EXHIBIT 10.1
 
Interactive Television Networks, Inc.
 
Shares of Common Stock
 
(Amendment to Certificate of Designation)
 
SUBSCRIPTION AGREEMENT
 
December 14, 2006

 
M.A.G. Capital, LLC
Mercator Momentum Fund, L.P.
Mercator Momentum Fund III, L.P.
Monarch Pointe Fund, Ltd.
c/o M.A.G. Capital, LLC
555 South Flower Street, Suite 4200
Los Angeles, California 90071

Ladies and Gentlemen:
 
Interactive Television Networks, Inc., a Nevada corporation (the "Company"),
hereby confirms its agreement with Mercator Momentum Fund, L.P. ("MMF"),
Mercator Momentum Fund III, L.P. ("MMF III"), and Monarch Pointe Fund, Ltd.
("Monarch") as set forth below. Each of MMF, MMF III and Monarch are sometimes
referred to herein as a "Purchaser" and together as the "Purchasers". The
Purchasers currently are the record and beneficial owners of an aggregate of
3,333,333 shares of the Company’s Series A Convertible Preferred Stock (the
"Series A Stock"), which shares represent all of the currently issued and
outstanding shares of the Series A Stock.
 
1. The Transaction. Subject to the terms and conditions herein contained, the
Company agrees that it shall: (a) Issue and sell to the Purchasers 933,333
shares (the “Securities”) of the Company's common stock, par value $0.001 per
share (the "Common Stock"); and (b) Amend the Certificate of Designation of
Preferences and Rights of Series A Convertible Preferred Stock as currently on
file with the Secretary of State of the State of Nevada (the "Series A
Certificate of Designation") to reduce the Conversion Price (as defined in the
Series A Certificate of Designation) from $3.75 to $0.75 per share. The form of
the amendment of the Series A Certificate of Designation is attached hereto as
Exhibit A. The 3,333,333 shares of its Series A Convertible Preferred Stock (the
"Series A Stock") shall continue to be convertible into shares (the "Conversion
Shares") of the Common Stock in accordance with the formula set forth in the
Series A Certificate of Designation. The number of Conversion Shares that any
Purchaser may acquire at any time are subject to limitation in the Series A
Certificate of Designation so that the aggregate number of shares of Common
Stock of which such Purchaser and all persons affiliated with such Purchaser
have beneficial ownership (calculated pursuant to Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) does not at any time exceed 9.99% of the
Company's then outstanding Common Stock.
 

 
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This Agreement, the amendment to the Series A Certificate of Designation, and
the Registration Rights Agreement by and among the Company and the Purchasers,
entered into concurrently herewith and attached hereto as Exhibit B, are
sometimes herein collectively referred to as the "Transaction Documents."
 
The Securities will be offered and sold to the Purchasers without such offers
and sales being registered under the Securities Act of 1933, as amended
(together with the rules and regulations of the Securities and Exchange
Commission (the "SEC") promulgated thereunder, the "Securities Act"), in
reliance on exemptions therefrom.
 
In connection with the sale of the Securities, the Company has made available
(including electronically via the SEC's EDGAR system) to Purchasers the
Company's periodic and current reports, forms, schedules, proxy statements and
other documents (including exhibits and all other information incorporated by
reference) filed with the SEC under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2005, and all subsequent reports, forms,
schedules, statements, documents, filings and amendments filed by the Company
with the SEC under the Exchange Act, are collectively referred to as the
"Disclosure Documents." All references in this Agreement to financial statements
and schedules and other information which is "contained," "included" or "stated"
in the Disclosure Documents (or other references of like import) shall be deemed
to mean and include all such financial statements and schedules, documents,
exhibits and other information which is incorporated by reference in the
Disclosure Documents.
 
2. Representations and Warranties of the Company. Except as set forth in the
Disclosure Schedule, the Company represents and warrants to and agrees with
Purchasers as follows:
 
(a) The Disclosure Documents as of their respective dates did not, and will not
(after giving effect to any updated disclosures therein) as of the Closing Date,
contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Disclosure Documents and the
documents incorporated or deemed to be incorporated by reference therein, at the
time they were filed or hereafter are filed with the SEC, complied and will
comply, at the time of filing, in all material respects with the requirements of
the Securities Act and/or the Exchange Act, as the case may be, as applicable.
 
(b) Schedule A of the Disclosure Schedules sets forth a complete list of the
subsidiaries of the Company (the "Subsidiaries"). Each of the Company and its
Subsidiaries has been duly incorporated and each of the Company and the
Subsidiaries is validly existing and in good standing as a corporation under the
laws of its jurisdiction of incorporation, with the requisite corporate power
and authority to own its properties and conduct its business as now conducted as
described in the Disclosure Documents and is duly qualified to do business as a
foreign corporation in good standing in all other jurisdictions where the
ownership or leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
business, condition (financial or other), properties or results of operations of
the Company and the Subsidiaries, taken as a whole (any such event, a "Material
Adverse Effect"); as of the Closing Date, the Company will have the authorized,
issued and outstanding capitalization set forth in on Schedule B (the "Company
Capitalization"); except as set forth in the Disclosure Documents or on Schedule
A, the Company does not have any Subsidiaries or own directly or indirectly any
of the capital stock or other equity or long-term debt securities of or have any
equity interest in any other person; all of the outstanding shares of capital
stock of the Company and the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights and are owned free and clear of all liens,
encumbrances, equities, and restrictions on transferability (other than those
imposed by the Securities Act and the state securities or "blue sky" laws) or
voting; except as set forth in the Disclosure Documents, all of the outstanding
shares of capital stock of the Subsidiaries are owned, directly or indirectly,
by the Company; except as set forth in the Disclosure Documents, no options,
warrants or other rights to purchase from the Company or any Subsidiary,
agreements or other obligations of the Company or any Subsidiary to issue or
other rights to convert any obligation into, or exchange any securities for,
shares of capital stock of or ownership interests in the Company or any
Subsidiary are outstanding; and except as set forth in the Disclosure Documents
or on Schedule C, there is no agreement, understanding or arrangement among the
Company or any Subsidiary and each of their respective stockholders or any other
person relating to the ownership or disposition of any capital stock of the
Company or any Subsidiary or the election of directors of the Company or any
Subsidiary or the governance of the Company's or any Subsidiary's affairs, and,
if any, such agreements, understandings and arrangements will not be breached or
violated as a result of the execution and delivery of, or the consummation of
the transactions contemplated by, the Transaction Documents.
 

