Exhibit A
Form Of 12% Unsecured 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 12% per annum (this unsecured 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 $1,200,000, 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
September 28, 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
June 30, 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 election (the “ Election
”) 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 either
be converted into securities of the Company or repaid in full, as
hereinafter described. The Election has no effect unless the
effective date of the IPO occurs prior to the Maturity Date. The
Election shall be made on the Form of Election attached to this
Note. The Election permits the Holder to elect one of the following
two alternatives:
(i)
Conversion : 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 50% of the IPO offering price;
or
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(ii)
Repayment : All outstanding principal and any accrued and
unpaid interest shall be repaid out of the proceeds of the IPO,
together with a five-year purchase warrant (the “ IPO
Warrant ”) to purchase such number of IPO Securities as
is equal to the number of IPO Securities that would have been
issued upon full conversion of the Note (including all accrued and
unpaid interest), if the Note had been converted at the IPO
offering price.
(b) The
Election need not be made at the time of issuance of this Note, but
must be made on or before such specific date as may be determined
in the reasonable discretion of the Company and the underwriter for
the IPO, which shall be a date prior to the anticipated filing date
of a registration statement for the IPO. The Company will provide
the Holder with at least 20 days’ prior written notice
of the date on which the Election must be received by the Company.
The Election shall be made in writing, by delivery of a completed
Form of Election to the Company. If Holder fails to timely deliver
a written notice of Election after notice thereof, the repayment
Election under subsection (a)(ii) shall be deemed to have been
irrevocably made.
(c) Issuance
of the IPO Securities, the IPO Warrant or delivery of the Payment
amount contemplated by the Election 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.
(d) 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.
(e) The IPO
Securities into which this Note may be converted, and the shares of
common stock of the Company issuable upon exercise of the IPO
Warrant and the
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Post-Maturity
Warrant shall be subject to registration with the SEC to the extent
provided in the Memorandum, and any Holder of this Note shall be
entitled to the benefits of such registration rights, and to
enforce such registration rights against the Company.
(a) “
Event of Default ”, wherever used herein, means any
one of the following events (whatever the reason and whether it
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 the principal of this Note, as and when
the same shall become due and payable; or
(ii) any
default in the payment of interest on this Note, as and when the
same shall become due and payable; or
(iii) Company shall fail to observe or
perform any obligation required to be performed by it hereunder or
shall breach any term or provision of this Note; or
(iv) Company shall commence, or there shall
be commenced against Company, a case under any applicable
bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or Company commence any other proceeding under
any reorganization, arrangement, adjustment o
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