NOTE PURCHASE AGREEMENT

 

This Note Purchase Agreement (this “Agreement”), is entered into as of August
31, 2011, by and among Ecko Entertainment, Inc., a Delaware corporation (the
“Company”), and each of the undersigned purchasers (individually a “Purchaser,”
and collectively, the “Purchasers”), listed on the Schedule of Purchasers
attached hereto as Exhibit A (the “Schedule of Purchasers”).

 

RECITAL

 

On the terms and subject to the conditions set forth herein, each of the
Purchasers are willing to purchase from the Company, and the Company is willing
to sell to each of the Purchasers, Unsecured Convertible Promissory Notes (each,
a “Note” and collectively, the “Notes”), to be issued by the Company in the
principal amounts set forth opposite each Purchaser’s name on the Schedule of
Purchasers (each, a “Loan Amount” and collectively, the “Loan Amounts”).

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, and the representations,
warranties, and covenants set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:

 

1.            Notes.

 

(a)            Issuance of Notes. In reliance upon the representations,
warranties and covenants of the parties set forth herein, the Company agrees to
issue, sell and deliver to the Purchasers, and the Purchasers, severally and not
jointly, agree to purchase from the Company, the Notes in an aggregate amount
not to exceed $1,000,000. The purchase price for the Notes shall be payable in
immediately available funds.

 

(b)            Terms of the Notes. The terms and conditions of the Notes are set
forth in the form of Note attached hereto as Exhibit B. Capitalized terms not
otherwise defined herein shall have the meanings set forth in Exhibit B.

 

2.            Closings; Delivery.

 

(a)            Closings. The initial closing of the purchase and sale of the
Notes under this Agreement (the “Initial Closing”), shall take place remotely
via the exchange of documentsand signatures on the date hereof (the “Initial
Closing Date”). The Company shall have the right to sell additional Notes
pursuant to this Agreement at one or more subsequent closings to occur on or
before the ninetieth (90th) day following the Initial Closing Date (the
“Subsequent Closings”), and to add additional entities and persons as Purchasers
hereunder and as parties hereto. Each Subsequent Closing shall take place
remotely via the exchange of documents and signatures on a date or dates
determined by the Company and the Purchasers purchasing additional Notes at such
Subsequent Closing (each such date, a “Subsequent Closing Date”). The Initial
Closing and each Subsequent Closing shall constitute and be treated as a
“Closing” hereunder, and the Initial Closing Date and each Subsequent Closing
Date shall constitute and be treated as a “Closing Date” hereunder.

 

1

 

 

(b)          Delivery. Subject to the terms of this Agreement, at the Closing,
the Company will deliver to each Purchaser participating in such closing a Note
in such Purchaser’s name representing the Note purchased by such Purchaser, and
such Purchaser will deliver to the Company, by check or wire transfer, payment
for the Note being purchased in an amount equal to the amount set forth opposite
such Purchaser’s name on the Schedule of Purchasers.

 

3.            Representations and Warranties of the Company. The Company hereby
represents and warrants to each Purchaser:

 

(a)          Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
business as currently conducted.

 

(b)          Corporate Power. The Company has all requisite legal and corporate
power to enter into, execute and deliver this Agreement and the Notes. This
Agreement and the Notes are valid and binding obligations of the Company,
enforceable in accordance with their terms, except as the same may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium, usury
or other laws of general application relating to or affecting enforcement of
creditors’ rights and the rules or laws governing specific performance,
injunctive relief or other equitable remedies.

 

(c)          Authorization.

 

(i)            Corporate Action. All corporate and legal action on the part of
the Company, its officers, directors and stockholders necessary for the
execution and delivery of this Agreement, the sale and issuance of the Notes,
and the performance of the Company’s obligations hereunder and under the Notes
have been taken.

 

(ii)         Valid Issuance. The Notes, and any shares of capital stock issued
upon conversion or exercise of the Notes, and any shares of the Company’s common
stock (the “Common Stock”) issued upon conversion of such capital stock, if
applicable (collectively, the “Securities”), when issued in compliance with the
provisions of this Agreement, the Notes or the terms of the capital stock, as
the case may be, will be validly issued and will be free of any liens or
encumbrances created by the Company, provided, however, that the Securities may
be subject to restrictions on transfer under state and/or federal securities
laws as set forth herein, and as may be required by future changes in such laws.