 
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(c) The Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Transaction Documents. Each of the
Transaction Documents has been duly and validly authorized by the Company and,
when executed and delivered by the Company, will constitute a valid and legally
binding agreement of the Company, enforceable against the Company in accordance
with its terms except as the enforcement thereof may be limited by
(A) bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally or (B) general principles of equity and the
discretion of the court before which any proceeding therefore may be brought
(regardless of whether such enforcement is considered in a proceeding at law or
in equity) (collectively, the "Enforceability Exceptions").
 
(d) The shares of Securities have been duly authorized and, when issued upon
payment thereof in accordance with this Agreement, will have been validly
issued, fully paid and non-assessable. The additional Conversion Shares that
will be issuable as a result of the decrease in the Conversion Price have been
duly authorized and validly reserved for issuance, and when issued upon
conversion of the Series A Stock in accordance with the terms of the amended
Series A Certificate of Designation, will have been validly issued, fully paid
and non-assessable. The Common Stock of the Company conforms to the description
thereof contained in the Disclosure Documents. The stockholders of the Company
have no preemptive or similar rights with respect to the Common Stock.
 

 
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(e) No consent, approval, authorization, license, qualification, exemption or
order of any court or governmental agency or body or third party is required for
the performance of the Transaction Documents by the Company or for the
consummation by the Company of any of the transactions contemplated thereby, or
the application of the proceeds of the issuance of the Securities as described
in this Agreement, except for such consents, approvals, authorizations,
licenses, qualifications, exemptions or orders (i) as have been obtained on or
prior to the Closing Date, (ii) as are not required to be obtained on or prior
to the Closing Date that will be obtained when required, or (iii) the failure to
obtain which would not, individually or in the aggregate, have a Material
Adverse Effect.
 
(f) Except as set forth on Schedule D of the Disclosure Schedule, none of the
Company or the Subsidiaries is (i) in material violation of its articles of
incorporation or bylaws (or similar organizational document), (ii) in breach or
violation of any statute, judgment, decree, order, rule or regulation applicable
to it or any of its properties or assets, which breach or violation would,
individually or in the aggregate, have a Material Adverse Effect, or (iii)
except as described in the Disclosure Documents, in default (nor has any event
occurred which with notice or passage of time, or both, would constitute a
default) in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, permit, certificate or
agreement or instrument to which it is a party or to which it is subject, which
default would, individually or in the aggregate, have a Material Adverse Effect.
 
(g) The execution, delivery and performance by the Company of the Transaction
Documents and the consummation by the Company of the transactions contemplated
thereby and the fulfillment of the terms thereof will not (a) violate, conflict
with or constitute or result in a breach of or a default under (or an event
that, with notice or lapse of time, or both, would constitute a breach of or a
default under) any of (i) the terms or provisions of any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate or agreement or instrument to which any of the
Company or the Subsidiaries is a party or to which any of their respective
properties or assets are subject, (ii) the Certificate of Incorporation or
bylaws of any of the Company or the Subsidiaries (or similar organizational
document) or (iii) any statute, judgment, decree, order, rule or regulation of
any court or governmental agency or other body applicable to the Company or the
Subsidiaries or any of their respective properties or assets or (b) result in
the imposition of any lien upon or with respect to any of the properties or
assets now owned or hereafter acquired by the Company or any of the
Subsidiaries; which violation, conflict, breach, default or lien would,
individually or in the aggregate, have a Material Adverse Effect.
 
(h) The audited consolidated financial statements included in the Disclosure
Documents present fairly the consolidated financial position, results of
operations, cash flows and changes in shareholders' equity of the entities, at
the dates and for the periods to which they relate and have been prepared in all
material respects in accordance with generally accepted accounting principles
applied on a consistent basis; the interim un-audited consolidated financial
statements included in the Disclosure Documents present fairly the consolidated
financial position, results of operations and cash flows of the entities, at the
dates and for the periods to which they relate subject to year-end audit
adjustments and have been prepared in all material respects in accordance with
generally accepted accounting principles applied on a consistent basis with the
audited consolidated financial statements included therein; the selected
financial and statistical data included in the Disclosure Documents present
fairly the information shown therein and have been prepared and compiled in all
material respects on a basis consistent with the audited financial statements
included therein, except as otherwise stated therein; and each of the auditors
previously engaged by the Company or to be engaged in the future by the Company
is an independent certified public accountant as required by the Securities Act
for an offering registered thereunder.
 

