Document:

Unassociated Document

PROMISSORY NOTE

 

	
$1,000,000.00

	
August 18, 2011

	 	 

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 MONTO HOLDINGS (PTY) LTD. ("Monto"), or its successors and assigns (together with Monto, the "Holder"), the principal sum of ONE MILLION Dollars ($1,000,000.00) or such lesser principal amount as is actually advanced by Monto to Company hereunder (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)           Subject to the terms hereof, Company may in its discretion, but shall not be required to, request advances of funds available hereunder (“Advances”) from Monto, up to a maximum principal amount of One Million Dollars ($1,000,000.00), and Monto shall loan such funds to Company on the terms and subject to the conditions hereof.  Company shall give Monto irrevocable written notice requesting an Advance at least two (2) business days before the date on which Company desires to receive the Advance (unless a shorter period is consented to by Monto).  Notwithstanding any term or provision of this Note that may be construed to the contrary, except for the initial Advance to be made on the Original Issue Date, at no time shall Monto be required to make an Advance hereunder (a) if an Event of Default (as defined below) shall have occurred or (b) unless and until the Company and Monto shall have received the Rosenthal Consent.

 

(b)           On the Original Issue Date, the parties hereby agree that Holder shall advance to the Company by wire of immediately available funds $350,000.00 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.

 

(c)           Prior to the Holder having the obligation of making the initial Advance of $350,000.00, 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;

 

  

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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 dated as of the date of this Note executed by the Loan Parties, in form and substance satisfactory to the Holder;

 

v.           the Holder shall have received the Warrant duly executed and delivered by People’s Liberation, Inc.;

 

vi.          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;

 

vii.         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;

 

viii.        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;

 

ix.          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;

 

x.           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

 

  

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xi.          the Holder shall have received such other assurances, certificates, documents, consents or opinions as it may reasonably require.

 

(d)           The delivery of the foregoing documents and the initial Advance of $350,000.00 by Monto 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 Stubbs Alderton & Markiles, LLP.  Advances after the Original Issue Date shall occur in accordance with, and subject to, the terms and conditions hereof, at the offices of Stubbs Alderton & Markiles, LLP or at such other location as the parties may determine.

 

Section 2.              Payment of Principal and Interest; Security; Prepayments.

 

(a)           Payment of Principal.  Unless earlier repaid upon acceleration of this Note in accordance with the terms hereof, the Principal Amount shall be repaid in full by the Company as follows: (i) 40.0% of the then outstanding Principal Amount shall be repaid on December 31, 2011, (ii) 20% of the then outstanding Principal Amount shall be repaid on February 29, 2012 and (iii) all of the remaining Principal Amount then outstanding shall be repaid on the Maturity Date.  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 7.00% per annum.  Interest shall be payable by the Company to the Holder on the Maturity 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 9.00% 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.

 

  

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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).

 

(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.

 

  

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(b)           The Company has good and marketable title to the assets disclosed in its most recent  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  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.

 

(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, 2010, and its unaudited financial statements for the fiscal quarter ended June 30, 2011 (collectively, the "Financial Reports").  None of the 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 Financial Reports comply in all material respects with applicable accounting requirements as in effect at the date of such  Financial Reports.  Such  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, 2010 and except as set forth in the 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 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.

 

  

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(e)           Except as disclosed in the 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 is required to be filed with the Securities and Exchange Commission (collectively, "Material Agreements") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange 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 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, 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);

 

  

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(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 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;

 

  

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(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 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, 2011, 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;

 

  

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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;

 

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);

 

  

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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 material 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 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; or

 

x.           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.

 

  

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(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, 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.

 

  

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(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 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.

 

  

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(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.

 

(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.

 

  

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(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 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.

 

  

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(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 Monto 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 and Monto have 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: 	 
	 	 	 	 

 

MONTO HOLDINGS (PTY) LTD.

 

	
By:

	
  

	 
	
Name:

	
  

	 
	
Title:

	
  

	 

 

 

	
Signature Page to Promissory Note

  

  

  

EXHIBIT A

 

(Certain Defined Terms)

 

"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, , 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)           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;

 

(c)           William Rast Sourcing, LLC ceases to directly own and control, legally and beneficially, all of the equity interests in William Rast Retail, LLC; or

 

(d)           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 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, , 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, , 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.

 

"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 May 31, 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, , supplemented, extended or otherwise modified from time to time.

 

"Original Issue Date" means August 18, 2011, 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.

 

"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.

 

“Rosenthal Consent” means the consent of Rosenthal & Rosenthal, Inc., a New York corporation, to the indebtedness incurred and liens created in favor of Holder pursuant to the terms of the Transaction Documents, to the extent the failure to obtain such consent would result in a breach of or an event of default under the Rosenthal Loan Documents.

 

“Rosenthal Loan Documents” means that certain Factoring Agreement, dated August 24, 2010, between Rosenthal & Rosenthal, Inc., a New York corporation, and William Rast Sourcing, LLC, a California limited liability company, and all other agreements entered into in connection therewith.

 

  

  

  

 

"Security Agreements" means the Borrower Security Agreement and the Guarantor Security Agreement.

 

"Transaction Documents" means this Note, the Warrant, 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, supplemented, extended or otherwise modified from time to time.

 

"Warrant" means that certain warrant to purchase 12,500,000 shares of common stock of People’s Liberation, Inc. issued to Holder on the Original Issue Date.Unassociated Document

 

BORROWER SECURITY AGREEMENT

 

 

THIS BORROWER SECURITY AGREEMENT (as amended, restated, supplemented, extended or otherwise modified from time to time, this "Agreement") dated as of August 18, 2011, is entered into by WILLIAM RAST LICENSING, LLC, a California limited liability company, as debtor ("Debtor"), in favor of Monto Holdings (Pty) Ltd. (together with its successors and assigns, "Secured Party").

