INTERACTIVE TELEVISION NETWORKS, INC. 16% SECURED CONVERTIBLE DEBENTURE DUE April 17, 2009
Exhibit
10.13
Dated: April 18, 2006
Dated: April 18, 2006
NEITHER
THIS DEBENTURE NOR THE SECURITIES INTO WHICH THIS DEBENTURE IS CONVERTIBLE
HAVE
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, AS
EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
| No.1 |
$1,000,000.00
|
16%
SECURED CONVERTIBLE DEBENTURE
DUE
April
17, 2009
THIS
DEBENTURE is issued by INTERACTIVE TELEVISION NETWORKS, INC., a Nevada
Corporation (the "Company").
This
Debenture is designated as the Company's 16% Secured Convertible Debenture,
due
on the date set forth above, in the aggregate principal amount of One Million
Dollars ($1,000,000.00) (the "Debenture").
FOR
VALUE
RECEIVED, the Company promises to pay to PENTAGON BERNINI FUND, LTD., an
international business company organized under the laws of the British Virgin
Islands, or its registered assigns (the "Holder"),
the
principal sum of $1,000,000.00, on or before the due date, or such earlier
date
or dates as the Debenture is required to be repaid as provided hereunder (the
"Maturity
Date")
and to
pay interest to the Holder on the aggregate unconverted and then outstanding
principal amount of this Debenture at the rate of 16% per annum.
Interest
on this Debenture shall accrue daily commencing on the Original Issue Date
(as
defined in Section 5)
until
payment in full of the unconverted outstanding principal sum, together with
all
accrued and unpaid interest and other amounts, which may become due hereunder,
has been made. Interest shall be payable quarterly in arrears on the last day
of
each January, April, July, and October, commencing on July 31, 2006 (except
that, if any such day is not a Business Day, then such payment shall be due
on
the next succeeding Business Day) (each such date, an "Interest
Payment Date").
Interest shall be payable in cash, except that the Company may, in its sole
discretion, pay up to 50% of the amount of interest payable on any Interest
Payment Date by issuing additional debentures in accordance with the same terms
as this Debenture (the “Interest
Debentures”).
Interest hereunder will be paid ratably to the Persons (as defined in
Section 5)
in
whose name this Debenture is registered on the records of the Company regarding
registration and transfers of Debentures (the "Debenture
Register")
on the
applicable Record Date (as defined in Section 5).
Interest shall be calculated based on a 365-day year.
-1-
On
the
first day of each month, commencing on November 1, 2007, and continuing
monthly thereafter in accordance with the amortization schedule set forth on
Exhibit A
hereto
(each, a "Monthly
Redemption Date"),
the
Company shall make a principal payment on the Debenture in the amount of $55,555
(except that the payment due on April 1, 2009, shall be in an amount equal
to the then-remaining outstanding principal balance of the Debenture) (each
a
"Principal
Payment").
Principal hereunder will be paid ratably to the Persons in whose name this
Debenture is registered on the Debenture Register on the applicable Record
Date.
The principal amount of this Debenture that is subject to redemption and
repayment on the Maturity Date shall be reduced by the amount of principal
that
is, from time to time, converted into Common Stock by the Holder pursuant to
Section 4.
In the
event that the outstanding principal balance of this Debenture is partially
reduced as a result of a conversion of a portion of this Debenture, such
reduction of the outstanding principal balance of this Debenture shall be
applied to Principal Payments in reverse order of maturity and shall
reduce/eliminate the Principal Payments payable on the latest Monthly Redemption
Dates first.
The
Company shall have the right to prepay this Debenture, in whole or in part,
at
any time and from time to time before the Maturity Date upon not less than
fifteen (15) days prior written notice to the Holder specifying the
prepayment date. Concurrently with each such prepayment, the Company shall
pay
all accrued and unpaid interest on the principal amount of the Debenture that
is
prepaid. No Prepayment Fee shall be payable with respect to prepayments of
principal on this Debenture.
In
the
event that the Company issues any additional debt or equity securities (other
than Interest Debentures or Common Stock issued upon a conversion pursuant
to
Section 4
hereof
or upon exercise of any of the Warrants or upon conversion or exercise of any
other debentures or warrants previously issued to the Holder), the Holder shall
have the right to require that up to fifty percent (50%) of the net proceeds
of
such debt or equity securities be applied to repay all or a portion of the
principal amount outstanding on the 17% Secured Convertible Debenture, dated
October 20, 2005, and the Holder shall have the right to require that up to
one hundred percent (100%) of the remaining net proceeds of such debt or equity
securities be applied to repay this Debenture.
