EXHIBIT 10.2
PROMISSORY NOTE SECURED BY LETTER OF CREDIT
$3,000,000.00
August 31, 2005
FOR VALUE RECEIVED, The Walking Company, a Delaware
corporation ("Maker"), promises to pay to
Bianca of Nevada, Inc., a Nevada
corporation ("Payee"), in lawful money of
the United States of America, the
principal sum of Three Million Dollars and
00/100 ($3,000,000.00), together with
interest on the unpaid principal balance at
five percent (5%) per annum.
This Promissory Note Secured by Letter of Credit ("Note") has
been executed and delivered pursuant to and
in accordance with the terms and
conditions of the Asset Purchase Agreement,
dated May 20, 2005, by and among
Maker, Payee and Sal Palermo, an individual
(the "Agreement"), and is subject to
the terms and conditions of the Agreement,
which are, by this reference,
incorporated herein and made a part hereof.
Capitalized terms used in this Note
without definition shall have the
respective meanings set forth in the
Agreement.
1.
PAYMENTS
1.1 PRINCIPAL
AND INTEREST
The principal amount of this Note shall be due and payable in
three (3) equal consecutive annual
installments of One Million Dollars
($1,000,000.00) each, commencing on the
first anniversary of the Closing Date
until paid in full. Interest on the unpaid
principal balance of this Note shall
be due and payable in installments on the
last day of each calendar quarter
commencing at the end of the first full
quarter succeeding the Closing Date. The
annual interest rate shall be five percent
(5%). Interest shall be calculated on
the basis of a year of 365 or 366 days, as
applicable, and charged for the
actual number of days elapsed.
1.2 MANNER OF
PAYMENT
All payments of principal and interest on this Note shall be
made by check mailed or delivered to
Payee's principal business office or at
such other place in the United States of
America as Payee shall designate to
Maker in writing or, if elected by Maker,
by wire transfer of immediately
available funds to an account designated by
Payee in writing. If any payment of
principal or interest on this Note is due
on a day which is not a Business Day,
such payment shall be due on the next
succeeding Business Day, and such
extension of time shall be taken into
account in calculating the amount of
interest payable under this Note.
1.3
PREPAYMENT
Maker may,
without premium or penalty, at any time and from
time to time, prepay all or any portion of
the outstanding principal balance due
under this Note, provided that each such
prepayment is accompanied by accrued
interest on the amount of principal prepaid
calculated to the date of such
prepayment. Any partial prepayments shall
be applied to installments of
principal in inverse order of their
maturity.
1.4
SET-OFF
Maker shall have the right to withhold and set-off against (a)
any amount due hereunder the amount of any
claim for an amount due in connection
with the Houston Store and Houston Lease to
which Maker may be entitled under
the Agreement, as provided in Section 10.3
thereof, or (b) any payment made
under any Real Property Lease due to or
payable on behalf of Payee under any
Real Property Lease. In the event any of
the foregoing claims is disputed by
Payee or Palermo, Maker may withhold the
amount of such claim until it is
resolved, and if all or part of such claim
is resolved in favor of Payee, Maker
will pay the amount resolved to have been
due Payee within 10 days of such
resolution, with interest at the rate
provided hereunder, from the date withheld
through the date paid. Exercise of such
set-off right shall in no way limit the
other remedies available to Payee in regard
to any such claims under the
Agreement or applicable law.
1.5 LETTER OF
CREDIT
Concurrently with the execution of this Note, Maker shall
deliver to Payee an irrevocable standby
Letter of Credit in the amount of Two
Million Dollars ($2,000,000.00) (the
"Letter of Credit") as security for the
payment of the second and third annual
installment payments of principal.
The Letter of Credit shall be issued by a financial
institution and in a form reasonably
acceptable to Payee and shall not expire
prior to forty (40) days after the third
anniversary of the Closing Date.
Upon Maker's payment to Payee of the second installment of
principal, the Payee s