 

WHEREAS, the Debtor has requested a term loan from Secured Party, in an original principal amount of $1,000,000 on the terms set forth in that certain Promissory Note of even date herewith issued by Debtor in favor of Secured Party (as amended, restated, supplemented, extended or otherwise modified from time to time, the "Monto Note").

 

WHEREAS, as a condition to the obligation of Secured Party to loan and advance funds pursuant to the Monto Note, Secured Party has required Debtor to enter into this Agreement and to grant the security interests described herein in the Collateral in favor of Secured Party.

 

NOW THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good, valuable, and binding consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:

 

1.           Definitions.

 

(a)           Capitalized terms used herein and not otherwise defined herein shall have the meanings provided in the Monto Note.  This Agreement is the "Borrower Security Agreement" referred to in the Monto Note.  This Agreement is one of the "Transaction Documents" referred to in the Monto Note.  To the extent that any terms or concepts defined or used herein are defined or used in the UCC (as defined below), such terms or concepts shall be interpreted for purposes hereof in a manner that is consistent with such definition or use in the UCC.

 

(b)           The following terms shall have the meanings set forth below:

 

"Account" has the meaning given such term in Section 9102(a)(2) of the UCC.

 

"Account Debtor" has the meaning given such term in Section 9102(a)(3) of the UCC.

 

"Certificate of Title" has the meaning given such term in Section 9102(a)(10) of the UCC.

 

"Certificated Security" has the meaning given such term in Section 8102(a)(4) of the UCC.

 

"Chattel Paper" has the meaning given such term in Section 9102(a)(11) of the UCC.

 

  

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"Collateral" shall mean all right, title, and interest of Debtor in and to all of the following property of Debtor, whether now owned or hereafter acquired and whether now existing or hereafter coming into existence:

 

(i)             Accounts;

 

(ii)            Chattel Paper and rights to receive monies included thereby;

 

(iii)           Commercial Tort Claims;

 

(iv)           Deposit Accounts;

 

(v)           Documents;

 

(vi)           Equity Collateral;

 

(vii)          General Intangibles;

 

(viii)         Goods, including Inventory and Equipment;

 

(ix)           Instruments and rights to receive monies included thereby;

 

(x)            Intellectual Property;

 

(xi)           Investment Property, including Commodity Accounts and Commodity Contracts;

 

(xii)          Letter-of-Credit Rights;

 

(xiii)         Notes;

 

(xiv)         other tangible and intangible personal property and Fixtures of Debtor;

 

(xv)          to the extent related to any property described in the clauses (i) through (xiv), all books, correspondence, loan files, records, invoices, and other papers, including without limitation all tapes, cards, computer runs, and other papers and documents in the possession or under the control of Debtor or any computer service company from time to time acting for Debtor; and

 

(xvi)         cash and non-cash Proceeds of any and all of the foregoing.

 

"Commercial Tort Claim" has the meaning given such term in Section 9102(a)(13) of the UCC and shall include, without limitation, those claims described on Schedule 1 attached hereto.

 

"Commodity Account" has the meaning given such term in Section 9102(a)(14) of the UCC.

 

  

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"Commodity Contract" has the meaning given such term in Section 9102(a)(15) of the UCC.

 

"Copyright Collateral" shall mean all Copyrights, whether now owned or hereafter acquired by Debtor, and shall include, without limitation, those listed on Schedule 2 attached hereto.

 

"Copyrights" shall mean all copyrights, copyright registrations, and applications for copyright registrations, including, without limitation, all renewals and extensions thereof, the right to recover for all past, present, and future infringements thereof, and all other rights of any kind whatsoever accruing thereunder or pertaining thereto.

 

"Deposit Account" has the meaning given such term in Section 9102(a)(29) of the UCC.

 

"Documents" has the meaning given such term in Section 9102(a)(30) of the UCC.

 

"Equipment" has the meaning given such term in Section 9102(a)(33) of the UCC.

 

"Equity Collateral" shall mean Pledged Equity and Pledged Equity Proceeds.

 

"Event of Default" shall have the meaning specified in Section 14 of this Agreement.

 

"Fixtures" has the meaning given such term in Section 9102(a)(41) of the UCC.

 

"General Intangibles" has the meaning given such term in Section 9102(a)(42) of the UCC.

 

"Goods" has the meaning given such term in Section 9102(a)(44) of the UCC, and shall include Motor Vehicles.

 

"Instruments" has the meaning given such term in Section 9102(a)(47) of the UCC.

 

"Intellectual Property" shall mean, collectively, all Copyright Collateral, all Patent Collateral, and all Trademark Collateral, together with (a) all inventions, processes, production methods, proprietary information, know-how, and trade secrets; (b) all licenses or user or other agreements granted to Debtor with respect to any of the foregoing, in each case whether now or hereafter owned or used; (c) all information, customer lists, identification of suppliers, data, plans, blueprints, specifications, designs, drawings, recorded knowledge, surveys, engineering reports, test reports, manuals, materials standards, processing standards, performance standards, catalogs, computer and automatic machinery software and programs, splash screens, films, masters, and artwork; (d) all field repair data, sales data, and other information relating to sales or service of products now or hereafter manufactured; (e) all accounting information and all media in which or on which any information or knowledge or data or records may be recorded or stored and all computer programs used for the compilation or printout of such information, knowledge, records, or data; and (f) all licenses, consents, permits, variances, certifications, and approvals of governmental agencies now or hereafter held by Debtor.

 

"Inventory" has the meaning given such term in Section 9102(a)(48) of the UCC.

 

  

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"Investment Property" has the meaning given such term in 9102(a)(49) of the UCC.

 

"Letter-of-Credit Right" has the meaning given such term in Section 9102(a)(51) of the UCC.

 

"Lien" shall mean a pledge, assignment, lien, charge, mortgage, encumbrance, or other security interest obtained under this Agreement or under any other agreement or instrument with respect to any present or future assets, property, contract rights, or revenues in order to secure the payment of indebtedness of the party referred to in the context in which the term is used.

 

"Motor Vehicles" shall mean motor vehicles, tractors, trailers, and other like property, whether or not the title thereto is governed by a certificate of title or ownership.

