Unassociated Document


    THIS PROMISSORY NOTE AND ANY SECURITIES INTO WHICH THIS NOTE MAY BE
CONVERTIBLE PURSUANT TO THE TERMS HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS AND
NEITHER THIS NOTE NOR ANY SUCH SECURITIES, NOR ANY INTEREST IN ANY THEREOF MAY
BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL TO THE HOLDER OF THIS NOTE, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTOR TO THE COMPANY, THAT SUCH SECURITIES OR INTERESTS THEREIN
MAY BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED IN THE
MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
APPLICABLE STATE SECURITIES LAWS.

     

    IMAGE
METRICS, INC.

     

    CONVERTIBLE PROMISSORY
NOTE

    
       

      
        
          
            
              	
                      $1,100,000

                    	
                      September 9,
    2010

                    
	 	
                      Santa Monica,
      California

                    


            

          

        

         

      

    

    IMAGE
METRICS, INC., a Nevada corporation (the “Company”), for value
received, hereby promises to pay to the order of Rosi Kahane (the “Lender”),
with an address of Chesa Carla, Giassa de las Barrieras 17, 7505 Celerina,
Switzerland or its assigns (the “Holder”), the
principal amount of one million one hundred thousand dollars ($1,100,000),
payable in full on the Maturity Date (as hereinafter defined), unless
prepayments have been made by the Company pursuant to Section 2(d) hereof, in
which case the outstanding balance hereon shall be payable in full on the
Maturity Date, and to pay interest on the unpaid principal balance hereof at the
rate of 13.50% per annum (calculated on the basis of a 365-day year) on the
Maturity Date, all as hereafter further provided.

     

    
      	 	
              1.

            	
              Related
    Agreements.

            


    

     

    This Note
is issued pursuant to that certain Loan Agreement of even date herewith by and
between the Company and the Holder (the “Loan Agreement”) to
which reference is made for a complete description of the rights, obligations,
limitations and restrictions of or applicable to the Company and the Holder.
Capitalized terms utilized herein and not otherwise defined shall have the
meanings ascribed to them in the Loan Agreement. This Note is the Note referred
to in that certain Security Agreement (All Assets) (the “Security Agreement”)
of even date herewith issued by the Company to the Holder. This Note and the
Company’s obligations hereunder are secured by the collateral described in the
Security Agreement.

     

    
      
        
        

      

      
         

        
          

        

      

      
        
        

      

       

      
        
          	 	
                  2.

                	
                  

                    Payments.

                  

                


        

      

    

    
       

      (a) The
”Maturity Date” is January 31, 2011; provided however that in
the event
that a Subsequent Financing is consummated, then the Maturity Date shall be the
earliest maturity date of any indebtedness incurred in the Subsequent
Financing.

    

     

    (b) After
the Maturity Date, interest on any overdue principal amount of this Note shall
accrue at a rate of eighteen percent (18%) per annum and shall be payable
quarterly.

     

    (c) If
the Maturity Date would fall on a day that is not a Business Day (as defined
below), the payment due on such Maturity Date will be made on the immediately
preceding Business Day with the same force and effect as if made on the the
Maturity Date. “Business Day” means any day which is not a Saturday or Sunday
and is not a day on which banking institutions are generally authorized or
obligated to close in the City of New York, New York.

     

    (d) The
Company may, at its option, prepay all or any part of the principal of this
Note, without payment of any premium or penalty; provided that, the Company
shall give Holder at least 15 days’ advance written notice of the Company’s
intent to prepay and Holder shall have the right to convert all or any portion
of this Note pursuant to Section 3(b) at any time during such 15-day period. All
payments on this Note, shall be applied first to accrued interest hereon and the
balance to the payment of the principal hereof.

     

    (e)
Payments of principal and interest on this Note shall be made by check sent to
the Holder’s address set forth above or to such other address as the Holder may
designate for such purpose from time to time by written notice to the Company,
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private
debts.

