detailed aging of the
Company's receivables and payables by invoice and/or a summary aging by account
debtor or vendor, as specified by the Holder;
 
iii.         promptly upon the Holder's request, statements from the applicable
bank or depository with respect to each deposit, securities, or other brokerage
account owned or held by the Company;
 
iv.          promptly upon the Holder's request, copies of all minutes, consents
and other materials (including, without limitation, any detailed audit reports,
management letters or recommendations) submitted to the board of directors or
similar governing body of any Loan Party in connection with any meeting of such
board of directors or similar governing body;
 
v.           promptly upon the Holder's request, such other books, records,
financial statements, tax returns, investment statements, lists of property and
accounts, budgets, forecasts or reports as to the Loan Parties as the Holder may
request;
 
vi.          immediately upon the occurrence of the same, notice of the
occurrence of any Event of Default;
 

 
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vii.        immediately upon the occurrence of the same or receipt of the same,
notice of any event, transaction or receipts that give rise to a mandatory
prepayment obligation under this Note; and
 
viii.       immediately upon knowledge of the same, notice of any matter that
has resulted or could reasonably be expected to result in a Material Adverse
Effect.
 
Section 5.                      Events of Default.
 
(a)           "Event of Default" means, wherever used herein, any of the
following events (whatever the reason for such event and whether such event
shall be voluntary or involuntary or effected by operation of law or pursuant to
any judgment, decree or order of any court, or any order, rule or, regulation of
any administrative or governmental body):
 
i.           any default in the payment of (A) the principal amount of this Note
or (B) interest or other amounts owing to the Holder on this Note, as and when
the same shall become due and payable (whether on the Maturity Date or by
acceleration or otherwise);
 
ii.          any Loan Party shall fail to observe or perform any other covenant
or agreement contained in this Note which failure is not cured, if possible to
cure, within the earlier to occur of (A) three days after notice of such failure
sent by the Holder and (B) five days after the Loan Party has become or should
have become aware of such failure;
 
iii.         a default or event of default (subject to any grace or cure period
provided in the applicable agreement, document or instrument) shall occur under
any of the Transaction Documents (other than this Note), or the failure or
invalidity of any of the Transaction Documents;
 
iv.          any representation or warranty made in this Note, any other
Transaction Document, any written statement pursuant hereto or thereto or any
other report, financial statement or certificate made or delivered to the Holder
shall be untrue or incorrect in any respect as of the date when made or deemed
made;
 
v.           any Loan Party shall be subject to a Bankruptcy Event;
 
vi.          any Loan Party (A) fails to make any payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand, or otherwise) in
respect of any Indebtedness having an aggregate principal amount (including
undrawn committed or available amounts and including amounts owing to all
creditors under any combined or syndicated credit arrangement) of more than
$25,000, or (B) fails to observe or perform any other agreement or condition
relating to any such Indebtedness or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event occurs, the effect
of
 

 
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which default or other event is to cause, or to permit the holder or holders of
such Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause, with the giving of notice if required, such Indebtedness to be demanded
or to become due or to be repurchased, prepaid, defeased or redeemed
(automatically or otherwise), or an offer to repurchase, prepay, defease or
redeem such Indebtedness to be made, prior to its stated maturity;
 
vii.         any monetary judgment, writ or similar final process shall be
entered or filed against any Loan Party or any of its property or other assets
for more than $10,000, and such judgment, writ or similar final process shall
remain unvacated, unbonded or unstayed for a period of 30 calendar days;
 
viii.       any Material Adverse Effect shall have occurred;
 
ix.         any Change of Control occurs;
 
x.           any Loan Party shall fail to observe or perform any covenant or
agreement contained in the APA Documents; or
 
xi.         any material license agreement (whether now existing or hereafter
arising, including, without limitation, any license agreement entered into with
Viva Optique, Inc.) is terminated, cancelled or breached by any party thereto.
 