The
performance of the Company's obligations under this Debenture is secured by
(i) that certain Security Agreement dated October 20, 2005 executed by the
Company encumbering substantially all of the Company's personal property, and
(ii) the pledge by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇ ▇▇▇▇▇ (collectively, the "Pledgors")
of a
total of 4,000,000 shares of common stock of the Company (collectively, the
"Pledged
Shares")
pursuant to the terms of that certain Stock Pledge Agreement dated October
20,
2005 between the Pledgors and the Holder (the "Stock
Pledge Agreement").
This
Debenture is subject to the following additional provisions:
-2-
Section
1. This
Debenture is exchangeable for an equal aggregate principal amount of Debentures
of different authorized denominations, as requested by the Holder surrendering
the same. No service charge will be made for such registration of transfer
or
exchange.
Section
2. This
Debenture has been issued subject to certain investment representations of
the
original Holder set forth in the Purchase Agreement dated October 20, 2005
and
may be transferred or exchanged only in compliance with such Purchase Agreement.
Prior to due presentment to the Company for transfer of this Debenture, the
Company and any agent of the Company may treat the Person (as defined in
Section 5)
in
whose name this Debenture is duly registered on the Debenture Register as the
owner hereof for the purpose of receiving payment as herein provided and for
all
other purposes, whether or not this Debenture is overdue, and neither the
Company nor any such agent shall be affected by notice to the
contrary.
Section
3. Events
of Default.
(a) An
"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, interest on, or damages in respect
of the Debenture, free of any claim of subordination, as and when the same
shall
become due and payable (whether on a Conversion Date or the Maturity Date or
by
acceleration or otherwise) which is not cured within three (3) days after
the date the payment became due and payable;
(ii)
the
failure to include the Underlying Shares in the next Registration Statement
that
the Company files with the Commission, registering the resale of the Underlying
Shares;
(iii)
the
failure to observe or perform any other covenant, agreement or warranty
contained in, or otherwise commit any breach of this Debenture and such failure
or breach shall not have been remedied within ten (10) days after the date
on which notice of such failure or breach shall have been given;
(iv)
the
Company shall commence, or there shall be commenced against the Company and
not
dismissed within 60 days, a case under any applicable bankruptcy or insolvency
laws as now or hereafter in effect or any successor thereto, or the Company
commences any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Company, or there is commenced against the Company and not dismissed within
60
days, any such bankruptcy, insolvency or other proceeding; or the Company is
adjudicated insolvent or bankrupt; or any order of relief or other order
approving any such case or proceeding is entered; or the Company suffers any
appointment of any custodian or the like for it or any substantial part of
its
property which continues undischarged or unstayed for a period of 60 days;
or
the Company makes a general assignment for the benefit of creditors; or the
Company shall fail to pay, or shall state that it is unable to pay, or shall
be
unable to pay, its debts generally as they become due; or the Company shall
call
a meeting of its creditors with a view to arranging a composition, adjustment
or
restructuring of its debts; or the Company shall by any act or failure to act
expressly indicate its consent to, approval of or acquiescence in any of the
foregoing; or any corporate or other action is taken by the Company for the
purpose of effecting any of the foregoing;
-3-
(v)
the
Common Stock shall cease to be quoted for trading or listed for trading on
the
National Association of Securities Dealers OTC Bulletin Board ("OTC")
or the
Nasdaq SmallCap Market, New York Stock Exchange, American Stock Exchange or
the
Nasdaq National Market (each, a "Subsequent
Market")
and
shall not again be quoted or listed for trading thereon within five
(5) Trading Days;
(vi)
the
Company shall fail for any reason to deliver Common Stock certificates to a
Holder prior to the fifth (5th)
Trading
Day after a Conversion Date pursuant to and in accordance with Section 4(b),
or the
Company shall provide notice to the Holder, including by way of public
announcement, at any time, of its intention not to comply with requests for
conversions of the Debenture in accordance with the terms hereof. If the
Company's transfer agent is not open for business during a Trading Day, such
Trading Day shall not be counted for purposes of determining the number of
days
for delivery of a Common Stock certificate;
(vii)
the
Company shall fail for any reason to deliver the payment in cash pursuant to
a
Buy-In (as defined herein) within ten (10) Business Days after notice is
deemed delivered hereunder;
(viii)
the
Company shall fail for any reason to cause the number of authorized but unissued
shares of its Common Stock to be increased to an amount sufficient to enable
the
Company to comply with the reserve requirement of Section 4(c)(v)
within a
period of sixty (60) days following its receipt of any Holder's notice
under Section 4(c)(v)
that
such reserve is not being satisfied if, at the time of the notice, the number
of
authorized shares of the Company's Common Stock is insufficient for this
purpose; or
(ix)
a
breach
by the Company of any of the covenants, representations or warranties set forth
herein.