     

    (f) The
obligations to make the payments provided for in this Note and the Loan
Agreement are absolute and unconditional and not subject to any defense, setoff,
counterclaim, rescission, recoupment or adjustment whatsoever. The Company
hereby expressly waives demand and presentment for payment, notice of
non-payment, notice of dishonor, protest, notice of protest, bringing of suit
and diligence in taking any action to collect any amount called for hereunder,
and shall be directly and primarily liable for the payment of all sums owing and
to be owing hereunder, regardless of and without any notice, diligence, act or
omission with respect to the collection of any amount called for
hereunder.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
       

      
        
          	 	
                  3.

                	
                  

                    Conversion.

                  

                


        

      

    

     

    
      (a)
Certain Definitions. The following terms shall have the meanings herein
specified:

       

    

    "Capital Stock" means
any of the current or future authorized class or series of capital stock of the
Company.

     

    "Common Stock" means
authorized Common Stock, $.001 par value, of the Company, and shall include any
other class or series of capital stock of the Company that is not limited to a
fixed sum in respect of the rights of the holder thereof to participate in the
liquidation or winding up of the Company.

     

    "Conversion Shares"
means the shares of Common Stock, or such other shares of Capital Stock,
issuable upon conversion of this Note.

     

    (b)
Election to Convert. Holder may, at its option exercisable by written notice
(the "Conversion Notice") to the Company at any time prior to payment in full
hereof, elect to convert all or any part of the entire outstanding principal
amount of this Note plus a pro rata share of the accrued interest on the then
outstanding balance (i) into shares of Common Stock at a conversion price equal
to $1.00 per share (subject to adjustment in the event of any stock splits,
stock dividends or other recapitalization of Common Stock). Conversion of this
Note shall be conditioned on Holder’s execution of an investment representation
statement in a form reasonably required by the Company.

     

    (c)
Delivery of Conversion Shares. The Capital Stock issued on conversion of this
Note (the "Conversion Shares") shall be delivered as follows:

     

    (i) As
promptly as practicable after conversion, the Company shall deliver to Holder,
or to such person or persons as are designated by Holder in the Conversion
Notice, a certificate or certificates representing the number of shares of
Capital Stock into which this Note or portion thereof is to be converted in such
name or names as are specified in the Conversion Notice, together with, in the
case of conversion of the entire remaining principal balance hereof, any cash
payable in respect of a fractional share. Such conversion shall be deemed to
have been effected at the close of business on the date when this Note shall
have been surrendered to the Company for conversion, so that the person entitled
to receive such Conversion Shares shall be treated for all purposes as having
become the record holder of such Conversion Shares at such time.

     

    (ii) In
the event that less than the entire outstanding principal of this Note is
converted hereunder pursuant to subsection (b) above, this Note shall not be
surrendered for cancellation but shall have the fact and amount of conversion
recorded on the face of this Note by writing acknowledged by Holder and the Company. If less than the entire principal balance of this
Note is converted, the amount of principal converted shall be reduced to the
nearest amount that results in no fractional shares.

     

    
      
        
        

      

      
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    (d)
Reservation of Shares. The Company agrees that, during the period within which
this Note may be converted, the Company will at all times have authorized and in
reserve, and will keep available solely for delivery upon the conversion of this
Note, Capital Stock and other securities and properties as from time to time
shall be receivable upon the conversion of this Note, free and clear of all
restrictions on issuance, sale or transfer other than those imposed by law and
free and clear of all pre-emptive rights. The Company agrees that the Conversion
Shares shall, at the time of such delivery, be validly issued and outstanding,
fully paid and non-assessable, and the Company will take all such action as may
be necessary to assure that the stated value or par value per share of the
Conversion Shares is at all times equal to or less than the Conversion
Price.

     

    
      (e)
Protection Against Dilution.

    

     

    
      (i) In
the event of any consolidation with or merger of the Company
with or into another corporation (other than a merger or consolidation in which
the Company is the surviving or continuing corporation) while any principal or
accrued interest remains outstanding under this Note, then such successor, shall
(i) execute with the Holder an agreement providing that the Holder shall have
the right thereafter to receive upon conversion of this Note solely the kind and
amount of shares of stock and other securities, property, cash or any
combination thereof receivable upon such consolidation, or merger by a holder of
the number of shares of Capital Stock for which this Note might have been
converted immediately prior to such consolidation or merger, (ii) make effective
provision in its Articles of Incorporation or otherwise, if necessary, in order
to effect such agreement, and (iii) set aside or reserve, for the benefit of the
Holder, the stock, securities, property and cash to which the Holder would be
entitled upon conversion of this Note.

