Unassociated Document


    Dated:
      February 26, 2007

     

    
      	No. SB-2	 	
              $75,000

            


    

     

     

    .

     

    Promissory
      Note 

     

    Due
      Date: June 26, 2007 

     

    This
      Promissory Note (the “Note”)
      is
      issued by The Apparel Agent, LLC, a
      California limited liability company (the “Obligor”),
      to
      Sub-Urban Brands, Inc. (the “Holder”).
      Capitalized terms not otherwise defined herein shall have the meaning ascribed
      thereto in the letter agreement, dated October 17, 2006 providing for the
      acquisition of Obligor by the Holder (“Letter Agreement”). 

     

    FOR
      VALUE RECEIVED,
      the
      Obligor hereby promises to pay to the Holder or its successors and assigns,
      subject to the forgiveness of indebtedness clause set forth below, the principal
      sum of Seventy Five Thousand Dollars ($75,000) together with accrued but unpaid
      interest on June
      26,
      2007 (the
      “Maturity
      Date”),
      in
      accordance with the following terms:

     

    Interest.
      Interest shall accrue on the outstanding principal balance hereof at an annual
      rate equal to eight percent (8%). Interest shall be calculated on the basis
      of a
      360-day year and the actual number of days elapsed, to the extent permitted
      by
      applicable law. Accrued and unpaid interest hereunder will be paid on the
      Maturity Date to the Holder or its assignee (as defined in Section
      5)
      in
      whose name this Note is registered on the records of the Obligor regarding
      registration and transfers of Notes (the “Note
      Register”).

     

    Foregiveness
      of Indebtedness.
      If the
      Holder completes its contemplated acquisition of the Obligor prior to the
      Maturity Date, pursuant to the Letter Agreement , the Holder will hereby forgive
      the Obligor of its obligation to repay the principal amount of this Note and
      any
      interest accrued but unpaid hereunder and this Note shall become null and void
      on the date of such acquisition. The principal amount advanced under this note
      plus any accrued and unpaid interest will be applied to the cash consideration
      under the terms agreed upon in the Letter Agreement. In addition, this note
      will
      be forgiven if the Holder does not complete the intended acquisition prior
      to
      the maturity date of this note due to no fault of the obligor.

     

    This
      Note
      is subject to the following additional provisions:

     

    Section
      1. Events
      of Default.

     

    (a) An
      “Event
      of Default”,
      wherever used herein, means any one of the following events (whatever the reason
      and whether it 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):

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    (i) Any
      default in the payment of the principal of, interest on or other charges in
      respect of this Note, free of any claim of subordination, as and when the same
      shall become due and payable (whether on the Maturity Date or by acceleration
      or
      otherwise);

     

    (ii) The
      Obligor shall fail to observe or perform any other covenant, agreement or
      warranty contained in, or otherwise commit any breach or default of any
      provision of this Note (except as may be covered by Section
      2(a)(i)
      hereof)
      which is not cured with in the time prescribed;

     

    (iii) The
      Obligor or any subsidiary of the Obligor shall commence, or there shall be
      commenced against the Obligor or any subsidiary of the Obligor under any
      applicable bankruptcy or insolvency laws as now or hereafter in effect or any
      successor thereto, or the Obligor or any subsidiary of the Obligor commences
      any
      other proceeding under any reorganization, arrangement, adjustment of debt,
      relief of debtors, dissolution, insolvency or liquidation or similar law of
      any
      jurisdiction whether now or hereafter in effect relating to the Obligor or
      any
      subsidiary of the Obligor or there is commenced against the Obligor or any
      subsidiary of the Obligor any such bankruptcy, insolvency or other proceeding
      which remains undismissed for a period of 61 days; or the Obligor or any
      subsidiary of the Obligor is adjudicated insolvent or bankrupt; or any order
      of
      relief or other order approving any such case or proceeding is entered; or
      the
      Obligor or any subsidiary of the Obligor suffers any appointment of any
      custodian, private or court appointed receiver or the like for it or any
      substantial part of its property which continues undischarged or unstayed for
      a
      period of sixty one (61) days; or the Obligor or any subsidiary of the Obligor
      makes a general assignment for the benefit of creditors; or the Obligor or
      any
      subsidiary of the Obligor shall fail to pay, or shall state that it is unable
      to
      pay, or shall be unable to pay, its debts generally as they become due; or
      the
      Obligor or any subsidiary of the Obligor shall call a meeting of its creditors
      with a view to arranging a composition, adjustment or restructuring of its
      debts; or the Obligor or any subsidiary of the Obligor shall by any act or
      failure to act expressly indicate its consent to, approval of or acquiescence
      in
      any of the foregoing; or any corporate or other action is taken by the Obligor
      or any subsidiary of the Obligor for the purpose of effecting any of the
      foregoing;

     

