Exhibit A
Form Of 10% Convertible Promissory Note
FOR VALUE
RECEIVED , NGTV, a California corporation (the “
Company ”), with their primary offices located at 9944
Santa Monica Blvd., Beverly Hills, California 90212, promises to
pay to the order of ___(the “ Holder ”), upon
the terms set forth below, the principal sum of $___plus interest
on the unpaid principal sum outstanding at the rate of 10% per
annum (this convertible promissory note, the “ Note
”). This Note is one of a series of notes (collectively, the
“ Notes ”) of like tenor and kind in the
aggregate principal amount of not more than $6,000,000, issued in
connection with an offering of Notes by the Company in accordance
with the terms and conditions of the Company’s Confidential
Private Offering Memorandum dated October 13, 2005 (the
“ Memorandum ”). The Notes, other than this
Note, are sometimes hereinafter referred to as the “ Other
Notes ”.
1. Principal Payments .
Company shall be required to pay the Holder an amount in cash, wire
transfer or check equal to the outstanding principal amount and all
accrued and unpaid interest of this Note, on or before
July 31, 2006 (the “ Maturity Date ”),
following which this Note shall become due and payable.
2. Interest Payments .
Commencing 30 days after the date hereof, accrued but unpaid
interest on this Note shall be due and payable on the 1
st of each calendar month thereafter. Interest
payments shall be made in cash or by wire transfer as instructed by
the Holder from time to time. Whenever any payment required under
the terms of this Note shall be stated to be due on a day other
than a business day, such payment shall be made on the next
succeeding business day, and such extension of time shall in such
case be included in the computation of payment of
interest.
(a) This Note
is subject to a mandatory conversion (the “Conversion”)
whereby, in the event that prior to the Maturity Date the Company
completes an initial public offering of its securities, resulting
in gross proceeds to the Company of at least $20,000,000 (the
“ IPO ”), the outstanding principal amount of
the Note and all accrued and unpaid interest thereon will be
converted into securities of the Company, as hereinafter described.
The Conversion shall not take effect unless the effective date of
the IPO occurs prior to the Maturity Date. Upon the closing of the
IPO, all outstanding principal and any accrued and unpaid interest
shall be converted at the initial closing of the IPO into
securities identical to the securities to be offered in the IPO
(the “ IPO Securities ”), at a conversion price
equal to a 33 ?% discount to the IPO offering price.
(b) Issuance
of the IPO Securities shall only occur upon surrender of the
original of this Note to the Company at its principal place of
business or delivery to the Company of an Affidavit of Lost Note
and such form of bond or security as is reasonably satisfactory to
the Company.
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(c) In the
event the IPO is not completed prior to the Maturity Date, this
Note will become immediately due and payable without notice to or
demand upon the Company and, in addition to repayment of this Note
on the Maturity Date, a warrant (the “ Post-Maturity
Warrant ”) will be issued to Holder entitling Holder to
purchase the number of shares of common stock of NGTV as is equal
to the principal amount of this Note, exercisable for a period of
five years from the date of issuance at an exercise price equal to
the fair market value of one share of common stock of the Company
as of the Maturity Date. The fair market value of the NGTV common
stock will be mutually agreed upon, in good faith, by NGTV and
Capital Growth Financial, LLC, on behalf of the holders of the
Notes, as a group (“ CGF ”); or, in the absence
of such agreement, by binding arbitration to be conducted before
the American Arbitration Association in Palm Beach County, Florida
(the “ Arbitration ”). In the absence of
agreement between the Company and CGF as to the fair market value
of the Company’s common stock, either the Company or CGF may
commence the Arbitration, which shall be conducted in accordance
with the AAA’s commercial rules for arbitration, before one
arbitrator. The expenses of the Arbitration shall be borne one-half
by the Company and one-half by the Holder and the holders of the
Other Notes, as a group. By acceptance of this Note, Holder agrees
to pay its allocable portion of the expenses attributable to the
holders of the Notes, as a group, including the fees and expenses
of counsel selected by CGF. The Post-Maturity Warrant will be in
the form attached as Exhibit B to the Memorandum, and will
include the piggyback registration rights set forth in
Section 15 thereof.
(d) In
consideration of the investment in this Note, the Company has
agreed, to the extent described in this Note and the Memorandum, to
register in the IPO Registration Statement (as such term is defined
in the Memorandum) resale of the securities into which this Note
may be converted (the “Conversion Securities”). In
addition, if resale of the Conversion Securities is not then
covered by an effective registration statement and the Company
shall determine to register any of its securities either for its
own account or the account of a security holder or holders (other
than a registration relating solely to employee benefit plans, or a
registration relating to a corporate reorganization or other
transaction on Form S-4, or a registration on any registration form
that does not permit secondary sales), the Company will:
(i) promptly notify the Holder of such determination; and
(ii) include in such registration statement (and any related
qualifications under applicable blue sky or other state securities
laws), at the Company’s sole cost and expense, except as set
forth in subsection (x) below, those Conversion Securities
specified in a written request or requests made by any Holder and
received by the Company within twenty (20) days after the
written notice from the Company described in clause (i) above
is delivered by the Company. Such written request may specify all
or a part of Holder’s Conversion Securities. (x) If the
registration statement of which the Company gives notice is for a
registered public offering involving an underwriting, the Company
shall so advise the Holder as a part of the written notice given
pursuant to subsection (a)(i), above. In such event, the right of
Holder to registration pursuant to this section shall be
conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Shares in the
underwriting to the extent provided herein. All Holders proposing
to distribute their securities through such
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underwriting
shall (together with the Company and the other holders of
securities of the Company with registration rights to participate
therein distributing their securities through such underwriting)
enter into an underwriting agr
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