(b)           Remedies Upon Event of Default.  If any Event of Default occurs,
the entire unpaid principal amount of this Note plus accrued and unpaid interest
and other amounts owing in respect thereof through the date of acceleration,
shall become, at the Holder's election in its sole and absolute discretion,
immediately due and payable upon written notice to the Company, except that,
with respect to a default under Section 5(a)(v) above, no such notice shall be
required and such acceleration shall be automatic and immediate.  In connection
with such acceleration described herein, the Holder need not provide, and the
Company hereby waives, any presentment, demand or protest of any kind, and the
Holder may immediately and without expiration of any grace period enforce any
and all of its rights and remedies hereunder and all other remedies available to
it under applicable law and the Transaction Documents.  Such acceleration may be
rescinded and annulled by the Holder at any time prior to payment hereunder and
the Holder shall have all rights as the holder of the Note until such time, if
any, as the Holder receives full payment pursuant to this Section 5(b).  No such
rescission or annulment shall affect any subsequent Event of Default or impair
any right consequent thereon.
 
Section 6.              Miscellaneous.
 
(a)           Notices.  Any and all notices or other communications or
deliveries to be provided by the Holder hereunder shall be delivered to the
address of the Company's principal place of business set forth above.  Notices
to the Holder shall be delivered to the address set forth in Section 1(c).
 
(b)           Absolute Obligation.  No provision of this Note shall alter or
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal of,
 

 
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and accrued interest, as applicable, on this Note at the time, place, and rate
herein prescribed.  This Note is a direct, unconditional and secured debt
obligation of the Company.  All payments to be made by the Company hereunder and
under the other Transaction Documents shall be made, in lawful money of the
United States of America, and without condition or deduction for any
counterclaim, defense, recoupment or setoff.
 
(c)           Lost or Mutilated Note.  If this Note shall be mutilated, lost,
stolen or destroyed, the Company shall execute and deliver, in exchange and
substitution for and upon cancellation of a mutilated Note, or in lieu of or in
substitution for a lost, stolen or destroyed Note, a new Note for the principal
amount of this Note so mutilated, lost, stolen or destroyed.
 
(d)           Governing Law.  All questions concerning the construction,
validity, enforcement and interpretation of this Note shall be governed by and
construed and enforced in accordance with the internal laws of the State of
California, without regard to the principles of conflict of laws thereof.
 
(e)           SUBMISSION TO JURISDICTION.  EACH LOAN PARTY  IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA SITTING IN LOS ANGELES
COUNTY AND OF THE UNITED STATES DISTRICT COURT SITTING IN LOS ANGELES COUNTY,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS NOTE OR ANY OTHER TRANSACTION DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH LOAN PARTY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH CALIFORNIA STATE COURT OR, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT.  EACH LOAN
PARTY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW.  NOTHING IN THIS NOTE OR IN ANY OTHER
TRANSACTION DOCUMENT SHALL AFFECT ANY RIGHT THAT THE HOLDER MAY OTHERWISE HAVE
TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS NOTE OR ANY OTHER TRANSACTION
DOCUMENT AGAINST ANY LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.
 
(f)           WAIVER OF VENUE.  EACH LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OTHER TRANSACTION DOCUMENT IN ANY
COURT REFERRED TO IN PARAGRAPH (E) OF THIS SECTION.  EACH LOAN PARTY HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
DEFENSE
 

 
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OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT.
 
(g)           SERVICE OF PROCESS.  EACH LOAN PARTY IRREVOCABLY CONSENTS TO
SERVICE OF PROCESS BY MAILING OF A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL
OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO THE ADDRESS FOR NOTICES SET
FORTH IN SECTION 6(A) OF THIS NOTE.  NOTHING IN THIS NOTE WILL AFFECT THE RIGHT
OF ANY LOAN PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE
LAW.
 