    (iv) The
      Obligor or any subsidiary of the Obligor shall default in any of its obligations
      under any other Note or any mortgage, credit agreement or other facility,
      indenture agreement, factoring agreement or other instrument under which there
      may be issued, or by which there may be secured or evidenced any indebtedness
      for borrowed money or money due under any long term leasing or factoring
      arrangement of the Obligor or any subsidiary of the Obligor in an amount
      exceeding $500,000 after 5/1/2006, whether such indebtedness now exists or
      shall
      hereafter be created and such default shall result in such indebtedness becoming
      or being declared due and payable prior to the date on which it would otherwise
      become due and payable;

     

    (b) During
      the time that any portion of this Note is outstanding, if any Event of Default
      has occurred and shall continue for a period of ten (10) days after a notice
      of
      such default has been delivered by the Holder to the Obligor (the “Notice
      Period”),
      the
      full principal amount of this Note, together with interest and other amounts
      owing in respect thereof, to the date of acceleration shall become at the
      Holder's election, immediately due and payable in cash. The Holder need not
      provide and the Obligor hereby waives any presentment, demand, protest or other
      notice of any kind, and the Holder may immediately and without expiration of
      any
      grace period (other than the Notice Period) enforce any and all of its rights
      and remedies hereunder and all other remedies available to it under applicable
      law. Such declaration may be rescinded and annulled by Holder at any time prior
      to payment hereunder. No such rescission or annulment shall affect any
      subsequent Event of Default or impair any right consequent thereon.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

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

    


    


    
      	
              If
                to the Company, to:

            	
              The
                Apparel Agent , LLC

            
	 	
              1860
                Pico Blvd

            
	 	
              Los
                Angeles, CA 

            
	 	
              Attention:
                Kevin Kelly

            
	 	
              Telephone: 323.981.9977

            
	 	
              Facsimile:  323.981.9830

            
	 	 
	 	 
	
              If
                to the Holder:

            	
              Sub-Urban
                Brands, Inc. 

            
	 	
              8723
                Bellanca Avenue, Bldg A

            
	 	
              Los
                Angeles, CA 90045

            
	 	
              Attention:
                Joe Shortal, CEO & President

            
	 	
              Telephone: 310.670.0132

            
	 	
              Facsimile:  310.670.0765

            


    

    


    or
      at
      such other address and/or facsimile number and/or to the attention of such
      other
      person as the recipient party has specified by written notice given to each
      other party three (3) business days prior to the effectiveness of such change.
      Written confirmation of receipt (i) given by the recipient of such notice,
      consent, waiver or other communication, (ii) mechanically or electronically
      generated by the sender's facsimile machine containing the time, date, recipient
      facsimile number and an image of the first page of such transmission or (iii)
      provided by a nationally recognized overnight delivery service, shall be
      rebuttable evidence of personal service, receipt by facsimile or receipt from
      a
      nationally recognized overnight delivery service in accordance with clause
      (i),
      (ii) or (iii) above, respectively.

     

    Section
      3. Definitions.
      For the
      purposes hereof, the following terms shall have the following
      meanings:

     

    “Business
      Day”
means
      any day except Saturday, Sunday and any day which shall be a federal legal
      holiday in the United States or a day on which banking institutions are
      authorized or required by law or other government action to close.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    “Original
      Issue Date”
shall
      mean the date of the first issuance of this Note regardless of the number of
      transfers and regardless of the number of instruments, which may be issued
      to
      evidence such Note.

     

    “Person”
means
      a
      corporation, an association, a partnership, organization, a business, an
      individual, a government or political subdivision thereof or a governmental
      agency.

     

    Section
      4. Except
      as
      expressly provided herein, no provision of this Note shall alter or impair
      the
      obligations of the Obligor, which are absolute and unconditional, to pay the
      principal of, interest and other charges (if any) on, this Note at the time,
      place, and rate, and in the coin or currency, herein prescribed. This Note
      is a
      direct obligation of the Obligor. This Note ranks pari passu with all other
      Notes now or hereafter issued under the terms set forth herein. As long as
      this
      Note is outstanding, the Obligor shall not and shall cause their subsidiaries
      not to, without the consent of the Holder (which shall not be unreasonably
      withheld), (i) amend its certificate of incorporation, bylaws or other charter
      documents so as to adversely affect any rights of the Holder; (ii) repay,
      repurchase or offer to repay, repurchase or otherwise acquire shares of its
      Common Stock or other equity securities other than as to the Underlying Shares
      to the extent permitted or required under the Transaction Documents; or (iii)
      enter into any agreement with respect to any of the foregoing. 

     

    Section
      5. If
      this
      Note is mutilated, lost, stolen or destroyed, the Obligor shall execute and
      deliver, in exchange and substitution for and upon cancellation of the 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 but only upon receipt of evidence of such loss, theft or destruction
      of such Note, and of the ownership hereof, and indemnity, if requested, all
      reasonably satisfactory to the Obligor.