 

"Notes" shall mean all Promissory Notes or other debt instruments (including, without limitation, bonds and debentures of any nature whatsoever) from time to time issued to, or held by, Debtor.

 

"Obligations" shall mean (i) (x) the principal of and any interest on the Monto Note (including, without limitation, any further advances), and (y) all other obligations and liabilities of Debtor, whether now existing or hereafter incurred, under, arising out of, or in connection with, the Monto Note and the due performance and compliance by Debtor with all of the terms, conditions, and agreements contained in the Monto Note; (ii) any and all sums advanced by Secured Party in order to preserve the Collateral or preserve its Lien and security interest in the Collateral; (iii) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities referred to in clauses (i) and (ii) above, all of the expenses of any exercise by Secured Party of its rights hereunder, together with attorneys' fees and court costs; and (iv) to the extent not otherwise included in clauses (i), (ii), or (iii) above, all of Debtor's obligations set forth in this Agreement, including, without limitation, Section 21.

 

"Patent Collateral" shall mean all Patents, whether now owned or hereafter acquired by Debtor, and shall include, without limitation, those patents and applications, registrations and recordings described in Schedule 3 attached hereto.

 

"Patents" shall mean all patents and patent applications, including, without limitation, the inventions and improvements described and claimed therein together with the reissues, divisions, continuations, renewals, extensions, and continuations-in-part thereof, all income, royalties, damages, and payments now or hereafter due and/or payable under and with respect thereto, including, without limitation, damages and payments for past or future infringements thereof, the right to sue for past, present, and future infringements thereof, and all rights corresponding thereto throughout the world.

 

"Permitted Liens" has the meaning set forth in the Monto Note.

 

"Pledged Equity" shall mean (i) the shares of stock of, or partnership and other ownership interest in, any entity, including, without limitation, the equity interests described on Schedule 5, and any and all equity interests now or hereafter issued in substitution, exchange or replacement therefor or with respect thereto, and (ii) all ownership interests of any class or character of a successor entity formed by or resulting from a consolidation or merger in which any such issuer is not the surviving entity; in each case, whether now or hereafter owned by Debtor, together with any certificates evidencing any of the foregoing.

 

  

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"Pledged Equity Proceeds" shall mean all shares, securities, moneys, or property representing a dividend on any of the Pledged Equity, or representing a distribution or return of capital upon or in respect of the Pledged Equity, or resulting from a split-up, revision, reclassification, or other like change of the Pledged Equity or otherwise received in exchange therefor, and any subscription warrants, rights, or options issued to the holders of, or otherwise in respect of, the Pledged Equity.

 

"Proceeds" has the meaning given such term in Section 9102(a)(64) of the UCC.

 

"Promissory Notes" has the meaning given such term in Section 9102(a)(65) of the UCC.

 

"Securities" has the meaning given such term in Section 8102(a)(15) of the UCC.

 

"Securities Account" has the meaning given such term in Section 8501(a) of the UCC.

 

"Trademark Collateral" shall mean all Trademarks, whether now owned or hereafter acquired by Debtor, and shall include, without limitation, those registered and applied for trademarks, terms, designs and applications described in Schedule 4 attached hereto.  Notwithstanding the foregoing, the Trademark Collateral does not and shall not include any Trademark that would be rendered invalid, abandoned, void, or unenforceable by reason of its being included as part of the Trademark Collateral.

 

"Trademarks" shall mean all trade names, trademarks and service marks, logos, domain names, trademark and service mark registrations, and applications for trademark and service mark registrations, including, without limitation, all renewals of trademark and service mark registrations, all rights corresponding thereto throughout the world, the right to recover for all past, present, and future infringements thereof, all other rights of any kind whatsoever accruing thereunder or pertaining thereto, together, in each case, with the product lines and goodwill of the business connected with the use of, and symbolized by, each such trade name, trademark, and service mark.

 

"UCC" shall mean the Uniform Commercial Code as in effect in the State of California from time to time.

 

"Uncertificated Security" has the meaning given such term in Section 8102(a)(18) of the UCC.

 

2.           Grant of Liens.  As security for the due and punctual payment and performance in full of all Obligations (whether at the stated maturity, by acceleration, or otherwise and whether now owing or incurred in the future), Debtor hereby pledges, assigns, charges, delivers, and grants to Secured Party, a continuing perfected first-priority (subject to Permitted Liens) security interest in and a general Lien upon all of Debtor's right, title, and interest in and to the Collateral and all additions thereto and substitutions therefor, whether heretofore, now or hereafter received by or delivered or transferred to Secured Party hereunder.

 

  

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3.           Continuing Security Interest.

 

(a)           This Agreement creates an assignment, pledge, charge, continuing perfected, and, subject to any Permitted Lien, first-priority security interest in, and general Lien upon, the Collateral and shall (i) remain in full force and effect until all Obligations have been paid in full, (ii) be binding upon Debtor and its successors, permitted transferees, and permitted assigns, and (iii) inure, together with the rights and remedies of Secured Party hereunder, to the benefit of Secured Party and its successors, transferees, and assigns.

 

(b)           Upon the indefeasible payment in full of all Obligations, the assignments, pledges, charges, Liens, and security interests granted hereunder shall terminate, and all rights to the Collateral shall revert to Debtor.  Upon such termination, Secured Party will, at the sole expense of Debtor, execute and deliver to Debtor such documents as Debtor shall reasonably request to evidence such termination and Secured Party shall deliver and transfer such Collateral to Debtor.

 

4.           Debtor Remains Liable.  Anything herein to the contrary notwithstanding, (i) Debtor shall remain liable under any agreements which have been (in whole or in part) pledged or assigned herein to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed; (ii) the exercise by Secured Party of any of the rights hereunder shall not release Debtor from any of its duties or obligations under any such agreements; and (iii) Secured Party shall not have any obligation or liability under any such agreements by reason of this Agreement, nor shall Secured Party be obligated to perform any of the obligations or duties of Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

 

5.           Delivery and Perfection.

 

(a)           Debtor hereby authorizes Secured Party to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Collateral, and agrees to take all such other actions and to execute and deliver and file or cause to be filed such other instruments or documents, as Secured Party may reasonably require in order to establish and maintain a perfected, valid, and continuing security interest and Lien in the Collateral in accordance with this Agreement and the UCC and other applicable law.