(b) If
an
Event of Default occurs, the Holder shall have the right to declare immediately
due and payable all amounts owing under this Debenture. The Holder need not
provide and the Company hereby waives any presentment, demand, protest or other
notice of any kind, and the Holder may immediately and without expiration of
any
grace period enforce any and all of its rights and remedies hereunder and all
other remedies available to it under applicable law. Such declaration may be
rescinded and annulled by the Holder at any time prior to payment hereunder.
No
such rescission or annulment shall affect any subsequent Event of Default or
impair any right consequent thereon.
(c) If
an
Event of Default under Section 3(a)(i)
occurs,
then the Company shall pay, in addition to the amount of the required payment,
a
late charge equal to ten percent (10%) of the amount of the late payment as
liquidated damages and not as a penalty. The Company acknowledges that the
damage the Holder would suffer in the event of a late payment of any amount
owing under this Debenture would be difficult or impossible to ascertain, and
that the foregoing amount is a reasonable estimate of the damage the Holder
would suffer in such event.
-4-
(d) If
an
Event of Default under Section 3(a)(ii)
occurs,
then
(i) the Company shall pay liquidated damages to Holder equal to $1,000.00
for each dayafter the filing of the next Registration statement (if the
Underlying Shares are not included therein) until the Company files a
Registration Statement in which the Underlying Shares are included; and
(ii) the Conversion Price shall thereafter be reduced to $1.50 per share.
Any amounts to be paid as liquidated damages shall be paid in cash monthly
in
arrears on or before the 30th
day
following the end of the month or partial month to which they relate. The
Company acknowledges that the damage the Holder would suffer in the event of
an
Event of Default under Section 3(a)(ii) would
be
difficult or impossible to ascertain, and that the foregoing amount is a
reasonable estimate of the damage the Holder would suffer in such
event.
The
Holder need not provide and the Company hereby waives any presentment, demand,
protest or other notice of any kind, and the Holder may immediately and without
expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such
declaration may be rescinded and annulled by ▇▇▇▇▇▇ at any time prior to payment
hereunder. No such rescission or annulment shall affect any subsequent Event
of
Default or impair any right consequent thereon.
Section
4. Conversion.
(a) (i)
Conversion
at Option of the Holder.
(A) This
Debenture shall be convertible into shares of Common Stock at the option of
the
Holder, in whole or in part at any time and from time to time, after the
Original Issue Date (subject to the limitations on conversion set forth in
Section 4(a)(ii)
hereof).
The number of shares of Common Stock issuable upon a conversion hereunder equals
the quotient obtained by dividing (x) the outstanding balance of this
Debenture (principal plus unpaid interest) to be converted by (y) the
Conversion Price (as defined in Section 4(c)(i)).
(B) The
Holder shall effect conversions by simultaneously delivering to the Company
a
completed notice in the form attached hereto as Exhibit B
(a
"Conversion
Notice")
and a
completed Conversion Schedule in the form of Schedule I
attached
to the Conversion Notice (as to each Conversion Notice, the "Conversion
Schedule").
The
Conversion Schedule shall set forth the remaining principal amount of this
Debenture and all accrued and unpaid interest thereon subsequent to the
conversion at issue. The date on which a Conversion Notice is delivered to
the
Company is the "Conversion
Date"
relating to such Conversion Notice. Unless the Holder is converting the entire
principal amount outstanding under this Debenture, the Holder is not required
to
physically surrender this Debenture to the Company in order to effect
conversions. Subject to Section 4(b),
each
Conversion Notice, once given, shall be irrevocable. Conversions hereunder
shall
have the effect of reducing the outstanding principal amount of this Debenture
plus all accrued and unpaid interest thereon by amount of the applicable
conversion, which shall be evidenced by entries set forth in the Conversion
Schedule. The Holder and the Company shall maintain records showing the
principal amount converted and the date of such conversions. In the event of
any
dispute or discrepancy, the records of the Holder shall be controlling and
determinative in the absence of manifest error.
-5-
(ii)
Certain
Conversion Restrictions.
(i) The Holder may not convert the Debenture, if and to the extent such
issuance of conversion shares would result in the Holder, together with any
affiliate thereof, beneficially owning (as determined in accordance with
Section 13(d) of the Exchange Act and the rules promulgated thereunder) in
excess of 9.9910% of the then-issued and outstanding shares of Common Stock,
including shares issuable upon conversion of the Debenture held by such Holder
after application of this Section 4(a)(ii).