 

(d)          Government Consent. No consent, approval, order or authorization
of, or designation, registration, declaration or filing with, any federal,
state, local or other governmental authority on the part of the Company is
required in connection with the valid execution and delivery of this Agreement
and the Notes, other than, if required, filings or qualifications under the
Securities Act of 1933, as amended (the “Securities Act”), and other applicable
state securities laws, which filings or qualifications, if required, will be
timely filed or obtained by the Company.

 

2

 

 

(e)            Offering. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4 hereof, the offer, issue,
and sale of the Securities are exempt from the registration and prospectus
delivery requirements of the Securities Act, and have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit, or qualification requirements of all applicable state
securities laws.

 

4.            Representations and Warranties by the Purchaser. Each Purchaser
hereby represents and warrants to the Company:

 

(a)            Investment Intent. The Purchaser is acquiring the Securities for
the Purchaser’s own account, for investment and not with a view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Securities Act, and the Purchaser has no present intention of
selling, granting any participation in, or otherwise distributing the
Securities. The Purchaser understands that the Securities have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration and prospectus delivery requirements of the
Securities Act pursuant to Section 4(2) thereof, which exemption depends upon,
among other things, the bona fide nature of the Purchaser’s investment intent
expressed herein.

 

(b)            Access to Information. During the negotiation of the transactions
contemplated herein, the Purchaser and its representatives have been afforded
full and free access to corporate books, financial statements, records,
contracts, documents, and other information concerning the Company, and to its
offices and facilities, have been afforded an opportunity to ask such questions
of the Company’s officers, employees, agents, accountants and representatives
concerning the Company’s business, operations, financial condition, assets,
liabilities and other relevant matters as they have deemed necessary or
desirable, and have been given all such information as has been requested, in
order to evaluate the merits and risks of the prospective investment
contemplated herein.

 

(c)            Due Diligence. The Purchaser and its representatives have been
solely responsible for the Purchaser’s own “due diligence” investigation of the
Company and its management and business, for the Purchaser’s own analysis of the
merits and risks of this investment, and for the Purchaser’s own analysis of the
fairness and desirability of the terms of the investment. Notwithstanding the
foregoing, such due diligence investigation shall not limit the representations
and warranties made by the Company in Section 3 hereof.

 

(d)            Accredited Investor. The Purchaser (i) is an “Accredited
Investor” as that term is defined in Rule 501 of Regulation D promulgated under
the Securities Act and has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of such
Purchaser’s prospective investment in the Securities; and (ii) has the ability
to bear the economic risks of such Purchaser’s prospective investment, including
a complete loss of Purchaser’s investment in the Securities.

 

(e)            Authority. The Purchaser has the full right, power and authority
to enter into and perform the Purchaser’s obligations under this Agreement, and
this Agreement constitutes a valid and binding obligation of the Purchaser
enforceable in accordance with its terms except as may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium, usury or other
laws of general application relating to or affecting enforcement of creditors’
rights and the rules or laws governing specific performance, injunctive relief
or other equitable remedies.

 

3

 

 

(f)            Government Consent. No consent, approval, order or authorization
of, or designation, registration, declaration or filing with, any federal,
state, local or other governmental authority on the part of the Purchaser is
required in connection with the valid execution and delivery of this Agreement.

 

(g)            Restricted Securities. The Purchaser understands that the Company
has no present intention of registering the Securities, and that if the Company
does not (i) register its Common Stock with the Securities and Exchange
Commission pursuant to Section 12 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), (ii) become subject to Section 15(d) of the
Exchange Act, (iii) supply information pursuant to Rule 15c2-11 thereunder, or
(iv) have a registration statement covering the Securities under the Securities
Act in effect when the Purchaser desires to sell the Securities, the Purchaser
may be required to hold the Securities for an indeterminate period. The
Purchaser also understands that any sale of the Securities that might be made by
the Purchaser in reliance upon Rule 144 under the Securities Act may be made
only in limited amounts in accordance with the terms and conditions of that
rule.