 

(b)           Debtor shall, at the written request of Secured Party:

 

(i)            immediately deliver any and all Documents, Instruments, and Chattel Paper (including, without limitation, any Certificates of Title) evidencing or relating to the Collateral to Secured Party at the time and place and manner specified in Secured Party's request;

 

(ii)           immediately execute (if applicable) and deliver to Secured Party (or file or record in such offices as Secured Party may deem necessary or appropriate) any and all financing and continuation statements, other agreements, instruments, or other documents or amendments thereto, and perform any acts which may be necessary (A) to create, perfect, preserve, or otherwise protect the security interest and Liens granted herein or (B) to enable Secured Party to exercise and enforce its rights hereunder;

 

  

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(iii)           with respect to any Certificated Security not otherwise credited to a Securities Account, Debtor shall immediately effect transfer thereof to Secured Party (A) by physical delivery of such Certificated Security to Secured Party endorsed to Secured Party or its nominee or in blank or (B) in the case of a Certificated Security in registered form, by physical delivery of such Certificated Security to Secured Party specially endorsed to Secured Party or its nominee and thereafter reregistered in the name of Secured Party or their nominee;

 

(iv)           with respect to any Uncertificated Security not otherwise credited to a Securities Account, Debtor shall immediately (A) effect transfer thereof to Secured Party by registration thereof on the books and records of the issuer in the name of Secured Party or its nominee or (B) obtain the agreement of the issuer of such Uncertificated Securities that it will comply with instructions originated by Secured Party without further consent by the registered owner, through a written agreement in form and substance satisfactory to Secured Party; and

 

(v)           immediately mark all Certificates of Title in the manner specified in a written notice of Secured Party to Debtor requesting such marking, to evidence the fact that such Certificates of Title are subject to the security interest and Lien of Secured Party granted herein.

 

(c)           Upon the written request of Secured Party, Debtor agrees immediately to deliver to Secured Party, appropriately endorsed to the order of Secured Party, any Notes, trade acceptance, Chattel Paper, or other Instrument in which a security interest must be perfected by delivery or transfer of such Collateral to a secured party, which are acquired by Debtor from time to time.

 

(d)           Notwithstanding Section 9207 of the UCC, Secured Party may hold as additional security any Proceeds, including money and funds, received from the Collateral, all of which shall constitute Collateral hereunder, and Secured Party shall not be required to apply such money or funds to reduce the Obligations other than as expressly set forth herein.

 

6.           Proceeds of Sale.  Nothing contained in this Agreement shall limit or restrict in any way Secured Party's right to receive Proceeds of the Collateral in any form in accordance with the provisions of this Agreement.  All Proceeds that are received by Debtor contrary to the provisions of this Agreement shall be received in trust for the benefit of Secured Party, shall be segregated from other property or funds of Debtor and shall be forthwith paid over to Secured Party as Collateral in the same form as so received (with any necessary endorsement, document or instrument of transfer).

 

7.           Records and Information.  Debtor agrees to keep, at its office set forth in Section 11(d), its records concerning the Collateral.  Debtor agrees to promptly furnish to Secured Party such information concerning Debtor, the Collateral, and any Account Debtor as Secured Party may reasonably request.

 

  

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8.           Inspection.  Debtor agrees, upon prior notice provided by Secured Party, to permit Secured Party, through its officers and agents, to examine and inspect the Collateral and all records pertaining thereto, and to make extracts from such records as Secured Party may require.

 

9.           Use of Collateral.  Except upon the occurrence and during the continuance of any Event of Default, Debtor may in the ordinary course of Debtor's business use, consume, exhibit, demonstrate, sell, lease, or otherwise dispose of its Inventory, in carrying on its businesses substantially in the same manner as now conducted; provided, however, that a sale in the ordinary course of business shall not include any transfer or sale in satisfaction, partial or complete, of a debt owed by Debtor or any transfer or sale to any shareholder or affiliate of Debtor for consideration less than the consideration which would have been paid to Debtor by an unaffiliated third party in an arms' length transaction; and provided further that any such disposition shall not be unlawful or inconsistent with the terms of this Agreement or of any policy of insurance covering such Collateral.

 

10.         No Disposition.  Debtor covenants and agrees that it will not sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, any of the Collateral, except as provided for in Section 9 hereof, nor will it create, incur, or permit to exist any Lien on or with respect to any of the Collateral, any interest therein, or any Proceeds thereof, except for the Permitted Liens.

 

11.         Representations and Warranties.  Debtor represents, warrants and covenants to Secured Party throughout the term of this Agreement that:

 

(a)           Debtor is and will be the sole legal and beneficial owner of all of the Collateral now owned or hereafter acquired free and clear of any Lien, security interest, assignment, option, or other charge or encumbrance, except for the Permitted Liens;

 

(b)           This Agreement has been duly and validly authorized by Debtor and executed and delivered by Debtor and constitutes the legal, valid, and binding obligation of Debtor, enforceable against Debtor in accordance with its terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium, or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)) and, subject to the performance of the relevant procedures as specified in Section 5 herein with respect to such Collateral, creates a valid, binding, enforceable, and first priority perfected security interest in and general first Lien upon all of the Collateral (subject to Permitted Liens), and Debtor is duly authorized to make all filings and take all other actions necessary or desirable to perfect and to continue perfected such security interest;

 

(c)           As of the date hereof and on the date of delivery or transfer to Secured Party of any Collateral under this Agreement, Debtor has good and marketable title to the Collateral, subject to Permitted Liens;

 

  

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(d)           The office where Debtor maintains all records relating to the Collateral is located at:

 

	  	
William Rast Licensing, LLC

1212 South Flower Street

Fifth Floor

Los Angeles, California 90015

 

(e)           Debtor is a limited liability company duly organized and validly existing under the laws of the State of California;

 

(f)            Debtor's exact legal name as that name appears on Debtor's Articles of Organization and Debtor's organization identification number issued by its State of incorporation is as follows:

 

	  	
Legal Name

	
Identification Number

 

	  	
WILLIAM RAST LICENSING, LLC

	
200624310013

 

(g)           All Pledged Equity in which Debtor currently has or shall hereafter acquire an interest is and will be, as applicable, duly authorized, validly existing, fully paid, and non-assessable (in the case of any equity interest in a corporation) and duly issued and outstanding (in the case of any equity interest in any other entity), and none of such Pledged Equity is or will be subject to any contractual restriction, or any restriction under the charter, by-laws, partnership agreement, or other organizational document of the respective issuer, upon the transfer of such Pledged Equity;

 

(h)           As of the date hereof, any and all equity interests owned directly or indirectly by Debtor in any Person are described on Schedule 5 attached hereto, and Debtor owns the equity interests set forth opposite its name on Schedule 5 free and clear of Liens other than Permitted Liens;

 

(i)            Except pursuant to licenses and other user agreements entered into by the Debtor in the ordinary course of Debtor's business, Debtor owns and possesses the right to use, and has done nothing to authorize or enable any other Person to use, any Copyright, Patent or Trademark owned or used by Debtor on the date hereof, and all registrations therefor are valid and in full force and effect;

 

(j)           To Debtor's knowledge, (i) there is no violation by others of any right of Debtor with respect to any Copyright, Patent or Trademark of Debtor and (ii) Debtor is not infringing in any respect upon any Copyright, Patent or Trademark of any other Person; and no proceedings have been instituted, are pending or, to Debtor's knowledge, have been threatened against Debtor, and no claim against Debtor has been received by Debtor, alleging any such violation;

 

(k)           As of the date hereof, Debtor has no Commercial Tort Claims other than those described in Schedule 1 attached hereto and Debtor hereby covenants and agrees that it shall provide Secured Party with prompt written notice of each Commercial Tort Claim, and any judgment, settlement or other disposition thereof and will take such action as the Secured Party may request to grant and perfect a security interest therein in favor of the Secured Party;

 

  

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(l)            As of the date hereof, Debtor has no Copyrights registered, or subject to pending applications, with the United States Copyright Office ("USCO"), or any similar office or agency in the United States of America, or elsewhere other than those described on Schedule 2 attached hereto;

 

(m)           As of the date hereof, Debtor has no Patents registered, or subject to pending applications, in the United States Patent and Trademark Office ("USPTO"), or to the best knowledge of Debtor, any similar office or agency in the United States of America other than those described on Schedule 3 attached hereto;

 

(n)           As of the date hereof, Debtor has no Trademarks registered, or subject to pending applications, in the USPTO, or to the best knowledge of Debtor, any similar office or agency in the United States of America other than those described in Schedule 4 attached hereto;

 

(o)           As of the date hereof, Schedule 6 attached hereto sets forth each of the licenses owned or held by or on behalf of Debtor and all other Intellectual Property of Debtor other than the Intellectual Property otherwise set forth in the other Schedules hereto;

 

(p)           To the best of Debtor's knowledge, there are no actions, suits, proceedings or investigations pending or threatened in writing against Debtor before any governmental authority which could reasonably be expected to cause any portion of the Intellectual Property to be adjudged invalid or unenforceable, in whole or in part;

 

(q)           Debtor authorizes Secured Party to modify this Agreement by amending the Schedules hereto to include any new Intellectual Property, renewal thereof or any Intellectual Property applied for and obtained hereafter; and Debtor shall, upon request of Secured Party from time to time execute and deliver to Secured Party any and all assignments, agreements, instruments, documents and such other papers as may be requested by Secured Party to evidence the assignment of a security interest in each such Intellectual Property; and

 

(r)           As of the date hereof, Debtor has no deposit, brokerage, securities or other similar accounts other than those set forth opposite its name on Schedule 7 attached hereto.

 

12.           Covenants.

 

(a)           Debtor shall:

 

(i)            Maintain, or cause to be maintained, all items of the Collateral in good condition and repair, ordinary wear and tear excepted in the case of Equipment, and pay, or cause to be paid, the costs of repairs to or maintenance of that Collateral which is of a type that could be repaired or maintained;

 

  

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(ii)           Take all steps to preserve and protect the portion of the Collateral owned by it, including, with respect to the Intellectual Property, the filing of any renewal affidavits and applications;

 

(iii)           Not use any Collateral in violation of law or any applicable policy of insurance;

 

(iv)          Pay or cause to be paid when due all taxes, assessments, and other charges relating to the Collateral or this Agreement and reimburse Secured Party for all costs of and fees incurred in connection with any filing of the documents and instruments referred to in Section 5;

 

(v)           Not change its: (a) name or the name under which it does business; (b) chief executive office; (c) type of organization; (d) jurisdiction of organization; or (e) other legal structure without at least 30 day's prior written notice to Secured Party.  Prior to effectuating any change described in the preceding sentence, Debtor shall take or cause to be taken all actions deemed by Secured Party to be necessary or desirable to prevent any financing or continuation statement from becoming seriously misleading or rendered ineffective, or the security interests granted herein from becoming unperfected or the relative priority thereof otherwise impaired, as a result of such removal or change;

 

(vi)          Perform and observe all the material terms and provisions of any agreement for the sale or lease of goods, or any agreement for the rendering of services, giving rise to an Account to be performed or observed by it, maintain any such agreement in full force and effect, enforce any such agreement in accordance with its terms, and take all such action to such end as may be from time to time reasonably requested by Secured Party;

 

(vii)          Immediately notify Secured Party if it knows or has reason to know of any reason why any applicable registration or recording of any Patent Collateral, Trademark Collateral or Copyright Collateral may become abandoned, canceled, invalidated or unenforceable;