Since
the Holder will not be obligated to report to the Company the number of shares
of Common Stock it may hold at the time of a conversion hereunder, the Company
may issue Interest Shares or Principal Shares unless such issuance would result
in the issuance of shares of Common Stock in excess of 9.9910% of the then
outstanding shares of Common Stock known by the Company to be owned by the
Holder and its affiliates. In addition, unless the conversion at issue would
result in the issuance of shares of Common Stock in excess of 9.9910% of the
then-outstanding shares of Common Stock without regard to any other shares
of
Common Stock that may be beneficially owned by the Holder or an affiliate
thereof, the Holder shall have the authority and obligation to determine whether
the restriction contained in this Section 4(a)(ii)
will
limit any particular conversion hereunder, and to the extent that the Holder
determines that the limitation contained in this Section 4(a)(ii)
applies,
the determination of which portion of the principal amount of the Debenture
is
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice for a principal amount of the Debenture
that, without regard to any other shares that the Holder or its affiliates
may
beneficially own, would result in an issuance in excess of the amount permitted
hereunder, the Company shall notify the Holder of this fact and shall honor
the
conversion for the maximum principal amount permitted to be converted on such
Conversion Date in accordance with the periods described in Section 4(b)
and, at
the option of the Holder, either retain any principal amount tendered for
conversion in excess of the amount permitted hereunder for future conversions
or
return such excess principal amount to the Holder. The provisions of this
Section may be waived by a Holder (but only as to itself and not to any other
Holder) upon not less than 65 days prior notice to the Company. Other Holders
shall be unaffected by any such waiver.
(b)
(i)
Reserved.
(ii)
Nothing
herein shall limit a Holder's right to pursue actual damages or declare an
Event
of Default pursuant to Section 3
herein
for the Company's failure to deliver certificates representing shares of Common
Stock upon conversion within the period specified herein, and such Holder shall
have the right to pursue all remedies available to it at law. The exercise
of
any such rights shall not prohibit the Holder from seeking to enforce damages
pursuant to any other Section hereof or under applicable law. Further, if the
Company shall not have delivered any cash due in respect of conversion of the
Debenture or as payment of interest thereon by the third (3rd) Trading
Day after the Conversion Date, the Holder may, by notice to the Company, require
the Company to issue shares of Common Stock pursuant to Section 4(c),
except that for such purpose the Conversion Price applicable thereto shall
be
the lesser of the Conversion Price on the Conversion Date and the Conversion
Price on the date of such Holder demand. Any such shares will be subject to
the
provisions of this Section.
-6-
(iii)
In
addition to any other rights available to the Holder, if the Company fails
to
deliver to the Holder any certificate or certificates representing shares of
Common Stock upon conversion within the period specified herein by the third
(3rd) Trading Day after the Conversion Date, and if after such third
(3rd) Trading Day the Holder purchases (in an open market transaction or
otherwise) Common Stock to deliver in satisfaction of a sale by such Holder
of
the Underlying Shares which the Holder anticipated receiving upon such
conversion (a "Buy-In"), then the Company shall (A) pay in cash to the Holder
(in addition to any remedies available to or elected by the Holder) the amount
by which (x) the Holder's total purchase price (including brokerage commissions,
if any) for the Common Stock so purchased exceeds (y) the product of (1) the
aggregate number of shares of Common Stock that such Holder anticipated
receiving from the conversion at issue multiplied by (2) the market price of
the
Common Stock at the time of the sale giving rise to such purchase obligation
and
(B) at the option of the Holder, either reissue a Debenture in the principal
amount equal to the principal amount of the attempted conversion or deliver
to
the Holder the number of shares of Common Stock that would have been issued
had
the Company timely complied with its delivery requirements. If the Company's
transfer agent is not open for business during a Trading Day, such Trading
Day
shall not be counted for purposes of determining the number of days for delivery
of a Common Stock certificate. For example, if the Holder purchases Common
Stock
having a total purchase price of $11,000 to cover a Buy-In with respect to
an
attempted conversion of Debentures with respect to which the market price of
the
Underlying Shares on the date of conversion was a total of $10,000 under clause
(A) of the immediately preceding sentence, the Company shall be required to
pay
the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the
Buy-In.
(c) (i)
The
"Conversion
Price"
shall
be Two Dollars ($2.00) per share.
(ii)
If
the
Company, at any time while the Debenture is outstanding, shall (a) pay a
stock dividend or otherwise make a distribution or distributions on shares
of
its Common Stock or any other equity or equity equivalent securities payable
in
shares of Common Stock, (b) subdivide outstanding shares of Common Stock
into a larger number of shares, (c) combine (including by way of reverse
stock split) outstanding shares of Common Stock into a smaller number of shares,
or (d) issue by reclassification of shares of Common Stock any shares of
capital stock of the Company, then the Conversion Price shall be multiplied
by a
fraction of which the numerator shall be the number of shares of Common Stock
(excluding treasury shares, if any) outstanding before such event and of which
the denominator shall be the number of shares of Common Stock outstanding after
such event. Any adjustment made pursuant to this Section 4(c)(ii)
shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.