 
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(i) Except as described in the Disclosure Documents, there is not pending or, to
the knowledge of the Company, threatened any action, suit, proceeding, inquiry
or investigation, governmental or otherwise, to which any of the Company or the
Subsidiaries is a party, or to which their respective properties or assets are
subject, before or brought by any court, arbitrator or governmental agency or
body, that, if determined adversely to the Company or any such Subsidiary,
would, individually or in the aggregate, have a Material Adverse Effect or that
seeks to restrain, enjoin, prevent the consummation of or otherwise challenge
the issuance or sale of the Securities to be sold hereunder or the application
of the proceeds therefrom or the other transactions described in the Disclosure
Documents.
 
(j) The Company and the Subsidiaries own or possess adequate licenses or other
rights to use all patents, trademarks, service marks, trade names, copyrights
and know-how that are necessary to conduct their businesses as described in the
Disclosure Documents. None of the Company or the Subsidiaries has received any
written notice of infringement of (or knows of any such infringement of)
asserted rights of others with respect to any patents, trademarks, service
marks, trade names, copyrights or know-how that, if such assertion of
infringement or conflict were sustained, would, individually or in the
aggregate, have a Material Adverse Effect.
 
(k) Each of the Company and the Subsidiaries possesses all licenses, permits,
certificates, consents, orders, approvals and other authorizations from, and has
made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals presently required or necessary to own or lease, as the case may
be, and to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Disclosure
Documents ("Permits"), except where the failure to obtain such Permits would
not, individually or in the aggregate, have a Material Adverse Effect and none
of the Company or the Subsidiaries has received any notice of any proceeding
relating to revocation or modification of any such Permit, except as described
in the Disclosure Documents and except where such revocation or modification
would not, individually or in the aggregate, have a Material Adverse Effect.
 
(l) Subsequent to September 30, 2006 and except as described in the Company’s
Quarterly Report on Form 10-QSB for the quarter ended September 30, 2006 or in
Schedule E, (i) the Company and the Subsidiaries have not incurred any material
liabilities or obligations, direct or contingent, or entered into any material
transactions not in the ordinary course of business or (ii) the Company and the
Subsidiaries have not purchased any of their respective outstanding capital
stock, or declared, paid or otherwise made any dividend or distribution of any
kind on any of their respective capital stock or otherwise (other than, with
respect to any of such Subsidiaries, the purchase of capital stock by the
Company), (iii) there has not been any material increase in the long-term
indebtedness of the Company or any of the Subsidiaries, (iv) there has not
occurred any event or condition, individually or in the aggregate, that has a
Material Adverse Effect, and (v) the Company and the Subsidiaries have not
sustained any material loss or interference with respect to their respective
businesses or properties from fire, flood, hurricane, earthquake, accident or
other calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding.
 

 
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(m) There are no material legal or governmental proceedings nor are there any
material contracts or other documents required by the Securities Act to be
described in a prospectus that are not described in the Disclosure Documents.
Except as described in the Disclosure Documents, none of the Company or the
Subsidiaries is in default under any of the contracts described in the
Disclosure Documents, has received a notice or claim of any such default or has
knowledge of any breach of such contracts by the other party or parties thereto,
except for such defaults or breaches as would not, individually or in the
aggregate, have a Material Adverse Effect.
 
(n) Each of the Company and the Subsidiaries has good and marketable title to
all real property described in the Disclosure Documents as being owned by it and
good and marketable title to the leasehold estate in the real property described
therein as being leased by it, free and clear of all liens, charges,
encumbrances or restrictions, except, in each case, as described in the
Disclosure Documents or such as would not, individually or in the aggregate,
have a Material Adverse Effect. All material leases, contracts and agreements to
which the Company or any of the Subsidiaries is a party or by which any of them
is bound are valid and enforceable against the Company or any such Subsidiary,
are, to the knowledge of the Company, valid and enforceable against the other
party or parties thereto and are in full force and effect, in each case subject
to the Enforceability Exceptions.
 
(o) Each of the Company and the Subsidiaries has filed all necessary federal,
state and foreign income and franchise tax returns, except where the failure to
so file such returns would not, individually or in the aggregate, have a
Material Adverse Effect, and has paid all taxes shown as due thereon; and other
than tax deficiencies which the Company or any Subsidiary is contesting in good
faith and for which adequate reserves have been provided in accordance with
generally accepted accounting principles, there is no tax deficiency that has
been asserted against the Company or any Subsidiary that would, individually or
in the aggregate, have a Material Adverse Effect.
 
(p) None of the Company or the Subsidiaries is, or immediately after the Closing
Date will be, required to register as an "investment company" or a company
"controlled by" an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act").
 
(q) Since January 2002 none of the Company or the Subsidiaries or, to the
knowledge of any of such entities' directors, officers, employees, agents or
controlling persons, has taken, directly or indirectly, any action for the
purpose of causing the stabilization or manipulation of the price of the Common
Stock.
 
(r) None of the Company, the Subsidiaries or any of their respective Affiliates
(as defined in Rule 501(b) of Regulation D under the Securities Act) directly,
or through any agent, engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
in connection with the offering of the Securities or engaged in any other
conduct that would cause such offering to constitute a public offering within
the meaning of Section 4(2) of the Securities Act. Assuming the accuracy of the
representations and warranties of the Purchaser in Section 6 hereof, it is not
necessary in connection with the offer, sale and delivery of the Securities to
the Purchaser in the manner contemplated by this Agreement to register any of
the Securities under the Securities Act.
 