 

(viii)         Render any assistance, as Secured Party may solely determine is necessary, to Secured Party in any proceeding before the USPTO, the USCO, any federal or state court, or any similar office or agency in the United States of America, or any State therein, to maintain any Patent Collateral, Trademark Collateral or Copyright Collateral and to protect Secured Party's security interest therein, including, without limitation, filing of renewals, affidavits of use, affidavits of incontestability and opposition, interference, and cancellation proceedings;

 

(ix)           Immediately notify Secured Party if Debtor learns of any use by any Person of any term or design likely to cause confusion with any of the Trademark Collateral, or of any use by any Person of any other process or product which infringes upon any of the Trademark Collateral in a manner which is material to Debtor's business, and if requested by Secured Party, Debtor, at its expense, shall join with Secured Party in such action as Secured Party in Secured Party's discretion may reasonably deem advisable for the protection of Secured Party's interest in and to the Trademark Collateral;

 

  

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(x)           Assume all responsibility and liability arising from the use of the Intellectual Property, and Debtor hereby indemnifies and holds Secured Party harmless from and against any claim, suit, loss, damage or expense (including attorneys' fees) arising out of any alleged defect in any product manufactured, promoted, or sold by Debtor in connection with any Intellectual Property or out of the manufacture, promotion, labeling, sale, or advertisement of any such product by Debtor;

 

(xi)           Immediately notify Secured Party in writing of any adverse determination in any proceeding in the USPTO, USCO, or any other foreign or domestic governmental authority, court or body, Debtor becomes aware of regarding Debtor's claim of ownership in any of the Trademark Collateral, Patent Collateral or Copyright Collateral, and in the event of any infringement of any Trademark, Patent or Copyright owned by Debtor by a third party which is material to Debtor's business, Debtor shall promptly notify Secured Party of such infringement and sue for and diligently pursue damages for such infringement, and if Debtor shall fail to take such action within one (1) month after such notice is given to Secured Party, Secured Party may, but shall not be required to, itself take such action in the name of Debtor, and Debtor hereby appoints Secured Party the true and lawful attorney of Debtor, for it and in its name, place and stead, on behalf of Debtor, solely, without limitation on any other rights of Secured Party under this Agreement, to commence judicial proceedings in any court or before any other tribunal to enjoin and recover damages for such infringement, any such damages due to Debtor, net of costs and attorneys' fees, to be applied to the Obligations;

 

(xii)           (A) Maintain, with responsible insurance companies, insurance covering the Collateral against such insurable losses as is required by the Transaction Documents and as is consistent with sound business practice, (B) cause Secured Party to be designated as loss payee (as customary for secured parties based on the type of insurance) with respect to all insurance (whether or not required by the Transaction Documents), (C) obtain the written agreement of the insurers that such insurance shall not be cancelled, terminated or materially modified to the detriment of Secured Party without at least 30 days' prior written notice to Secured Party, and (D) furnish copies of such insurance policies or certificates to Secured Party immediately upon request therefor and otherwise comply with the terms and provisions of the Transaction Documents with respect to such insurance coverage; and

 

  

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(xiii)           with respect to the Copyright Collateral, at its sole expense, do, make, execute and deliver all such additional and further acts, things, deeds, assurances, and instruments, in each case in form and substance satisfactory to Secured Party, relating to the creation, validity, or perfection of the security interests provided for in this Agreement under 35 U.S.C. Section 261, 15 U.S.C. Section 1051 et seq., 17 U.S.C. Sections 101, 201 et seq., the UCC or other Law of the United States of America, the State of California, other States or any other domestic or foreign jurisdiction as Secured Party may from time to time reasonably request, and shall take all such other action as Secured Party may reasonably require to perfect Secured Party's security interest in any of the Copyright Collateral and to completely vest in and assure to Secured Party its rights hereunder in any of the Copyright Collateral.

 

13.           Further Assurances and Protections.

 

(a)           Debtor shall at its expense do, file, record, make, execute, and deliver all such acts, notices, instruments, statements, or other documents as Secured Party may request to perfect, preserve, or otherwise protect the security interest and Liens of Secured Party in the Collateral or any part thereof or to give effect to the rights, powers, and remedies of Secured Party under this Agreement;

 

(b)           Debtor will give prompt written notice to Secured Party of, and defend the Collateral against, any suit, action, or proceeding related to the Collateral or which could adversely affect the security interests and Liens granted hereunder; and

 

(c)           Debtor authorizes Secured Party to have this or any other similar agreement recorded or filed with the USCO, USPTO or other appropriate federal, state or foreign government office.

 

14.           Events of Default.  The occurrence of any of the following events or conditions shall constitute an event of default (each an "Event of Default") under this Agreement:

 

(a)           The occurrence of an Event of Default as defined in the Monto Note; or

 

(b)           The failure or refusal by Debtor to perform, or the breach or violation of, any of the terms, obligations, covenants, or warranties of this Agreement, and that failure or refusal continues unremedied for five (5) business days after such failure or refusal.