(h)           WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS NOTE OR ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS NOTE AND THE OTHER TRANSACTION DOCUMENTS BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
 
(i)           Expenses.  If the Company or the Holder shall commence an action
or proceeding to enforce any provisions of this Note, then the prevailing party
in such action or proceeding shall be reimbursed by the other party for its
reasonable attorneys' fees and other reasonable costs and expenses incurred with
the investigation, preparation and prosecution of such action or proceeding.
 
(j)           Judicial Reference.  If any action or proceeding is filed in a
court of the State of California by or against any party hereto in connection
with any of the transactions contemplated by this Note or any other Transaction
Document, (a) the court shall, and is hereby directed to, make a general
reference pursuant to California Code of Civil Procedure Section 638 to a
referee (who shall be a single active or retired judge) to hear and determine
all of the issues in such action or proceeding (whether of fact or of law) and
to report a statement of decision, provided that at the option of any party to
such proceeding, any such issues pertaining to a "provisional remedy" as defined
in California Code of Civil Procedure Section 1281.8 shall be heard and
determined by the court, and (b) without limiting the generality of Sections
6(k) and 6(q) below, the Company shall be solely responsible to pay all fees and
expenses of any referee appointed in such action or proceeding.
 

 
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(k)           Costs of Preparation and Collection.  The Company agrees to pay
all costs and expenses, including the fees and expenses of any attorneys,
accountants and other experts retained by the Holder, which are expended or
incurred by the Holder in connection with (a) the preparation, negotiation,
execution and delivery of this Note and the other Transaction Documents; (b) the
enforcement of this Note or the collection of any sums due hereunder, whether or
not suit is commenced; (c) any actions for declaratory relief in any way related
to this Note; (d) the protection or preservation of any rights of the Holder
under this Note; (e) any actions taken by the Holder in negotiating any
amendment, waiver, consent or release of or under this Note; (f) any actions
taken in reviewing the Loan Parties' financial affairs if an Event of Default
has occurred; (g) the Holder's participation in any refinancing, restructuring,
bankruptcy or insolvency proceeding involving any Loan Party; (h) verifying,
maintaining, or perfecting any security interest or other lien granted to the
Holder in any collateral; (i) any effort by the Holder to protect, assemble,
complete, collect, sell, liquidate or otherwise dispose of any collateral,
including in connection with any action or proceeding; or (j) any refinancing or
restructuring of this Note, including, without limitation, any restructuring in
the nature of a "work out" or in any insolvency or bankruptcy proceeding.  All
sums due to the Holder pursuant to this clause (k) shall be due and payable
immediately without demand and shall bear interest at the same rate as then
applicable to the Principal Amount.
 
(l)           Waiver.  Any waiver by the Holder of a breach of any provision of
this Note shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Note.  The failure of the Holder to insist upon strict adherence to any term of
this Note on one or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Note.  Any waiver by the Holder must be in writing.
 
(m)          Severability.  If any provision of this Note is invalid, illegal or
unenforceable, the balance of this Note shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
 
(n)           Next Business Day.  Whenever any payment or other obligation
hereunder shall be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day.
 
(o)           Headings.  The headings contained herein are for convenience only,
do not constitute a part of this Note and shall not be deemed to limit or affect
any of the provisions hereof.
 
(p)           Usury.  To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by the
Holder in order to enforce any right or remedy under any Transaction Document;
provided that, notwithstanding any provision to the contrary
 

 
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contained in any Transaction Document, it is expressly agreed and provided that
the total liability of the Company under the Transaction Documents for payments
in the nature of interest shall not exceed the maximum lawful rate authorized
under applicable law (taking into account any exemptions or exceptions under
applicable law) (the "Maximum Rate"), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate.  It
is agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate applicable to
the Transaction Documents from the effective date forward, unless such
application is precluded by applicable law.  If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to the
Holder with respect to indebtedness evidenced by the Transaction Documents, such
excess shall be applied by the Holder to the unpaid principal balance of any
such indebtedness or be refunded to the Company, the manner of handling such
excess to be at the Holder's election.
 