    

     

    (ii) In
the event of any reclassification or change of the Capital Stock into which this
Note may be converted (other than a change in par value or from no par value to
a specified par value, or as a result of a subdivision or combination, but
including any change in the shares into two or more classes or series of
shares), or in the event of any consolidation or merger of another corporation
into the Company in which the Company is the continuing corporation and in which
there is a reclassification or change (including a change to the right to
receive cash or other property) of the Capital Stock into which this Note may be
converted (other than a change in par value, or from no par value to a specified
par value, or as a result of a subdivision or combination, but including any
change in the shares into two or more classes or series of shares), in either
case while any principal or accrued interest remains outstanding under this
Note, then the Holder shall have the right thereafter to receive upon conversion
of this

     

    
      
        
        

      

      
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    Note solely the kind and amount of shares of stock and other
securities, property, cash or any combination thereof receivable upon such
reclassification, change, consolidation or merger by a holder of the number of
shares of Capital Stock for which this Note might have been converted
immediately prior to such reclassification, change, consolidation or
merger.

     

    The above
provisions of this Section 3(e) shall similarly apply to successive
reclassifications and changes of Capital Stock and to successive consolidations
and mergers.

     

    Notice of
such consolidation, merger, sale, distribution, reclassification or
reorganization and of such provisions so proposed to be made, shall be mailed to
the Holder not less than fifteen (15) days prior to such event.

    
      
         

        
          
            	 	
                    4.

                  	
                    

                      Reserved.

                    

                  


          

        

      

      
        
           

          
            
              	 	
                      5.

                    	
                      

                        Remedies
      Upon Default.

                      

                    


            

             

          

        

      

    

    Upon the
failure of the Company to make any payment due to the Holder hereunder, which
failure shall not be cured within ten Business Days following the date that such
payment is due, the Holder, by notice in writing given to the Company, may
declare the entire principal amount then outstanding of, and the accrued
interest on, this Note to be due and payable immediately, and upon any such
declaration the same shall become and be due and payable immediately, without
presentment, demand, protest or other formalities of any kind, all of which are
expressly waived by the Company.

    
      
         

        
          
            	 	
                    6.

                  	
                    

                      Transfer.

                    

                  


          

        

      

      
        
           

        

      

    

    
      (a) Any
Notes issued upon the transfer of this Note shall be numbered and shall
be registered in a Note Register as they are issued. The Company shall be
entitled to treat the registered holder of any Note on the Note Register as the
owner in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to, or interest in, such Note on the part of any other
person, and shall not be liable for any registration or transfer of Notes which
are registered or to be registered in the name of a fiduciary or the nominee of
a fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Note shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by the Holder’s duly authorized
attorney or representative, or accompanied by proper evidence of succession,
assignment, or authority to transfer. In all cases of transfer by an attorney,
executor, administrator, guardian, or other legal representative, duly
authenticated evidence of his, her or its authority shall be produced. Upon any
registration of transfer, the Company shall deliver a new Note or Notes to the
person entitled thereto. This Note may be exchanged, at the option of the Holder thereof, for another Note, or other Notes of
different denominations, of like tenor and representing in the aggregate a like
principal amount, upon surrender hereto to the Company or its duly authorized
agent.