 

15.           Remedies upon an Event of Default.  On and after the occurrence and continuance of an Event of Default, Secured Party may, in its discretion:

 

(a)           request that Debtor, and upon such request Debtor shall, assemble the Collateral at such place or places convenient to Secured Party designated in such request;

 

  

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(b)           enforce collection of any of the Collateral by suit or any other lawful means available to Secured Party, or demand, collect, or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral;

 

(c)           surrender, release, or exchange or otherwise modify the terms of all or any part of the Collateral, or compromise or extend or renew for any period any indebtedness thereunder or evidenced thereby;

 

(d)           assert all other rights and remedies of a secured party under the UCC (whether or not in effect in any applicable jurisdiction) and all other applicable law, including, without limitation, the right to take possession of, hold, collect, sell, lease, deliver, grant options to purchase, or otherwise retain, liquidate, or dispose of all or any portion of the Collateral.  The proceeds of any collection, liquidation, or other disposition of the Collateral shall be applied by Secured Party first to the payment of all expenses (including, without limitation, all fees, taxes, reasonable attorneys' fees and legal expenses) incurred by Secured Party in connection with retaking, holding, collecting, or liquidating the Collateral.  The balance of such proceeds, if any, shall, to the extent permitted by law, be applied to the payment of the Obligations (i) first, to payment of that portion of the Obligations constituting fees, expenses and indemnities owed to Secured Party, (ii) second, to payment of that portion of the Obligations constituting interest owed to Secured Party, (iii) third, to payment of that portion of the Obligations constituting unpaid principal of the Monto Note, (iv) fourth, to pay any other Obligations owed to Secured Party, and (v) finally, the balance, if any, after all of the Obligations have been indefeasibly paid in full, to Debtor or as otherwise required by law.  In case of any deficiency, Debtor shall, whether or not then due, remain liable therefor.  If notice prior to disposition of the Collateral or any portion thereof is necessary under applicable law, written notice mailed to Debtor at its notice address specified on the signature page hereof five (5) business days prior to the date of such disposition shall constitute reasonable notice, but notice given in any other reasonable manner shall be sufficient.  Without precluding any other methods of sale or other disposition, the sale or other disposition of the Collateral or any portion thereof shall have been made in a commercially reasonable manner if conducted in conformity with reasonable commercial practices of creditors disposing of similar property; but in any event Secured Party may sell, lease, deliver, grant options to purchase or otherwise retain, liquidate or dispose such Collateral on such terms and to such purchaser(s) (including Secured Party) as Secured Party in its absolute discretion may choose, and for cash or for credit or for future delivery, without assuming any credit risk, at public or private sale or other disposition, without demand of performance, and without any obligation to advertise or give notice of any kind other than that necessary under applicable law.  Debtor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale or other disposition hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise.  At any such sale or other disposition, unless prohibited by applicable law, Secured Party may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption.  Secured Party shall not be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall it be under any obligation to take any action whatsoever with regard thereto.

 

Secured Party shall incur no liability as a result of the sale of the Collateral, or any part thereof, at any private sale pursuant to this Agreement conducted in a commercially reasonable manner.  Debtor hereby waives any claims against Secured Party arising by reason of the fact that the price at which the Collateral may have been sold at such a private sale was less than the price that might have been obtained at a public sale or was less than the aggregate amount of the Obligations, even if Secured Party accepts the first offer received and does not offer the Collateral to more than one offeree.

 

  

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Debtor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and applicable state securities laws, Secured Party may be compelled, with respect to any sale of all or any part of the Collateral, to limit purchasers to those who will agree, among other things, to acquire the relevant Collateral for their own account, for investment and not with a view to the distribution or resale thereof.  Debtor acknowledges that any such private sale may be at prices and on terms less favorable to Secured Party than those obtainable through a public sale without such restrictions, and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Secured Party shall have no obligation to engage in public sales and no obligation to delay the sale of any Collateral for the period of time necessary to enable the registration of the Collateral or related transaction so as to permit a public offer to be made with respect thereto;

 

(e)           license or sublicense, whether general, special or otherwise, and whether on an exclusive or non-exclusive basis, any Intellectual Property included in the Collateral throughout the world for such term or terms, on such conditions and in such manner as Secured Party shall in its sole discretion determine;

 

(f)           without assuming any obligation or liability thereunder, at any time and from time to time, in its sole discretion, enforce (and shall have the exclusive right to enforce) against any licensee or sublicensee all rights and remedies of Debtor in, to and under any of its Intellectual Property and take or refrain from taking any action under any thereof, and Debtor releases Secured Party from liability for, and agrees to hold Secured Party free and harmless from and against any claims and expenses arising out of, any lawful action so taken or omitted to be taken with respect thereto, except for claims and expenses arising from Secured Party's gross negligence or willful misconduct;

 

(g)           make a request upon Debtor (which shall not be construed as implying any limitation on the rights or powers of Secured Party), and upon such request Debtor shall, execute and deliver to Secured Party a power of attorney, in form and substance satisfactory to Secured Party, for the implementation of any sale, lease, license or other disposition of Intellectual Property owned by Debtor or any such action related thereto.  In connection with any such disposition, but subject to any confidentiality provisions imposed on Debtor in any license or similar agreement, Debtor will supply to Secured Party its know-how and expertise relating to the relevant Intellectual Property, and its customer lists and other records relating to such Intellectual Property and to the distribution of said products or services;

 

(h)           to the extent not already so transferred, transfer all or any part of the Collateral into Secured Party's name or the name of their nominee or nominees; and

 

  

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(i)           give all consents, waivers, and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (Debtor hereby irrevocably constituting and appointing Secured Party the proxy and attorney-in-fact of Debtor, with full power of substitution to do so), including, without limitation, the exercise of all voting, consensual and other powers of ownership pertaining to the Collateral.

 

16.           Secured Party Appointed Attorney-in-Fact.  Without limiting any rights or powers granted to Secured Party pursuant to this Agreement, applicable law or otherwise, Debtor hereby appoints Secured Party as its attorney-in-fact, with full power and authority in the place and stead of Debtor and in the name of Debtor or otherwise, from time to time in Secured Party's discretion to take any and all action and to execute, file and record any and all instruments, agreements, and documents which Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, to execute any assignment of Intellectual Property to Secured Party or other transferee, and to receive, endorse and collect all instruments made or payable to Debtor representing any Proceeds in respect of the Collateral or any part thereof and to give full discharge for the same.  The appointment set forth in this Section 16 is coupled with an interest and is irrevocable.

 

17.           Secured Party May Perform.  If Debtor fails to perform any agreement, covenant, or obligation contained herein, Secured Party may itself perform, or cause performance of such agreement, covenant or obligation and the expenses and costs of Secured Party incurred in connection therewith shall be payable by Debtor.