 
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(s) There is no strike, labor dispute, slowdown or work stoppage with the
employees of the Company or any of the Subsidiaries which is pending or, to the
knowledge of the Company or any of the Subsidiaries, threatened.
 
(t) Each of the Company and the Subsidiaries carries general liability insurance
coverage comparable to other companies of its size and similar business.
 
(u) Each of the Company and the Subsidiaries maintains internal accounting
controls which provide reasonable assurance that (A) transactions are executed
in accordance with management's authorization, (B) transactions are recorded as
necessary to permit preparation of its financial statements and to maintain
accountability for its assets, and (C) access to its material assets is
permitted only in accordance with management's authorization and (D) the values
and amounts reported for its material assets are compared with its existing
assets at reasonable intervals.
 
(v) The Company does not know of any claims for services, either in the nature
of a finder's fee or financial advisory fee, with respect to the offering of the
Securities and the transactions contemplated by the Transaction Documents.
 
(w) The Common Stock is traded on the Over-the-Counter Bulletin Board (the "OTC
BB"). Except as described in the Disclosure Documents, the Company currently is
not in violation of, and the consummation of the transactions contemplated by
the Transaction Documents will not violate, any rule of the National Association
of Securities Dealers.
 
(x) The Company is eligible to use Form SB-2 for the resale of the Securities
and the Conversion Shares by Purchaser or their transferees. The Company has no
reason to believe that it is not capable of satisfying the registration or
qualification requirements (or an exemption therefrom) necessary to permit the
resale of the Securities and the Conversion Shares under the securities or "blue
sky" laws of any jurisdiction within the United States.
 
(y) To the Company's knowledge, none of the officers or directors of the Company
(i) has been convicted of any crime (other than  traffic
violations  or misdemeanors not involving fraud) or is currently under
investigation or indictment for any such crime, (ii) has been found by a court
or governmental agency to have violated any securities or commodities law or to
have committed fraud or is currently a party to any legal proceeding in which
either is alleged, (iii) has been the subject of a proceeding under the
bankruptcy laws or any similar state laws, or (iv) has been an officer,
director, general partner, or managing member of an entity which has been the
subject of such a proceeding.
 

 
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3. Purchase, Sale, and Delivery of the Securities; Amendment of Certificate of
Designation. (a)  On the basis of the representations, warranties, agreements
and covenants herein contained and subject to the terms and conditions herein
set forth, the Company agrees to issue and sell to the Purchasers, and
Purchasers agree to purchase from the Company, a total of 933,333 shares of
Common Stock.
 
(b) Subject to the fulfillment of each of the conditions to closing set forth
herein, the closing of the transactions described herein (the "Closing") shall
take place on December 14, 2006 or such later date as may be specified by the
parties (the "Closing Date"). On the Closing Date, Purchasers shall acquire
933,333 shares of Common Stock. Within three business days following the Closing
Date, the Company shall (i) deliver to Purchasers a certificate in definitive
form for 933,333 shares of Common Stock issued to the respective Purchasers, and
(ii) file the amendment to the Certificate of Designation in the form set forth
as Exhibit A hereto.  On the Closing Date, the Company, MMF, MMF III, Monarch
shall execute and deliver that certain Registration Rights Agreement in the form
attached hereto.
 
(c) In consideration for the sale of the Securities and the amendment of the
Certificate of Designation, the Purchasers shall, on the Closing Date, pay to
the Company, by wire transfer, a total of $700,000.
 
4. Certain Covenants of the Company. The Company covenants and agrees with
Purchasers as follows:
 
(a) None of the Company or any of its Affiliates will sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any "security" (as
defined in the Securities Act) which would be integrated with the sale of the
Securities in a manner which would require the registration under the Securities
Act of the Securities.
 
(b) The Company will not become, at any time prior to the expiration of three
years after the Closing Date, an open-end investment company, unit investment
trust, closed-end investment company or face-amount certificate company that is
or is required to be registered under the Investment Company Act.
 
(c) None of the proceeds of the Series A Stock will be used to reduce or retire
any insider note or convertible debt held by an officer or director of the
Company.
 
(d) The Securities and the additional Conversion Shares will be eligible for
trading on the OTC BB or such market on which the Company's shares are
subsequently listed or traded, immediately following the effectiveness of the
Registration Statement.
 
(e) The Company will do and perform all things required to be done and performed
by it under this Agreement and the other Transaction Documents and to satisfy
all conditions precedent on its part to the obligations of the Purchasers to
purchase and accept delivery of the Securities.
 

 
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(f) The Company shall allocate the $700,000 of proceeds to be received under
Section 3(c) above substantially as follows: (i) $250,000 will be used to fund
the payments required to be made under the recently announced distribution
agreement between the Company and Major League Baseball Advanced Media, L.P.;
(ii) $50,000 will be used for the encoding and storage required under the
Company’s agreement related to the programming of NBC Universal Cable; (iii)
$400,000 will be used for sales and marketing and for working capital and
general corporate purposes.
 
 
5. Conditions to Closing.
 
 
(a) The obligation of Purchasers to consummate the Closing is subject to the
following conditions unless waived in writing by the Purchasers:
 
(i) The representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects (other than
representations and warranties with a Material Adverse Effect qualifier, which
shall be true and correct as written) on and as of the Closing Date and the
Company shall have complied in all material respects with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder at
or prior to the Closing Date.
 