(q)           Indemnification.  The Company will indemnify and hold the Holder
harmless from any loss, liability, damages, judgments, and costs of any kind
relating to or arising directly or indirectly out of (a) this Note or any other
Transaction Document, (b) any credit extended or committed by the Holder to the
Company hereunder, and (c) any litigation or proceeding related to or arising
out of this Note, any other Transaction Document, or any such credit.  This
indemnity includes but is not limited to reasonable attorneys' fees.  This
indemnity extends to the Holder, its affiliates, partners, directors, officers,
employees, agents, successors, attorneys, and assigns.  This indemnity will
survive repayment of the Company's obligations to the Holder.  All sums due to
the Holder under this clause (q) shall be due and payable immediately without
demand and shall bear interest at the same rate as then applicable to the
Principal Amount.
 
(r)           Successors and Assigns; Assignments and Participations.
 
i.           This Note shall be binding upon and inure to the benefit of the
Company and the Holder and their respective successors and assigns, except that
the Company may not assign or transfer any of its rights or obligations under
this Note or any other Transaction Document without the prior written consent of
the Holder.
 
ii.          The Holder may, at any time and from time to time without the
consent of the Company, assign or transfer to one or more Persons, or sell
participations in, all or any portion of this Note.  The term "Holder" as used
herein shall initially mean Mobility and shall also include any transferee of
this Note.
 
 
 
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
 

 
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by its
duly authorized officer as of the date first above indicated.
 

 
WILLIAM RAST LICENSING, LLC,
a California limited liability company
 
 
 
By:                                                                 
Name:
Title:
 
 
ACKNOWLEDGED AND ACCEPTED:
 
MOBILITY SPECIAL SITUATIONS I, LLC,
a California limited liability company
 
By:           ___________________________
Name:      ___________________________
Title:        ___________________________
 

 
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EXHIBIT A
 
(Certain Defined Terms)
 
"APA Documents" means that certain Asset Purchase Agreement of even date
herewith entered into by and among ECA Holdings II, LLC, New Media Retail
Concepts, LLC, People's Liberation, Inc., and Versatile Entertainment, Inc., and
each other agreement, instrument or document executed by any of the Loan Parties
(or any one or more of them) in connection with such Asset Purchase Agreement,
in each case as amended, restated, supplemented, extended or otherwise modified
from time to time.
 
"Bankruptcy Event" means any of the following events: (a) any Loan Party
commences a case or other proceeding under any Debtor Relief Law; (b) there is
commenced against any Loan Party any case or proceeding under any Debtor Relief
Law that is not dismissed within 30 calendar days after commencement; (c) any
Loan Party is adjudicated insolvent or bankrupt or any order of relief or other
order approving any such case or proceeding is entered; (d) any Loan Party
suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 30 calendar days
after such appointment; (e) any Loan Party makes a general assignment for the
benefit of creditors; (f) any Loan Party calls a meeting of its creditors with a
view to arranging a composition, adjustment or restructuring of its debts; or
(g) any Loan Party, by any act or failure to act, expressly indicates its
consent to, approval of or acquiescence in any of the foregoing or takes any
corporate, limited liability company or other action for the purpose of
effecting any of the foregoing.
 
"Borrower Security Agreement" means the Borrower Security Agreement of even date
herewith made by the Company in favor of the Holder, as amended, restated,
supplemented, extended or otherwise modified from time to time.
 
"Business Day" means any day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close under the laws of, or are in fact
closed in, California.
 