(iii)
If
the
Company, at any time while the Debenture is outstanding, shall distribute to
all
holders of Common Stock (and not to the Holder) evidences of its indebtedness
or
assets or rights or warrants to subscribe for or purchase any security, then
in
each such case the Conversion Price at which the Debenture shall thereafter
be
convertible shall be determined by multiplying the Conversion Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution by a fraction of which the denominator
shall be the Per Share Market Value determined as of the record date mentioned
above, and of which the numerator shall be such Per Share Market Value on such
record date less the then fair market value at such record date of the portion
of such assets or evidence of indebtedness so distributed applicable to one
outstanding share of the Common Stock, as determined by the Board of Directors
in good faith. In either case the adjustments shall be described in a written
statement provided to the Holder describing of the portion of assets or
evidences of indebtedness so distributed or such subscription rights applicable
to one share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date mentioned above.
-7-
(iv)
In
case
of any reclassification of the Common Stock or any compulsory share exchange
pursuant to which the Common Stock is converted into other securities, cash
or
property, the Holder shall have the right thereafter to convert the then
outstanding principal amount, together with all accrued but unpaid interest
and
any other amounts then owing hereunder in respect of this Debenture only into
the shares of stock and other securities, cash and property receivable upon
or
deemed to be held by holders of the Common Stock following such reclassification
or share exchange, and the Holder of the Debenture shall be entitled upon such
event to receive such amount of securities, cash or property as the shares
of
the Common Stock of the Company into which the then outstanding principal
amount, together with all accrued but unpaid interest and any other amounts
then
owing hereunder in respect of this Debenture could have been converted
immediately prior to such reclassification or share exchange would have been
entitled.
(v)
The
Company shall maintain a share reserve of not less than 105% of the shares
of
Common Stock issuable upon conversion of the Debenture; and within five
(5) Business Days following the receipt by the Company of a Holder's notice
that such minimum number of Underlying Shares is not so reserved, the Company
shall if there are sufficient authorized but unissued shares promptly reserve
a
sufficient number of shares of Common Stock to comply with such requirement.
If
there are not sufficient authorized but unissued shares, the Company shall
use
its best efforts to call a special shareholders' meeting within sixty
(60) days of such notice to increase the number of authorized shares of
Common Stock.
(vi)
All
calculations under this Section 4 shall be made to the nearest ten
thousandth. No adjustments in either the Conversion Price shall be required
if
such adjustment is less than $0.0001, provided, however, that any adjustments
which by reason of this Section are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(vii)
Whenever
the Conversion Price is adjusted pursuant to this Section 4(c), the Company
shall promptly mail to the Holder a notice setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(viii)
If
(A)
the Company shall declare a dividend (or any other distribution) on the Common
Stock; (B) the Company shall declare a special nonrecurring cash dividend on
or
a redemption of the Common Stock; (C) the Company shall authorize the granting
to all holders of the Common Stock rights or warrants to subscribe for or
purchase any shares of capital stock of any class or of any rights; (D) the
approval of any stockholders of the Company shall be required in connection
with
any reclassification of the Common Stock, any consolidation or merger to which
the Company is a party, any sale or transfer of all or substantially all of
the
assets of the Company, of any compulsory share exchange whereby the Common
Stock
is converted into other securities, cash or property; (E) the Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding
up of
the affairs of the Company; then, in each case, the Company shall cause to
be
filed at each office or agency maintained for the purpose of conversion of
the
Debenture, and shall cause to be mailed to the Holder at its last address as
it
shall appear upon the stock books of the Company, at least ten
(10) calendar days prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is to
be
taken for the purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the holders
of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer
or
share exchange, provided, that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. The Holder is entitled to
convert the Debenture during the ten (10) day calendar period commencing the
date of such notice to the effective date of the event triggering such
notice.
-8-
(ix)
In
case
of any (1) merger or consolidation of the Company with or into another Person,
or (2) sale by the Company of more than one-half (½) of its assets in one or a
series of related transactions, a Holder shall have the right to (A) convert
the
aggregate principal amount of the Debenture then outstanding into the shares
of
stock and other securities, cash and property receivable upon or deemed to
be
held by holders of Common Stock following such merger, consolidation or sale,
and such Holder shall be entitled upon such event or series of related events
to
receive such amount of securities, cash and property as the shares of Common
Stock into which such aggregate principal amount of the Debenture could have
been converted immediately prior to such merger, consolidation or sales would
have been entitled, or (B) in the case of a merger or consolidation, require
the
surviving entity to issue to the Holder a convertible debenture with a principal
amount equal to the aggregate principal amount of the Debenture then held by
such Holder, plus all accrued and unpaid interest and other amounts owing
thereon, which such newly issued convertible debenture shall have terms
identical (including with respect to conversion) to the terms of this Debenture,
and shall be entitled to all of the rights and privileges of the Holder of
the
Debenture set forth herein and the agreements pursuant to which the Debentures
were issued. In the case of clause (B), the conversion price applicable for
the
newly issued shares of convertible preferred stock or convertible debentures
shall be based upon the amount of securities, cash and property that each share
of Common Stock would receive in such transaction and the Conversion Price
in
effect immediately prior to the effectiveness or closing date for such
transaction. The terms of any such merger, sale or consolidation shall include
such terms so as to continue to give the Holder the right to receive the
securities, cash and property set forth in this Section upon any conversion
or
redemption following such event. This provision shall similarly apply to
successive such events.