(ii) No Event of Default or breach of any covenant under this Agreement or the
Transaction Documents shall have occurred.
 
(iii) The Company shall be current in all of its public filings.
 
(iv) None of the issuance and sale of the Securities pursuant to this Agreement
or any of the transactions contemplated by any of the other Transaction
Documents shall be enjoined (temporarily or permanently) and no restraining
order or other injunctive order shall have been issued in respect thereof; and
there shall not have been any legal action, order, decree or other
administrative proceeding instituted or, to the Company's knowledge, threatened
against the Company or against Purchaser relating to the issuance of the
Securities or Purchasers' activities in connection therewith or any other
transactions contemplated by this Agreement, the other Transaction Documents or
the Disclosure Documents.
 
(b) The obligation of the Company to consummate the Closing is subject to the
condition (unless waived in writing by the Company) that the representations and
warranties of the Purchasers contained in this Agreement shall be true and
correct in all material respects (other than representations and warranties with
a Material Adverse Effect qualifier, which shall be true and correct as written)
on and as of the Closing Date and the Purchasers shall have complied in all
material respects with all agreements and satisfied all conditions on their part
to be performed or satisfied hereunder at or prior to the Closing Date.
 

 
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6. Representations and Warranties of the Purchasers.
 
(a) Each Purchaser represents and warrants to the Company that the Securities to
be acquired by it hereunder and the additional Conversion Shares that it may
acquire upon conversion or exercise of the Series A Stock are being acquired for
their own account for investment and with no intention of distributing or
reselling such Securities or such additional Conversion Shares in any
transaction which would be in violation of the securities laws of the United
States of America or any State. Nothing in this Agreement, however, shall
prejudice or otherwise limit the Purchasers' right to sell or otherwise dispose
of all or any part of such Securities and additional Conversion Shares under an
effective registration statement under the Securities Act and in compliance with
applicable state securities laws or under an exemption from such registration.
By executing this Agreement, each Purchaser further represents that such
Purchaser does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participation to any person with respect
to any of the Securities.
 
(b) Each Purchaser understands that neither the Securities nor the Conversion
Shares have been registered under the Securities Act and may not be offered,
resold, pledged or otherwise transferred except (a) pursuant to an exemption
from registration under the Securities Act (and, if requested by the Company,
based upon an opinion of counsel acceptable to the Company) or pursuant to an
effective registration statement under the Securities Act and (b) in accordance
with all applicable securities laws of the states of the United States and other
jurisdictions.
 
Each Purchaser agrees to the imprinting, so long as appropriate, of the
following legend on the Securities and the Conversion Shares that it may acquire
upon conversion of the Series A Stock:
 
The shares of stock evidenced by this certificate have not been registered under
the U.S. Securities Act of 1933, as amended, and may not be offered, sold,
pledged or otherwise transferred ("transferred") in the absence of such
registration or an applicable exemption therefrom. In the absence of such
registration, such shares may not be transferred unless, if the Company
requests, the Company has received a written opinion from counsel in form and
substance satisfactory to the Company stating that such transfer is being made
in compliance with all applicable federal and state securities laws.
 
The legend set forth above may be removed if and when the Securities or
Conversion Shares, as the case may be, are disposed of pursuant to an effective
registration statement under the Securities Act or in the opinion of counsel to
the Company experienced in the area of United States Federal securities laws
such legends are no longer required under applicable requirements of the
Securities Act. The Securities and the Conversion Shares shall also bear any
other legends required by applicable Federal or state securities laws, which
legends may be removed when in the opinion of counsel to the Company experienced
in the applicable securities laws, the same are no longer required under the
applicable requirements of such securities laws. The Company agrees that it will
provide Purchasers, upon request, with a substitute certificate, not bearing
such legend at such time as such legend is no longer applicable. Each Purchaser
agrees that, in connection with any transfer of the Securities or the Conversion
Shares by it pursuant to an effective registration statement under the
Securities Act, such Purchaser will comply with all prospectus delivery
requirements of the Securities Act.
 

 
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(c) Each Purchaser represents and warrants to the Company that it is an
"accredited investor" within the meaning of Rule 501(a) of Regulation D under
the Securities Act. Each Purchaser represents and warrants to the Company that
such Purchaser did not learn of the opportunity to acquire Securities or any
other security issuable by the Company through any form of general advertising
or public solicitation.
 
(d) Each Purchaser represents and warrants to the Company that it has such
knowledge, sophistication and experience in business and financial matters so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, having been represented by its own independent counsel, and
has so evaluated the merits and risks of such investment and is able to bear the
economic risk of such investment and, at the present time, is able to afford a
complete loss of such investment.
 
(e) Each Purchaser represents and warrants to the Company that its overall
commitment to investments which are not readily marketable is not
disproportionate to its net worth, and its purchase of the Securities will not
cause such overall commitment to become excessive.
 
(f) Each Purchaser recognizes that the purchase of the Securities involves a
high degree of risk.
 
(g) Each Purchaser represents and warrants to the Company that all information
it has provided to the Company including, but not limited to, its financial
position and its knowledge of financial and business matters is true, correct
and complete as of the date of execution of this Agreement. Each Purchaser
undertakes to provide promptly to the Company written notice of any material
changes in its financial position or otherwise, and such information shall be
true, correct and complete as of the date given. Each Purchaser understands that
the Company will rely to a material degree upon the representations contained
therein.
 