 

5.            Market Stand-Off Agreement. The Purchaser hereby agrees that it
will not, without the prior written consent of the managing underwriter, during
the period commencing on the date of the final prospectus relating to the
Company’s initial public offering (“IPO”) and ending on the date specified by
the Company and the managing underwriter (such period not to exceed one hundred
eighty (l80) days or such other period (not to exceed thirty-four (34) days
after such 180-day period) as may be requested by the Company or an underwriter
to accommodate regulatory restrictions on (a) the publication or other
distribution of research reports and (b) analyst recommendations and opinions,
including, but not limited to, the restrictions contained in FINRA Rule 2711),
(i) lend, offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of common stock of the Company (the “Common Stock”) or
any securities convertible into or exercisable or exchangeable for Common Stock
(whether such shares or any such securities are then owned by the Purchaser or
are thereafter acquired), or (ii) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences of
ownership of the Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or other
securities, in cash or otherwise. The underwriters in connection with the
Company’s IPO are intended third-party beneficiaries of this Section 5 and shall
have the right, power and authority to enforce the provisions hereof as though
they were a party hereto. Each Purchaser further agrees to execute such
agreements as may be reasonably requested by the underwriters in the Company’s
IPO that are consistent with this Section 5 or that are necessary to give
further effect thereto.

 

6.            Restrictive Legend. Each certificate or document representing the
Securities, and any other securities issued in respect of the Securities upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event shall be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any legend required under
applicable state securities laws):

 

4

 

 

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, OFFERED FOR
SALE, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE
COMPANY STATING THAT SUCH SALE, OFFER FOR SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT.

 

7.            Miscellaneous.

 

(a)            Waiver and Amendment. Any provision of this Agreement may be
amended, waived or modified upon the written consent of the Company and the
Purchasers holding a majority in interest of the then outstanding Loan Amounts.
Any amendment or waiver effected in accordance with this Section 7(a) shall be
binding upon the Company, each Purchaser and each transferee of each Purchaser.

 

(b)            Governing Law. This Agreement and all actions arising out of or
in connection with this Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflicts of law provisions of the State of Delaware or of any other state.

 

(c)            Entire Agreement. This Agreement, together with Exhibit A and
Exhibit B attached hereto, constitute the full and entire understanding and
agreement between the Company and each of the Purchasers with regard to the
subjects hereof and thereof.

 

(d)            Expenses. The Company and the Purchasers shall each bear their
respective expenses and legal fees incurred in connection with the negotiation,
execution and delivery of this Agreement and the Notes.

 

(e)            Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
(i) upon actual delivery to theparty to be notified, (ii) 24 hours after sending
a confirmed facsimile transmission, (iii) one (1) business day after deposit
with a recognized overnight courier, or (iv) three (3) business daysafter
deposit with the U.S. Postal Service by certified or registered mail, postage
prepaid, return receipt requested, addressed or sent (1) if to a Purchaser, at
the address or facsimile number ofthe Purchaser set forth below such party’s
name on the Schedule of Purchasers, or at such other address or facsimile number
as the Purchaser shall have furnished to the Company in writing upon 10 days’
notice, or (2) if to the Company, at 40 West 23rd Street, New York, New York
10010, or at such other address as the Company shall have furnished to the
Purchasers in writing upon 10 days’ notice.

 

5

 

 

(f)            Validity. If any provision of this Agreement or the Note shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

 

(g)            Counterparts; Facsimile Signatures. This Agreement may be
executed in any number of counterparts, each of which shall be an original, but
all of which together shall be deemed to constitute one instrument. This
Agreement may be executed by facsimile signatures.

 

[remainder of page intentionally left blank]

 

6

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Note Purchase
Agreement as of the date first set forth above.