"Change of Control" means an event or series of events by which:
 
(a) Colin Dyne ceases to be (i) the Chief Executive Officer of People's
Liberation, Inc., (ii) the sole manager of William Rast Licensing, LLC, or (iii)
the sole manager of  William Rast Sourcing, LLC;
 
(b) Darryn Barber ceases (i) to be the Chief Financial Officer and President of
People's Liberation, Inc. or (ii) to have the same title and position with the
Company, William Rast Sourcing, LLC, and William Rast Retail, LLC, as he
currently holds on the Original Issue Date;
 
(c)  People's Liberation, Inc., ceases to directly own and control, legally and
beneficially, all of the equity interests in Versatile Entertainment, Inc., and
all of the equity interests in Bella Rose, LLC;
 

 
 

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(d)  William Rast Sourcing, LLC ceases to directly own and control, legally and
beneficially, all of the equity interests in William Rast Retail, LLC; or
 
(e)  any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, but excluding any employee benefit plan
of such person or its subsidiaries, and any person or entity acting in its
capacity as trustee, agent or other fiduciary or administrator of any such plan)
other than Colin Dyne or Gerard Guez becomes the "beneficial owner" (as defined
in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that
a person or group shall be deemed to have "beneficial ownership" of all
securities that such person or group has the right to acquire, whether such
right is exercisable immediately or only after the passage of time (such right,
an "option right")), directly or indirectly, of 25% or more of the equity
securities of People's Liberation, Inc., entitled to vote for members of the
board of directors or equivalent governing body of People's Liberation, Inc., on
a fully-diluted basis (and taking into account all such securities that such
"person" or "group" has the right to acquire pursuant to any option right).
 
"Company" has the meaning set forth in the first paragraph of this Note.
 
"Debtor Relief Laws" means the Bankruptcy Code of the United States, and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.
 
"Disposition" or "Dispose" means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction) of any property by
any Person (or the granting of any option or other right to do any of the
foregoing), including any sale, assignment, transfer or other disposal, with or
without recourse, of any notes or accounts receivable or any rights and claims
associated therewith.
 
"Extraordinary Receipt" means any cash received by or paid to or for the account
of any Person not in the ordinary course of business, including tax refunds,
pension plan reversions, proceeds of insurance (other than proceeds of business
interruption insurance to the extent such proceeds constitute compensation for
lost earnings), condemnation awards (and payments in lieu thereof), indemnity
payments and any purchase price adjustments.
 
"GAAP" means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles as may be approved by a significant segment of the accounting
profession in the United States, that are applicable to the circumstances as of
the date of determination, consistently applied.
 
"Gross Proceeds" means, with respect to any agreement, transaction, litigation
or settlement, the sum of cash and cash equivalents received in connection with
such
 

 
 

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agreement, transaction, litigation or settlement (including any cash or cash
equivalents received by way of deferred payment pursuant to, or by monetization
of, a note receivable or otherwise).
 
"Guarantor Security Agreement" means the Guarantor Security Agreement of even
date herewith made by the Guarantors in favor of the Holder, as amended,
restated, supplemented, extended or otherwise modified from time to time.
 
"Guarantors" means People's Liberation, Inc., a Delaware corporation, Versatile
Entertainment, Inc., a California corporation, Bella Rose, LLC, a California
limited liability company, William Rast Sourcing, LLC, a California limited
liability company, and William Rast Retail, LLC,  a California limited liability
company, and their respective successors and assigns.
 
"Guaranty" means the Guaranty of even date herewith made by the Guarantors for
the benefit of the Holder, as amended, restated, supplemented, extended or
otherwise modified from time to time.
 
"Indebtedness" means, with respect to any Person at any particular time, all of
the following, whether or not included as indebtedness or liabilities in
accordance with GAAP:  (a) all obligations of such Person for borrowed money;
(b) all obligations of such Person evidenced by bonds, debentures, notes, loan
agreements or other similar instruments and all reimbursement or other
obligations of such Person in respect of letters of credit, bankers acceptances,
current swap agreements, interest rate hedging agreements, interest rate swaps,
or other financial products; (c) all capital lease obligations of such Person;
(d) all obligations or liabilities secured by a lien or encumbrance on any asset
of such Person, irrespective of whether such obligation or liability is assumed
by such Person; (e) all obligations of such Person for the deferred purchase
price of assets; (f) all synthetic leases of such Person; and (g) any obligation
of such Person guaranteeing or intended to guarantee (whether directly or
indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any
of the foregoing obligations of any other Person; provided, however,
Indebtedness shall not include (x) usual and customary trade debt incurred in
the ordinary course of business and (y) endorsements for collection or deposit
in the ordinary course of business.
 