(h) Each Purchaser represents and warrants to the Company that (i) the purchase
of the Securities to be purchased by it hereunder has been duly and properly
authorized and this Agreement has been duly executed and delivered by it or on
its behalf and constitutes the valid and legally binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms, subject
to the Enforceability Exceptions, (ii) the purchase of the Securities to be
purchased by it does not conflict with or violate its charter, by-laws or any
law, regulation or court order applicable to it; and (iii) the purchase of the
Securities to be purchased by it does not impose any penalty or other onerous
condition on Purchaser under or pursuant to any applicable law or governmental
regulation.
 
(i) Each Purchaser represents and warrants to the Company that neither it nor
any of its directors, officers, employees, agents, partners, members,
controlling persons or shareholders holding 5% or more of the Common Stock
outstanding on the Closing Date, has taken or will take, directly or indirectly,
any actions designed, or might reasonably be expected to cause or result in the
stabilization or manipulation of the price of the Common Stock.
 

 
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(j) Each Purchaser acknowledges it or its representatives have reviewed and
understand the Transaction Documents and Disclosure Documents and further
acknowledges that it or its representatives have been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment in the Securities;
and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy and completeness of the information contained
in the Disclosure Documents.
 
(k) Each Purchaser represents and warrants to the Company that it has based its
investment decision solely upon the information contained in the Disclosure
Documents and such other information as may have been provided to it or its
representatives by the Company in response to their inquiries, and has not based
its investment decision on any research or other report regarding the Company
prepared by any third party ("Third Party Reports"). Each Purchaser understands
and acknowledges that (i) the Company does not endorse any Third Party Reports
and (ii) its actual results may differ materially from those projected in any
Third Party Report.
 
(l) Each Purchaser represents and warrants to the Company that no oral or
written representations have been made and no oral or written information has
been furnished to them or their advisors in connection with this offering that
were in any way inconsistent with the information set forth in the Disclosure
Documents.
 
(m) Each Purchaser understands and acknowledges that (i) any forward-looking
information included in the Disclosure Documents supplied to Purchaser by the
Company or its management is subject to risks and uncertainties, including those
risks and uncertainties set forth in the Disclosure Documents; and (ii) the
Company's actual results may differ materially from those projected by the
Company or its management in such forward-looking information.
 
(n) Each Purchaser understands and acknowledges that (i) the Securities are
offered and sold without registration under the Securities Act in a private
placement that is exempt from the registration provisions of the Securities Act
and (ii) the availability of such exemption depends in part on, and that the
Company and its counsel will rely upon, the accuracy and truthfulness of the
foregoing representations and each of the Purchasers hereby consents to such
reliance.
 
(o) Each Purchaser understands that no U.S. federal or state agency, or any
agency or governmental or regulatory authority in any other country, including
without limitation, the U.S. Securities and Exchange Commission, has passed upon
the Securities or made any finding or determination as to the fairness of this
investment.
 

 
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(p) Each Purchaser represents and warrants to the Company that it is not a
prohibited investor under the anti-money laundering or anti-terrorism laws of
any jurisdiction, including without limitation, any country, territory, nation
or national association.
 
(q) Each Purchaser understands that the Company and its assets may be subject to
the laws and regulations of many jurisdictions, including but not limited to
anti-terrorism laws and anti-money laundering laws. No Purchaser, nor any person
or entity who controls Purchaser, nor, to the best of Purchasers' knowledge, any
person or entity who owns any direct equity interest in it, is identified on the
list of "Specially Designated Nationals and Blocked Persons" ("SDNs") maintained
by the U.S. Department of Treasury's Office of Foreign Assets Control ("OFAC"),
and Purchaser is not owned or controlled by any SDN. Each Purchaser is not
involved in business arrangements or otherwise engaged in transactions with or
involving countries subject to economic or trade sanctions imposed by the United
States Government, or with or involving SDNs in violation of the regulations
maintained by the OFAC. Each Purchaser is in full compliance with the Bank
Secrecy Act (31 U.S.C. § 5311 et. seq.) and 18 U.S.C. §§ 1956 and 1957 and the
regulations under such statutes; and any other applicable anti-terrorist or
anti-money laundering Laws and regulations.
 
(r) Each Purchaser represents and warrants to the Company that none of the
Purchasers, nor any of their affiliates has, directly or indirectly, offered to
"short sell", contracted to "short sell," otherwise engaged in any "short
selling" or encouraged others to "short sell" the securities of the Company,
including, without limitation, shares of Common Stock that will be received as a
result of the conversion of the Series A Stock; provided, however, that nothing
contained herein shall prohibit the Purchasers from selling any shares of the
Company's Common Stock "against the box."
 
(s) Each Purchaser has the requisite power and authority to execute, deliver and
perform its obligations under this Agreement and the Registration Rights
Agreement, and all other documents executed and delivered by such Purchaser in
connection with the purchase of the Securities (collectively, the “Purchaser
Documents”). Each of the Purchaser Documents has been duly and validly
authorized by the Purchaser and, when executed and delivered by such Purchaser,
will constitute a valid and legally binding agreement of the Purchaser,
enforceable against the Purchaser in accordance with its terms except as the
enforcement thereof may be limited by Enforceability Exceptions.
 