 

  COMPANY:       ECKO ENTERTAINMENT, INC.
a Delaware corporation       By:       Guy Ben-Artzi     President

 

7

 

 

COUNTERPART SIGNATURE PAGE TO
NOTE PURCHASE AGREEMENT

 

  PURCHASER:           Eitan Matmon

 

8

 

 

COUNTERPART SIGNATURE PAGE TO
NOTE PURCHASE AGREEMENT

 

  PURCHASER:       /s/ Craig dos Santos    Andover Fund LLC.       Andover Fund 
      By: /s/ Craig dos Santos         Name: Craig dos Santos       Title:
Managing Director

 

 

9

 

 

EXHIBIT A

 

SCHEDULE OF PURCHASERS

 

Closing Date: August 31, 2011

 

PURCHASERS  AMOUNT OF NOTE                TOTAL:     

 

10

 

 

EXHIBIT B

 

THIS NOTE AND THE SECURITIES EVIDENCED BY THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD,
OFFERED FOR SALE, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THIS NOTE OR THE SECURITIES REPRESENTED
HEREBY REASONABLY SATISFACTORY TO THE COMPANY STATING THAT SUCH SALE, OFFER FOR
SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE ACT.

 

UNSECURED CONVERTIBLE PROMISSORY NOTE

 

$50,000 August 29, 2011

 

FOR VALUE RECEIVED, Ecko Entertainment, Inc., a Delaware corporation (the
“Company”), promises to pay to Andover Fund (the “Holder”), or registered
assigns, the principal sum of Fifty-Thousand Dollars ($50,000), or such lesser
amount as shall then equal the outstanding principal amount hereof, together
with simple interest from the date of this Note on the unpaid principal balance
at a rate equal to five percent (5%) per annum. The interest rate shall be
computed on the basis of the actual number of days elapsed and a year of 365
days. All unpaid principal, together with unpaid and accrued interest payable
hereunder, if not converted by the provisions of Section 6 below, shall be due
and payable on demand by the Holder at any time after the earlier of (i) twelve
(12) months following the date hereof, or (ii) upon or after the occurrence of
an Event of Default (as defined below). This Note is one of a series of
Unsecured Convertible Promissory Notes (the “Notes”) containing substantially
similar terms and conditions issued by the Company pursuant to that certain Note
Purchase Agreement dated August 29th, 2011 (the “Purchase Agreement”), and the
holders of the Notes are referred to herein as the “Holders.”

 

The following is a statement of the rights of the Holder and the conditions to
which this Note is subject, and to which the Holder hereof, by the acceptance of
this Note, agrees:

 

1.            Definitions. As used in this Note, the following capitalized terms
have the following meanings:

 

(a)            “Change of Control” shall mean (i) the sale, transfer or other
disposition (but not including a pledge or mortgage to a bona fide lender) of
all or substantially all of the assets of the Company (other than to a
wholly-owned subsidiary of the Company), or (ii) the merger or consolidation of
the Company into or with another entity after which the stockholders of the
Company immediately prior to such transaction do not own, immediately following
the consummation of the transaction by virtue of their shares in the Company or
securities received in exchange for such shares in connection with the
transaction, a majority of the voting power of the surviving entity.
Notwithstanding the foregoing, a merger effected solely for the purpose of
changing the domicile of the Company shall not be deemed a Change of Control.

 

11

 

 

(b)            “Majority Holders” shall mean the Holders of a majority in
interest of the then outstanding Loan Amounts (as defined in the Purchase
Agreement).

 

(c)            “Qualified Financing” shall mean an equity financing of the
Company in which the Company issues shares of capital stock in a transaction or
series of related transactions and receives an aggregate of at least $2,000,000
in consideration of such issuance (including consideration in the form of
cancellation of the Notes).

 

2.            Events of Default. The occurrence of any of the following shall
constitute an “Event of Default” under this Note:

 

(a)            Failure to Pay. The Company shall fail to pay any principal or
accrued interest payment on the date due hereunder, and such payment shall not
have been made within ten (10) business days of the Company’s receipt of the
Holder’s written notice to the Company of such failure to pay;

 

(b)            Voluntary Bankruptcy or Insolvency Proceedings. The Company shall
(i) apply for or consent to the appointment of a receiver, trustee, liquidator
or custodian of itself or of all or a substantial part of its property, (ii)
make a general assignment for the benefit of its creditors, (iii) be dissolved
or liquidated in full or in part, (iv) become insolvent (as such term may be
defined or interpreted under any applicable statute), (v) commence a voluntary
case or other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or other
similar law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vi) take any
action for the purpose of effecting any of the foregoing;