(d) The
Company covenants that it will at all times reserve and keep available out
of
its authorized and unissued shares of Common Stock, solely for the purpose
of
issuance upon conversion of the Debenture and payment of interest on the
Debenture, each as herein provided, free from preemptive rights or any other
actual or contingent purchase rights of persons other than the Holder, not
less
than such number of shares of the Common Stock as shall (subject to any
additional requirements of the Company as to reservation of such shares set
forth in the Debenture) be issuable (taking into account the adjustments and
restrictions of Section 4(a)(ii))
upon
the conversion of the outstanding principal amount of the Debenture and payment
of interest hereunder. The Company covenants that all shares of Common Stock
so
issuable shall, upon issue, be duly and validly authorized, issued and fully
paid, nonassessable and, if the registration statement registering the resale
of
the Underlying Shares has been declared effective under the Securities Act,
registered for public sale in accordance with such registration
statement.
-9-
(e) Upon
a
conversion hereunder the Company shall not be required to issue stock
certificates representing fractions of shares of the Common Stock, but may
if
otherwise permitted, make a cash payment in respect of any final fraction of
a
share based on the Per Share Market Value at such time. If the Company elects
not, or is unable, to make such a cash payment, the Holder shall be entitled
to
receive, in lieu of the final fraction of a share, one whole share of Common
Stock.
(f) The
issuance of certificates for shares of the Common Stock on conversion of the
Debenture shall be made without charge to the Holder thereof for any documentary
stamp or similar taxes that may be payable in respect of the issuance or
delivery of such certificates, provided
that the
Company shall not be required to pay any tax that may be payable in respect
of
any transfer involved in the issuance or delivery of any such certificates
upon
conversion in a name other than that of the Holder of the Debenture so
converted, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been
paid.
(g) Any
and
all notices or other communications or deliveries to be provided by the Holder
hereunder, including, without limitation, any Conversion Notice, shall be in
writing and delivered personally, by facsimile, sent by a nationally recognized
overnight courier service or sent by certified or registered mail, postage
prepaid, addressed to the Company, at
|
If
to the Company:
▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CFO
If
to the Holder:
Pentagon
Bernini Fund, Ltd.
c/o
Pentagon Capital Management Plc.
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Telephone
No.: ▇▇▇ (▇)▇▇ ▇▇▇▇-▇▇▇▇
Facsimile
No.: ▇▇▇ (▇)▇▇ ▇▇▇▇-▇▇▇▇
Attention:
Mr. ▇▇▇▇▇ ▇▇▇▇▇▇▇, CEO
|
-10-
With
a
copy to:
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
LLP
▇▇▇
▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ Floor
Los
Angeles, CA 90071
Telephone
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
or
such
other address or facsimile number as the Company may specify for such purposes
by notice to the Holder delivered in accordance with this Section. Any and
all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent
by a
nationally recognized overnight courier service or sent by certified or
registered mail, postage prepaid, addressed to each Holder at the facsimile
telephone number or address of such ▇▇▇▇▇▇ appearing on the books of the
Company. Any notice or other communication or deliveries hereunder shall be
deemed given and effective on the earliest of (i) the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section prior to 5:00 p.m. (the
recipient's time), (ii) the date after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile telephone
number specified in this Section later than 5:00 p.m. (the recipient's
time) on any date and earlier than 11:59 p.m. (the recipient's time) on
such date, (iii) four (4) days after deposit in the United States
mail, (iv) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (v) upon actual receipt
by the party to whom such notice is required to be given.
Section
5. Definitions.
For the
purposes hereof, the following terms shall have the following
meanings:
"Business
Day"
means
any day except Saturday, Sunday and any day that is a federal legal holiday
in
the United States or a day on which banking institutions are authorized or
required by law or other government action to close.
"Commission"
means
the Securities and Exchange Commission.
"Common
Stock"
means
the common stock, $0.001 par value per share, of the Company and stock of any
other class into which such shares may hereafter be changed or
reclassified.
-11-
"Exchange
Act"
means
the Securities Exchange Act of 1934, as amended.