"Interest Payment Date" means the first Business Day of each calendar month.
 
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, or preference,
priority or other security interest or preferential arrangement in the nature of
a security interest of any kind or nature whatsoever (including any conditional
sale or other title retention agreement, any easement, right of way or other
encumbrance on title to real property, and any financing lease having
substantially the same economic effect as any of the foregoing).
 
"Loan Parties" means the Company and the Guarantors.
 

 
 

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"Material Adverse Effect" means (a) a material adverse change in, or a material
adverse effect upon, the operations, business, properties, liabilities (actual
or contingent), condition (financial or otherwise) or prospects of any Loan
Party or the Loan Parties taken as a whole; (b) a material impairment of the
rights and remedies of the Holder under any Transaction Document, or of the
ability of any Loan Party to perform its obligations under any Transaction
Document to which it is a party; or (c) a material adverse effect upon the
legality, validity, binding effect or enforceability against any Loan Party of
any Transaction Document to which it is a party.
 
"Maturity Date" means February 13, 2012.
 
"Net Cash Proceeds" means, with respect to any Disposition by any Loan Party, or
any Extraordinary Receipt received or paid to the account of any Loan Party, the
excess, if any, of (i) the sum of cash and cash equivalents received in
connection with such transaction (including any cash or cash equivalents
received by way of deferred payment pursuant to, or by monetization of, a note
receivable or otherwise) over (ii) the sum of (A) the principal amount of any
Indebtedness that is secured by the applicable asset and that is required to be
repaid in connection with such transaction (other than Indebtedness under the
Transaction Documents), and (B) the reasonable and customary out-of-pocket
expenses incurred by such Loan Party in connection with such transaction.
 
"Note" means this Promissory Note, as amended, restated, supplemented, extended
or otherwise modified from time to time.
 
"Original Issue Date" means August 13, 2010, regardless of any transfers of this
Note and regardless of the number of instruments which may be issued to evidence
this Note.
 
"Permitted Lien" means, with respect to any Loan Party, the individual and
collective reference to the following: (a) Liens for taxes, assessments and
other governmental charges or levies not yet due or Liens for taxes, assessments
and other governmental charges or levies being contested in good faith and by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP; (b) Liens imposed by law which were incurred in the
ordinary course of such Loan Party's business (such as carriers', warehousemen's
and mechanics' Liens, statutory landlords' Liens, and other similar Liens), and
which (x) do not individually or in the aggregate materially detract from the
value of such Loan Party's property or assets or materially impair the use
thereof in the operation of such Loan Party's business or (y) are being
contested in good faith by appropriate proceedings, which proceedings have the
effect of preventing for the foreseeable future the forfeiture or sale of the
property or asset subject to such Lien, (c) Liens granted to the Holder pursuant
to the Security Agreements, and (d) existing Liens set forth on Schedule 1
attached hereto (but not any refinancing or replacement Liens related
thereto).  For the avoidance of doubt, other than the Liens expressly set forth
on Schedule 1 with respect to Indebtedness outstanding on the Original Issue
Date, the Lien of any factor or any financier shall not be a "Permitted Lien"
unless otherwise consented to in writing by the Holder.
 

 
 

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"Person" means any individual, firm, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, governmental authority or other entity of any kind.
 
"Security Agreements" means the Borrower Security Agreement and the Guarantor
Security Agreement.
 
"Transaction Documents" means this Note, the Guaranty, the Security Agreements,
each other agreement, instrument or document executed by the Loan Parties (or
any one or more of them) that creates or purports to create or perfects a Lien
in favor of the Holder, and each other instrument, document or agreement now or
hereafter executed by any Loan Party in favor of the Holder in connection with
this Note, in each case as amended, restated, supplemented, extended or
otherwise modified from time to time.
 

 
 

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