     

    Section
      6. No
      indebtedness of the Obligor is senior to this Note in right of payment, whether
      with respect to interest, damages or upon liquidation or dissolution or
      otherwise. Without the Holder’s consent, the Obligor will not and will not
      permit any of their subsidiaries to, directly or indirectly, enter into, create,
      incur, assume or suffer to exist any indebtedness of any kind, on or with
      respect to any of its property or assets now owned or hereafter acquired or
      any
      interest therein or any income or profits there from that is senior in any
      respect to the obligations of the Obligor under this Note.

     

    Section
      7. This
      Note
      shall be governed by and construed in accordance with the laws of the State
      of
      California , without giving effect to conflicts of laws thereof. Each of the
      parties consents to the jurisdiction of the Courts of the State of California
      sitting in Los Angeles County, California and the U.S. District Court for
      the Central District of California in connection with any dispute arising under
      this Note and hereby waives, to the maximum extent permitted by law, any
      objection, including any objection based on forum non conveniens
      to the
      bringing of any such proceeding in such jurisdictions. 

     

    Section
      8. 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 must be in writing.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    Section
      9. 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. If it shall be found that any interest or other amount deemed
      interest due hereunder shall violate applicable laws governing usury, the
      applicable rate of interest due hereunder shall automatically be lowered to
      equal the maximum permitted rate of interest. The Obligor covenants (to the
      extent that it may lawfully do so) that it shall not at any time insist upon,
      plead, or in any manner whatsoever claim or take the benefit or advantage of,
      any stay, extension or usury law or other law which would prohibit or forgive
      the Obligor from paying all or any portion of the principal of or interest
      on
      this Note as contemplated herein, wherever enacted, now or at any time hereafter
      in force, or which may affect the covenants or the performance of this
      indenture, and the Obligor (to the extent it may lawfully do so) hereby
      expressly waives all benefits or advantage of any such law, and covenants that
      it will not, by resort to any such law, hinder, delay or impeded the execution
      of any power herein granted to the Holder, but will suffer and permit the
      execution of every such as though no such law has been enacted.

     

    Section
      10. THE
      PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY
      OF
      THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON
      OR
      ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
      DOCUMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL
      OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT
      FOR
      THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

     

    Section
      11. Security
      Interest/Waiver of Automatic Stay.
      This Note is secured by a security interest granted to Obligor for the benefit
      of the Holder, in the inventory of the Obligor. The Company acknowledges and
      agrees that should a proceeding under any bankruptcy or insolvency law be
      commenced by or against the Company, then the Holder should be entitled to
      an
      order from the court granting immediate relief from the automatic stay pursuant
      to 11 U.S.C. Section 362 to permit the Holder to exercise all of its rights
      and
      remedies pursuant to this Note and/or applicable law. THE COMPANY EXPRESSLY
      WAIVES THE BENEFIT OF THE AUTOMATIC STAY IMPOSED BY 11 U.S.C. SECTION 362.
      FURTHERMORE, THE COMPANY EXPRESSLY ACKNOWLEDGES AND AGREES THAT NEITHER 11
      U.S.C. SECTION 362 NOR ANY OTHER SECTION OF THE BANKRUPTCY CODE OR OTHER STATUTE
      OR RULE (INCLUDING, WITHOUT LIMITATION, 11 U.S.C. SECTION 105) SHALL STAY,
      INTERDICT, CONDITION, REDUCE OR INHIBIT IN ANY WAY THE ABILITY OF THE HOLDER
      TO
      ENFORCE ANY OF ITS RIGHTS AND REMEDIES UNDER THIS NOTE AND/OR APPLICABLE LAW.
      The Company hereby consents to any motion for relief from stay that may be
      filed
      by the Holder in any bankruptcy or insolvency proceeding initiated by or against
      the Company and, further, agrees not to file any opposition to any motion for
      relief from stay filed by the Holder. The Company represents, acknowledges
      and
      agrees that this provision is a specific and material aspect of this Note,
      and
      that the Holder would not agree to the terms of this Note if this waiver were
      not a part of this Note. The Company further represents, acknowledges and agrees
      that this waiver is knowingly, intelligently and voluntarily made, that neither
      the Holder nor any person acting on behalf of the Holder has made any
      representations to induce this waiver, that the Company has been represented
      in
      the signing of this Note and in the making of this waiver by independent legal
      counsel selected by the Company and that the Company has discussed this waiver
      with counsel. 

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      Obligor has caused this Promissory Note to be duly executed by a duly authorized
      officer as of the date set forth above.

     

    
      	 	 	 
	 	
              The
                Apparel Agent, LLC

            
	 
 	 
 	 
 
	 	By:  	 
	 	
               

              Name:

            	
              
 Kevin
              Kelly
	 	 	 
	 	Title:	 


    

    


    
      
        
        

      

      
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