"Market
Price"
on any
given date means the average of the three lowest intra-day trading prices of
the
Company's Common Stock during the ten (10) immediately preceding Trading
Days (which may include Trading Days prior to the Original Issue Date),
provided,
that
such 10-Trading Day period shall be extended by the number of Trading Days
during such period on which (i) trading in the Common Stock is suspended
by, or not traded on, the OTC or a Subsequent Market on which the Common Stock
is then traded, or (ii) after the date the registration statement for the
Underlying Shares is declared effective by the SEC, the prospectus included
in
the registration statement may not be used by the Holder for resale of
Underlying Shares (provided such inability to use the prospectus is not
(a) caused by the Holder or (b) the result of the Company's filing of
post-effective amendments to the registration statement.
"Original
Issue Date"
means
the date of the first issuance of the Debenture, regardless of the number of
transfers and regardless of the number of instruments that may be issued to
evidence such Debenture.
"Per
Share Market Value"
on any
given date means the price per share in the last reported trade of the Common
Stock on the OTC or on a Subsequent Market on which the Common Stock is then
listed.
"Person"
means
an individual, a corporation, a limited liability company, a partnership, an
unincorporated association, a business trust, a government or political
subdivision thereof or a governmental agency.
"Record
Date"
means,
with respect to each Interest Payment Date or Quarterly Redemption Date, the
date that is five (5) Business Days prior to such Interest Payment Date or
Quarterly Redemption Date.
"Securities
Act"
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
"Trading
Day"
means a
day on which shares of Common Stock are quoted on the OTC or quoted or traded
on
any Subsequent Market on which shares of Common Stock are then quoted or listed;
provided
that in
the event shares of Common Stock are not so quoted or listed, then "Trading
Day"
shall mean a Business Day.
"Underlying
Shares"
means
the shares of Common Stock issuable upon conversion of the Debenture in
accordance with the terms hereof.
"Warrants"
means
the Warrants to Purchase Common Stock, dated April 18, 2006, that were issued
by
the Company to the Holder and all other Holders concurrently with the issuance
of the Debenture on April 18, 2006.
Section
6. Except
as
expressly provided herein, no provision of this Debenture shall alter or impair
the obligations of the Company, which are absolute and unconditional, to pay
the
principal of, and interest on, this Debenture at the time, place, and rate,
and
in the coin or currency, herein prescribed. This Debenture is a direct
obligation of the Company. This Debenture ranks pari passu with all other
Debentures previously issued or issued concurrently herewith and shall be senior
to other convertible Debentures issued in the future. As long as the Debenture
is outstanding, the Company shall not and shall cause its subsidiaries not
to,
without the consent of the Holder, amend its certificate of incorporation,
bylaws or other charter documents so as to adversely affect any rights of the
Holder.
-12-
Section
7. This
Debenture shall not entitle the Holder to any of the rights of a stockholder
of
the Company, including without limitation, the right to vote, to receive
dividends and other distributions, or to receive any notice of, or to attend,
meetings of stockholders or any other proceedings of the Company, unless and
to
the extent converted into shares of Common Stock in accordance with the terms
hereof.
Section
8. If
this
Debenture is mutilated, lost, stolen or destroyed, the Company shall execute
and
deliver, in exchange and substitution for and upon cancellation of the mutilated
Debenture, or in lieu of or in substitution for a lost, stolen or destroyed
debenture, a new Debenture for the principal amount of this Debenture so
mutilated, lost, stolen or destroyed but only upon receipt of evidence of such
loss, theft or destruction of such Debenture, and of the ownership hereof,
and
indemnity, if requested, all reasonably satisfactory to the
Company.
Section
9. THE
VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS
SET
FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO PROVISIONS RELATING TO
CONFLICTS OF LAW TO THE EXTENT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY. THE PARTIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREE THAT ACTIONS, SUITS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT MAY BE BROUGHT ONLY IN STATE OR FEDERAL COURTS
LOCATED IN THE STATE OF NEW YORK, COUNTY OF NEW YORK AND HEREBY SUBMIT
TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE.
Section
10. Any
waiver by the Company or the Holder of a breach of any provision of this
Debenture shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Debenture. The failure of the Company or the Holder to insist upon strict
adherence to any term of this Debenture on one or more occasions shall not
be
considered a waiver or deprive that party of the right thereafter to insist
upon
strict adherence to that term or any other term of this Debenture. Any waiver
must be in writing.
Section
11. If
any
provision of this Debenture is invalid, illegal or unenforceable, the balance
of
this Debenture shall remain in effect, and if any provision is inapplicable
to
any person or circumstance, it shall nevertheless remain applicable to all
other
persons and circumstances. If it shall be found that any interest or other
amount deemed interest due hereunder shall violate applicable laws governing
usury, the applicable rate of interest due hereunder shall automatically be
lowered to equal the maximum permitted rate of interest. The Company covenants
(to the extent that it may lawfully do so) that they shall not at any time
insist upon, plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay, extension or usury law or other law which would prohibit
or forgive the Company from paying all or any portion of the principal of or
interest on the Debenture as contemplated herein, wherever enacted, now or
at
any time hereafter in force, or which may affect the covenants or the
performance of this indenture, and the Company (to the extent it may lawfully
do
so) hereby expressly waives all benefits or advantage of any such law, and
covenants that it will not, by resort to any such law, hinder, delay or impeded
the execution of any power herein granted to the Holder, but will suffer and
permit the execution of every such as though no such law has been
enacted.