    

     

    
      
        
        

      

      
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    (b) The
Holder acknowledges that it has been advised by the Company that this Note has
not been registered under the Act, that the Note is being or has been issued on
the basis of the statutory exemption provided by Section 4(2) of the Act or
Regulation D promulgated thereunder, or both, relating to transactions by an
issuer not involving any public offering, and that the Company’s reliance
thereon is based in part upon the representations made by the original Holder in
accordance with the terms of the Offering. The Holder acknowledges that such
Holder has been informed by the Company of, or is otherwise familiar with, the
nature of the limitations imposed by the Act and the rules and regulations
thereunder on the transfer of securities. In particular, the Holder agrees that
no sale, assignment or transfer of the Note shall be valid or effective, and the
Company shall not be required to give any effect to any such sale, assignment or
transfer (collectively, “Transfer”), unless
(i) the Transfer of the Note is registered under the Act, it being understood
that the Note is not currently registered for sale and that the Company has no
obligation or intention to so register the Notes, or (ii) the Transfer is exempt
from registration under the Act and the Holder delivers an opinion of counsel
inform and substance satisfactory to the Company and counsel for the Company
that the Transfer is so exempt, and, in either case, that the Transfer is not
restricted by applicable state securities laws.

    
      
        
           

          
            
              	 	
                      7.

                    	
                      

                        Miscellaneous.

                      

                    


            

          

        

        
          
             

          

        

      

    

    
      (a) Any
notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or by Federal Express, Express Mail or similar overnight
delivery or courier service or delivered (in person or by telecopy, telex or
similar telecommunications equipment) against receipts to the party to whom it
is to be given; (i) if to the Company, at its address at 1918 Main Street,
2nd
Floor, Santa Monica, California 90405, Attention: Chief Executive Officer, (ii)
if to the Holder, at its address set forth on the first page hereof or (iii) in
either case, to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 7(a). Notice to the estate of
any party shall be sufficient if addressed to the party as provided in this
Section 7(a). Any notice or other communication given by certified mail shall be
deemed given at the time of certification thereof, except for a notice changing
a party’s address which shall be deemed given at the time of receipt thereof.
Any notice given by other means permitted by this Section 7(a) shall be deemed
given at the time of receipt thereof.

    

     

    (b) Upon
receipt of evidence satisfactory to the Company of the loss, theft, destruction
or mutilation of this Note (and upon surrender of this Note if mutilated), and
upon reimbursement of the Company’s reasonable incidental expenses and in the
case of loss, theft or destruction, indemnity as the Company shall, at its
option, reasonable request and in form satisfactory to counsel for the Company,
the Company shall execute and deliver to the Holder a new Note of like date,
tenor and denomination.

     

    
      
        
        

      

      
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    (c) No course of dealing and no delay or omission on the part of the
Holder in exercising any right or remedy shall operate as a waive thereof or
otherwise prejudice the Holder’s rights, powers or remedies. No right, power or
remedy conferred by this Note upon the Holder shall be exclusive of any other
right, power or remedy referred to herein or now or hereafter available at law,
in equity, by statute or otherwise, and all such remedies may be exercised
singly or concurrently.

     

    (d) This
Note has been negotiated in the State of California and shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to principles governing conflicts of law.

     

    (e) The
parties irrevocably consent to the jurisdiction of the federal and state courts
of the State of California in connection with any action or proceeding arising
out of or relating to this Note, any document or instrument delivered pursuant
to or in connection with this Note, or a breach of this Note or any such
document or instrument.

     

    (f) This
Note may be amended, or any of its provisions waived (which amendment or waiver
shall be binding upon all future Holders) only by written consent or consents
executed by the Company and the holders of Notes representing a majority in
principal amount of the Notes then outstanding; provided, however, that any
waiver or amendment which reduces the amount of principal owing hereunder or the
interest rate set forth herein, or which changes the date of payment of any
principal hereof, the Maturity Date provided hereunder shall be effective only
upon the written consent of the Company, the Holder and the holders of Notes
representing a majority in principal amount of the Notes then
outstanding.

     

    IN WITNESS WHEREOF, the
Company has caused this Note to be executed and delivered as of the day and year
first above written.

     

    
      
        
          
            	 	

                    IMAGE
      METRICS, INC.

                  	 
	 	 	 
	 	 	 
	 	 	 	 
	 	
                    By:
      

                  	  	 
	 	 	Ron
      Ryder	 
	 	 	

                    Chief
      Financial Officer

                  	 
	 	 	 	 


          

        

      

    

     

    
      
        
        

      

      
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