(t) Neither the execution and delivery of the Purchaser Documents nor the
consummation or performance of any of the transactions contemplated thereby
will, directly or indirectly (with or without notice or lapse of time) (i)
contravene, conflict with, or result in a violation of any provision of the
charter documents of the Purchasers, or (ii) contravene, conflict with, or
result in a violation of, or give any governmental body or other person the
right to challenge any of the contemplated transactions.
 
7. Covenants of Purchasers.
 
(a) Not to Short Sell Stock. Purchaser, on behalf of itself, its affiliates, its
successors and assigns and any other direct or indirect transferee holding any
of the Securities or any shares of Common Stock issuable upon the conversion of
any shares of the Series A Stock, hereby covenants and agrees not to, directly
or indirectly, offer to "short sell", contract to "short sell" or otherwise
"short sell" or encourage others to "short sell" the securities of the Company,
including, without limitation, shares of Common Stock that will be received as a
result of the conversion of the Series A Stock; provided, however, that nothing
contained herein shall prohibit the Purchasers from selling any shares of the
Company's Common Stock "against the box."
 

 
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(b) Consent to Amendment of Series A Certificate of Designation. The Purchasers,
representing the holders of all of the issued and outstanding shares of Series A
Stock, hereby consent to the amendment of the Series A Certificate of
Designation in the form set forth as Exhibit A attached hereto. This consent
shall constitute the consent required to be given by the holders of the
preferred stock under with NRS 78.1955(3) of the Nevada Corporate Law. The
Purchasers hereby further agree to execute and deliver any and all consent forms
or stockholder resolutions reasonably requested by the Company in order to
evidence their consent to the amendment of the Series A Certificate of
Designation.
 
8. Termination.
 
(a) This Agreement may be terminated in the sole discretion of the Company by
notice to Purchasers if at the Closing Date:
 
(i) the representations and warranties made by Purchasers in Section 6 are not
true and correct in all material respects; or
 
(ii) as to the Company, the sale of the Securities hereunder (i) is prohibited
or enjoined by any applicable law or governmental regulation or (ii) subjects
the Company to any penalty, or in its reasonable judgment, other onerous
condition under or pursuant to any applicable law or government regulation that
would materially reduce the benefits to the Company of the sale of the
Securities to Purchasers, so long as such regulation, law or onerous condition
was not in effect in such form at the date of this Agreement.
 
(b) This Agreement may be terminated by the Purchasers by notice to the Company
given in the event that the Company shall have failed, refused or been unable to
satisfy all material conditions on its part to be performed or satisfied
hereunder on or prior to the Closing Date, or if after the execution and
delivery of this Agreement and immediately prior to the Closing Date, trading in
securities of the Company on the OTC BB shall have been suspended.
 
(c) This Agreement may be terminated by mutual written consent of all parties.
 
9. Registration. The Company shall prepare and file with the SEC a Registration
Statement on Form SB-2 covering the resale of the (i) the Securities and (ii)
the maximum number of additional Conversion Shares issuable upon conversion of
the Series A Stock which may be acquired by the Purchasers as a result of the
reduction in the Conversion Price (collectively, the "Registrable Securities"),
on or before January 31, 2007, as set forth in the Registration Rights
Agreement.
 

 
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10. Indemnification. In consideration of the Company acquiring the IBD
Securities, the Purchasers jointly and severally shall defend, protect,
indemnify and hold harmless the Company from and against any and all causes of
action, suits, claims, losses, costs, liabilities and damages incurred by any
the Company as a result of, or arising out of, the gross negligence or willful
misconduct of any Purchaser with respect to the Purchaser's ownership of the IBD
Securities free and clear of encumbrances.
 
11. Event of Default. If an Event of Default (as defined below) occurs and
remains uncured for a period of 15 days, each Purchaser shall have the right to
exercise any or all of the rights given to each Purchaser relating to the
Securities or the Series A Stock. In addition, the Company shall pay the
Purchasers an aggregate of $1,500 per day during which an Event of Default is
occurring and remains uncured.
 
Each Purchaser need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind, and each Purchaser 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 Purchaser 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.
 
An "Event of Default" shall include the commencement by the Company of a
voluntary case or proceeding under the bankruptcy laws or the Company's failure
to: (i) discharge or stay a bankruptcy proceeding within 60 days of such action
being taken against the Company, (ii) file the Registration Statement with the
SEC on or before January 31, 2007, and (iii) maintain trading of the Company’s
Common Stock on the OTC BB except for any periods when the stock is listed on
the NASDAQ Small Stock Market, the NASDAQ National Stock Market, the AMEX or the
NYSE.
 
12.  Notices. All communications hereunder shall be in writing and shall be hand
delivered, mailed by first-class mail, couriered by next-day air courier or by
facsimile and confirmed in writing (i) if to the Company, at the addresses set
forth below, or (ii) if to a Purchaser, to the address set forth on the
signature page hereto.
 

 
If to the Company:
 
 
Interactive Television Networks, Inc.
 
2010 Main Street, Suite 500
 
Irvine, California 92614 
 
Facsimile: (888) 886-1305
 
Attention: Murray Williams, CFO

 
All such notices and communications shall be deemed to have been duly given: (i)
when delivered by hand, if personally delivered; (ii) five business days after
being deposited in the mail, postage prepaid, if mailed certified mail, return
receipt requested; (iii) one business day after being timely delivered to a
next-day air courier guaranteeing overnight delivery; (iv) the date of
transmission if sent via facsimile to the facsimile number as set forth in this
Section or the signature page hereof prior to 6:00 p.m. on a business day, or
(v) the business day following the date of transmission if sent via facsimile at
a facsimile number set forth in this Section or on the signature page hereof
after 6:00 p.m. or on a date that is not a business day. Change of a party's
address or facsimile number may be designated hereunder by giving notice to all
of the other parties hereto in accordance with this Section.
 