 

(c)            Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for
the appointment of a receiver, trustee, liquidator or custodian of the Company
or of all or a substantial part of its property, or an involuntary case or other
proceedings seeking liquidation, reorganization or other relief with respect to
the Company or its debts under any bankruptcy, insolvency or other similar law
or hereafter in effect, shall be commenced, and an order for relief entered, or
such proceeding shall not be dismissed or discharged within thirty (30) days of
commencement; or

 

(d)            Breach of Agreements. Unless waived by the Majority Holders, the
Company’s material breach of any representation, covenant or agreement contained
in this Note or the Purchase Agreement, and such breach is not cured by the
Company within fifteen (15) business days after written notice thereof, in
reasonable detail, is given to the Company by the Holder.

 

12

 

 

3.            Rights of Holder Upon Default. Upon the occurrence of any Event of
Default and at any time thereafter during the continuance of such Event of
Default, the Holder may declare all outstanding principal and accrued interest
hereunder to be immediately due and payable without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived. In
addition to the foregoing, upon the occurrence or existence of any Event of
Default, the Holder may exercise any other right, power or remedy granted to the
Holder or otherwise permitted to the Holder by law, either by suit in equity or
by action at law, or both.

 

4.            Prepayment. This Note may not be prepaid in whole or in part at
any time by the Company without the prior written consent of the Majority
Holders.

 

5.            Unsecured. This Note is a general unsecured obligation of the
Company.

 

6.            Conversion.

 

(a)            Automatic Conversion. In the event the Company closes a Qualified
Financing on or prior to the Maturity Date, all of the principal and accrued
interest then outstanding under the Note shall be automatically converted,
without further action on the part of the Holder, into shares of capital stock
of the Company issued in the Qualified Financing at the closing thereof. The
shares of capital stock issued upon such conversion shall be entitled to the
same rights, and shall be subject to the same restrictions, as are applicable to
the shares issued pursuant to the Qualified Financing, and the Holder shall
become a party to the agreements entered into by the investors in connection
with the Qualified Financing. The price per share for such conversion shall be
equal to the lesser of (i) seventy percent (70%) of the price per share of the
capital stock paid by the investors in the Qualified Financing, or (ii) the
price per share that would result based on a valuation of the Company
immediately prior to the closing of the Qualified Financing equal to $15,000,000
(such price per share to be determined by dividing $15,000,000 by the then fully
diluted capitalization of the Company, including shares of Common Stock reserved
for issuance under the Company’s stock option plans).

 

(b)            Optional Conversion. In the event the Company closes an equity
financing which is not deemed a Qualified Financing (a “Non-Qualified
Financing”) on, prior to or after the Maturity Date, or the Company closes a
Qualified Financing after the Maturity Date, at the option of the Holder, all of
the principal and accrued interest then outstanding under the Note may be
converted into shares of capital stock of the Company issued in the
Non-Qualified Financing or the Qualified Financing, as applicable, at the
closing thereof. The shares of capital stock issued upon such conversion shall
be entitled to the same rights, and shall be subject to the same restrictions,
as are applicable to the shares issued pursuant to the Non-Qualified Financing
or Qualified Financing, as the case may be, and the Holder shall become a party
to the agreements entered into by the investors in connection with the
Non-Qualified Financing or Qualified Financing, as the case may be. The price
per share for such conversion shall be equal to the lesser of (i) seventy
percent (70%) of the price per share of the capital stock paid by the investors
in the Non-Qualified Financing or Qualified Financing, as applicable, or (ii)
the price per share that would result based on a valuation of the Company
immediately prior to the closing of the Non-Qualified Financing or Qualified
Financing, as applicable, equal to $15,000,000 (such price per share to be
determined by dividing $15,000,000 by the then fully diluted capitalization of
the Company, including shares of Common Stock reserved for issuance under the
Company’s stock option plans).