-13-
Section
12. Whenever
any payment or other obligation hereunder shall be due on a day other than
a
Business Day, such payment shall be made on the next succeeding Business
Day.
Section
13. The
Company may not assign this Debenture or any rights or obligations hereunder
without the prior written consent of ▇▇▇▇▇▇. Holder may assign this Agreement,
in whole or in part, and any rights or obligation hereunder without the prior
written consent of Company by delivery of written notice to Company of such
assignment.
Section
14. The
Company shall provide the Holder with no less than fifteen (15) Trading Days
advance notice, in writing, of a redemption/prepayment of some or all of the
outstanding principal balance of this Debenture. Such written notice shall
state
the (i) amount of this Debenture that will be subject to
redemption/prepayment, and (ii) the payment date of the
pre-payment/redemption. The Holder shall be entitled to convert some or all
of
this Debenture until the close of business on the Business Day immediately
preceding the date set by the Company for the pre-payment/redemption pursuant
to
this Section 14.
Section
15. If
any
action at law or equity is necessary to enforce or interpret this Agreement,
the
prevailing party shall be entitled to received from the other party or parities
reasonable attorneys fees, costs and necessary disbursements (including costs
of
collection) in addition to any other relief to which the prevailing party or
parties maybe entitled.
IN
WITNESS WHEREOF, the Company has caused this 16% Secured Convertible
Debenture to be duly executed by a duly authorized officer as of the date first
above indicated.
|
INC.,
a
Nevada corporation
By:
_________________________________
Name:
______________________________
Title:
_______________________________
|
|
-14-
EXHIBIT
A
AMORTIZATION
SCHEDULE
|
November
1, 2007
|
$55,555.00
|
|
December
1, 2007
|
$55,555.00
|
|
January
1, 2008
|
$55,555.00
|
|
February
1, 2008
|
$55,555.00
|
|
March
1, 2008
|
$55,555.00
|
|
April
1, 2008
|
$55,555.00
|
|
May
1, 2008
|
$55,555.00
|
|
June
1, 2008
|
$55,555.00
|
|
July
1, 2008
|
$55,555.00
|
|
August
1, 2008
|
$55,555.00
|
|
September
1, 2008
|
$55,555.00
|
|
October
1, 2008
|
$55,555.00
|
|
November
1, 2008
|
$55,555.00
|
|
December
1, 2008
|
$55,555.00
|
|
January
1, 2009
|
$55,555.00
|
|
February
1, 2009
|
$55,555.00
|
|
March
1, 2009
|
$55,555.00
|
|
April
1, 2009
|
$55,565.00
|
-15-
EXHIBIT
B
NOTICE
OF CONVERSION
(To
be
Executed by the Registered Holder
in
order
to Convert the Debenture)
The
undersigned hereby elects to convert the attached Debenture into shares of
common stock, $0.001 par value per share (the "Common
Stock"),
of
Interactive Television Networks, Inc., a Nevada corporation (the "Company"),
according to the conditions hereof, as of the date written below. If shares
are
to be issued in the name of a person other than the undersigned, the undersigned
will pay all transfer taxes payable with respect thereto and is delivering
herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the holder for any
conversion, except for such transfer taxes, if any.
Conversion
Calculations:
|
____________________________________________
Date
to Effect Conversion
____________________________________________
Principal
Amount of Debentures to be Converted
|
|
|
$__________
|
|
|
___________________________________________
Number
of shares of Common Stock to be Issued
|
|
|
___________________________________________
Applicable
Conversion Price
|
|
|
___________________________________________
Signature
|
|
|
___________________________________________
Name
|
|
|
___________________________________________
Address
|
|
-16-
Schedule
1
CONVERSION
SCHEDULE
16%
Convertible Debenture due April 1, 2009, in the aggregate principal amount
of $1,000,000.00 issued by Interactive Television Networks, Inc., a Nevada
corporation. This Conversion Schedule reflects conversions made under
Section 4(a)(i)
of the
above-referenced
Debenture.
Dated:
|
Date
of Conversion
(or
for first entry, Original Issue Date)
|
Amount
of Conversion
|
Aggregate
Principal Amount Remaining Subsequent to Conversion
(or
original Principal Amount)
|
Company
Attest
|
|
|
|
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|
|
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|
|
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|
|
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|
|
||||
|
|
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|
|
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|
|
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|
|
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-17-