 

18.           Security Interest Absolute.  All rights of Secured Party and all Liens hereunder, and all obligations of Debtor hereunder, shall be absolute and unconditional irrespective of:

 

(a)           lack of validity or enforceability of this Agreement, the Monto Note or any of the other Transaction Documents;

 

(b)           any change in the time, manner, or place of payment of, or in any other term of any or all of the Obligations or any amendment or waiver of any provision of this Agreement, the Monto Note or any of the other Transaction Documents;

 

(c)           any release or non-perfection of any portion of the Collateral or any exchange, release, or non-perfection of any other collateral, or any release, amendment, or waiver of any guaranty for all or any of the Obligations; or

 

(d)           any other circumstance which might otherwise constitute a defense available to, or a discharge of Debtor in respect of the Obligations or this Agreement, the Monto Note or any of the other Transaction Documents.

 

19.           Secured Party's Duties.  The powers conferred to Secured Party hereunder are solely to protect Secured Party's interest in the Collateral and shall not impose any duty upon it to exercise any such powers except for the safe custody of any Collateral or any portion thereof in its possession, and Secured Party shall exercise that standard of care with respect to the Collateral in its possession which it exercises in the administration of its own assets and property; provided, however, that Secured Party shall not in any event be liable for any action taken or omitted with respect to the Collateral or this Agreement in good faith and in the absence of gross negligence or willful misconduct.  Secured Party shall have no duty as to the Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to the Collateral.

 

  

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20.           Rights Cumulative.  The rights, powers, and remedies of Secured Party under this Agreement shall be in addition to all rights, powers, and remedies given to Secured Party by virtue of any statute or rule of law or any agreement, all of which rights, powers and remedies shall be cumulative and may be exercised successively or concurrently without impairing Secured Party's security interest, Lien, and assignment in the Collateral.

 

21.           Indemnity and Expenses.

 

(a)           Secured Party shall not have any liability to any Person and shall be indemnified and held harmless by Debtor for any liability incurred by reason of taking or refraining from taking any action with respect to the Collateral, except in the case of Secured Party's gross negligence or willful misconduct.  Debtor agrees to indemnify Secured Party from and against any and all claims, losses, and liabilities arising out of or connected with this Agreement (including, without limitation, enforcement of this Agreement), except such claims, losses, or liabilities resulting solely from Secured Party's gross negligence or willful misconduct.  This Section 21(a) shall survive any termination of this Agreement.

 

(b)           Debtor agrees to pay all expenses, costs, and disbursements incurred by Secured Party (including, without limitation, all attorneys' fees and other legal expenses incurred by Secured Party in connection therewith) in connection with (i) retaking, holding, collecting, preparing for sale, and selling or otherwise realizing upon, liquidating, or disposing of the Collateral, (ii) the enforcement of its rights hereunder upon the occurrence and during the continuance of an Event of Default, (iii) the performance by Secured Party of any agreement, covenant, or obligation of Debtor contained herein that Debtor has failed or refused to perform, and (v) the participation or other involvement of Secured Party with (x) bankruptcy, insolvency, receivership, foreclosure, winding up, or liquidation proceedings, or any actual or attempted sale, or any exchange, enforcement, collection, compromise, or settlement in respect of any of the Collateral, and for the care of the Collateral and defending or asserting rights and claims of Secured Party in respect thereof, by litigation or otherwise, including expenses of insurance, (y) judicial or regulatory proceedings, and (z) workout, restructuring, or other negotiations or proceedings (whether or not the workout, restructuring or transaction contemplated thereby is consummated).

 

22.           Amendment or Waiver.  Neither this Agreement nor any terms hereof may be changed, waived, discharged, or terminated unless such change, waiver, discharge or termination is in writing signed by the parties hereto.

 

23.           Notices.  Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing  and mailed or delivered: if to Debtor, at the address specified immediately below Debtor's name on the signature page hereof; and if to Secured Party at its address specified immediately below its name on the signature page hereof; or at such other address as shall be designated by any party in a written notice to the other parties hereto.  All such notices and communications shall, when mailed, be effective three business days after deposit in the mails, and shall, when delivered, be effective upon delivery of such notice.

 

  

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24.           No Waiver.  No failure or delay on the part of Secured Party in exercising any right, power or privilege hereunder or under the UCC or any other applicable law shall operate as a waiver hereof or thereof; nor shall any single or partial exercise of any right, power, or privilege hereunder or under the UCC or any other applicable law preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder.  No notice to or demand on Secured Party in any case shall entitle Debtor to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of Secured Party to any other or further action in any circumstances without notice or demand.

 

25.           Severability of Provisions.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of that prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of that provision in any other jurisdiction.

 

26.           Non-Assignment.  Debtor shall not have the right to assign its rights or delegate its obligations hereunder or any part thereof to any other person without Secured Party's prior written consent.  This Agreement shall be binding upon any successors or assigns of Debtor, and shall benefit any successors or assigns of Secured Party.

 

27.           Integration of Terms.  This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto.

 

28.           Governing Law.

 

(a)      This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and be governed by the law of the State of California without regard to choice of law principles thereof that would cause the laws of any other jurisdiction to apply.

 

29.           Counterparts.  This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.

 

 

[Signature Page Follows]

 

  

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first written above.

 

DEBTOR:

	  	
WILLIAM RAST LICENSING, LLC,

	 
	  	
a California limited liability company

	 
	  	  	  	 
	  	
By:

	
 

	 
	  	
Name:

	
 

	 
	  	
Title:

	
 

	 

	  	
Address:

	
William Rast Licensing, LLC

	  	
 

	
1212 South Flower St., Fifth Floor

	  	
 

	
Los Angeles, CA 90015

	  	
 

	
Attn: _______________

	  	  	  

SECURED PARTY:

	  	
MONTO HOLDINGS (PTY) LTD.

	 
	  	  	  	 
	  	  	  	 
	  	
By:

	
 

	 
	  	
Name:

	
 

	 
	  	
Title:

	
 

	 
	  	  	  	 
	  	
Address:

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