 
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13. Survival Clause. The respective representations, warranties, agreements and
covenants of the Company and the Purchasers set forth in this Agreement shall
survive until December 31, 2007, except that the rights and remedies of
Purchasers upon the existence of an Event of Default shall continue to survive.
 
14. Fees and Expenses. Each party shall pay its own legal expenses incurred in
connection with the preparation and negotiation of the Transaction Documents.
 
15. Attorneys' Fees. If any action at law or in equity is necessary to enforce
or interpret the terms of this Agreement or to the amendment to the Series A
Certificate of Designation, the prevailing party or parties shall be entitled to
receive from the other party or parties reasonable attorneys’ fees, costs and
necessary disbursements in addition to any other relief to which the prevailing
party or parties may be entitled.
 
16. Successors. This Agreement shall inure to the benefit of and be binding upon
the Purchasers and the Company and their respective successors and legal
representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained; this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person. Neither the Company nor any Purchaser may
assign this Agreement or any rights or obligation hereunder without the prior
written consent of the other party.
 
17. No Waiver; Modifications in Writing. No failure or delay on the part of the
Company or the Purchasers in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company or the Purchasers at law or in equity or otherwise. No
waiver of or consent to any departure by the Company or the Purchasers from any
provision of this Agreement shall be effective unless signed in writing by the
party entitled to the benefit thereof, provided that notice of any such waiver
shall be given to each party hereto as set forth below. Except as otherwise
provided herein, no amendment, modification or termination of any provision of
this Agreement shall be effective unless signed in writing by or on behalf of
each of the Company and the Purchaser. Any amendment, supplement or modification
of or to any provision of this Agreement, any waiver of any provision of this
Agreement, and any consent to any departure by the Company or the Purchasers
from the terms of any provision of this Agreement shall be effective only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement, no notice to or demand
on the Company in any case shall entitle the Company to any other or further
notice or demand in similar or other circumstances.
 

 
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18. Entire Agreement. This Agreement, together with Transaction Documents,
constitutes the entire agreement among the parties hereto and supersedes all
prior agreements, understandings and arrangements, oral or written, among the
parties hereto with respect to the subject matter hereof and thereof.
 
19. Severability. If any provision of this Agreement is held to be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Agreement shall not in any way be affected or
impaired thereby.
 
20. APPLICABLE LAW. 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 CALIFORNIA, 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 CITY OF LOS ANGELES, CALIFORNIA AND HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS FOR SUCH PURPOSE.
 
21. Counterparts. This Agreement may be executed in two or more counterparts and
may be delivered by facsimile transmission, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
 
If the foregoing correctly sets forth our understanding, please indicate your
acceptance thereof in the space provided below for that purpose, whereupon this
Agreement shall constitute a binding agreement among the Company and the
Purchasers.

 
Very truly yours,
 
 
Interactive Television Networks, Inc.
       
By:
___________________________
   
Name: Charles Prast
 
 
Title:   Chief Executive Officer

 
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ACCEPTED AND AGREED:
 
Shares of Common Stock: -0-
       
Mecator Momentum Fund, L.P.
       
By:
__________________________
   
David Firestone
   
Managing Partner
         
__________________________
   
Harry Aharonian
   
Portfolio Manager
Shares of Common Stock: -0-
       
Mecator Momentum Fund III, L.P.
       
By:
__________________________
   
David Firestone
   
Managing Partner
         
__________________________
   
Harry Aharonian
   
Portfolio Manager
Shares of Common Stock: 933,333
       
Monarch Pointe Fund Ltd.
       
By:
__________________________
   
David Firestone
   
Managing Partner
         
__________________________
   
Harry Aharonian
   
Portfolio Manager
     

 
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Addresses for Notice to any Purchaser:
 
c/o M.A.G. Capital, LLC
555 South Flower Street, Suite 4500
Los Angeles, California 90071
Attention: David Firestone
or: Harry Aharonian
Facsimile: (213) 533-8285
with copy to:
 
Ricardo J. Hollingsworth
Kirkpatrick & Lockhart Nicholson Graham LLP
599 Lexington Avenue
New York, NY 10022-6030
Tel : 212-536-4859
Fax: 212-536-3901

 
 
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Exhibit A
 
Amendment to Certificate of Designation of
 
Series A Convertible Preferred Stock
 

 
Section (f)(iii) of the Certificate of Designation of Series A Convertible
Preferred Stock is hereby restated in its entirety to read as follows:
 
(iii)Conversion Price. The number of shares into which one share of Series A
Preferred Stock shall be convertible shall be determined by dividing the Series
A Purchase Price by the then existing Conversion Price (as set forth below) (the
"Conversion Ratio"). The "Conversion Price" per share for the Series A Preferred
Stock shall be equal to $0.75 (subject to appropriate adjustment for stock
splits, stock dividends, combinations, recapitalizations or other
recapitalization affecting the Series A Preferred Stock and as otherwise set
forth herein). The Conversion Price shall be further adjusted upon the
occurrence of any event in paragraph (f)(iv)-(vi) or (ix).
 

 

 
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Exhibit B
 
Registration Rights Agreement
 
 
 
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