 

13

 

 

(c)            Notice. Written notice (the “Company Notice”) shall be delivered
to the Holder of this Note at the address last shown on the records of the
Company for the Holder or, if no such address appears, at the place where the
principal executive office of the Company is located, notifying the Holder of
the terms and conditions of the Qualified Financing or Non-Qualified Financing,
as the case may be, the price per share for the conversion, the principal and
accrued interest then outstanding under the Note, the date on which any such
conversion will occur, and calling upon such Holder to surrender to the Company,
in the manner and at the place designated, the Note. If the Holder elects to
convert this Note, the Holder shall provide written notice to the Company no
later than five (5) business days after the Company Notice is deemed given.
Notwithstanding the foregoing, no notice is required to be delivered by the
Holder to the Company to effect an automatic conversion of this Note pursuant to
a Qualified Financing.

 

(d)            Mechanics and Effect of Conversion. No fractional shares of
capital stock of the Company shall be issued upon conversion of this Note. Upon
the conversion of all of theprincipal and accrued interest outstanding under
this Note, in lieu of the Company issuing any fractional shares to the Holder,
the Company shall pay to the Holder the amount of outstanding principal and
accrued interest that is not so converted. Upon full conversion of this Note,
theCompany shall be forever released from all its obligations and liabilities
under this Note.

 

7.            Successors and Assigns. Subject to the restrictions on transfer
described in Section 10 below, the rights and obligations of the Company and the
Holder shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.

 

8.            Waiver and Amendment. Any provision of the Notes may be amended,
waived or modified upon the written consent of the Company and the Majority
Holders. Any amendment or waiver effected in accordance with this Section 8
shall be binding upon the Company, each Holder and each transferee of each
Holder.

 

9.            Transfer of this Note. This Note may not be transferred in
violation of any restrictive legend set forth hereon. Each new note issued upon
transfer of this Note shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Securities Act of 1933,
as amended (the “Securities Act”), unless in the opinion of counsel for the
Company such legend is not required in order to ensure compliance with the
Securities Act. The Company may issue stop transfer instructions to its transfer
agent in connection with such restrictions. Prior to presentation of this Note
for registration of transfer, the Company shall treat the Holder as the owner
and registered holder of this Note for the purpose of receiving all payments of
principal and interest hereon and for all other purposes whatsoever, whether or
not this Note shall be overdue and the Company shall not be affected by notice
to the contrary.

 

10.         Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state or local tax authorities.

 

14

 

 

11.         Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed effectively given (a) upon
actual delivery to the party to be notified, (b) 24 hours after sending a
confirmed facsimile transmission, (c) one (1) business day after deposit with a
recognized overnight courier, or (d) three (3) business days after deposit with
the U.S. Postal Service by certified or registered mail, postage prepaid, return
receipt requested, addressed or sent (1) if to the Holder, at the address or
facsimile number of the Holder last shown on the records of the Company for the
Holder, or at such other address or facsimile number as the Holder shall have
furnished to the Company in writing upon 10 days’ notice, or (2) if to the
Company, at 40 West 23rd Street, New York, New York 10010, or at such other
address as the Company shall have furnished to the Holder in writing upon 10
days’ notice.

 

12.         Payment. Payment shall be made in lawful tender of the United
States. Any payment of accrued interest and/or principal shall be payable on a
Pro Rata Basis to all holders of the Notes. “Pro Rata Basis” shall mean the
amount determined by dividing (a) the aggregate amount of unpaid principal under
this Note by (b) the aggregate amount of unpaid principal under all Notes.

 

13.         Expenses; Waivers. If action is instituted to collect this Note, the
Company promises to pay all costs and expenses, including, without limitation,
reasonable attorneys’ fees and costs, incurred in connection with such action.
The Company hereby waives notice of default, presentment or demand for payment,
protest or notice of nonpayment or dishonor and all other notices or demands
relative to this instrument.

 

14.         Governing Law. This Note and all actions arising out of or in
connection with this Note shall be governed by and construed in accordance with
the laws of the State of Delaware, without regard to the conflicts of law
provisions of the State of Delaware or of any other state.

 

[signature page to follow]

 

15

 

 

IN WITNESS WHEREOF, the Company has caused this Unsecured Convertible Promissory
Note to be issued as of the date first set forth above.

 

  ECKO ENTERTAINMENT, INC.
a Delaware corporation       By:       Guy Ben-Artzi     President

 

16