SUBSCRIPTION AGREEMENT
THIS
SUBSCRIPTION AGREEMENT
(this
“Agreement”),
is
dated as of December ____, 2007, by and among China Broadband, Inc. (formerly
Alpha Nutra, Inc.), a Nevada corporation
(the
“Company”),
and
the subscribers identified on the signature page hereto (each a “Subscriber”
and
collectively “Subscribers”).
WHEREAS,
the
Company and the Subscribers are executing and delivering this Agreement in
reliance upon an exemption from securities registration afforded by the
provisions of Section 4(2), Section 4(6) and/or Regulation D (“Regulation
D”)
as
promulgated by the United States Securities and Exchange Commission (the
“Commission”)
under
the Securities Act of 1933, as amended (the “1933
Act”);
WHEREAS,
the
parties desire that, upon the terms and subject to the conditions contained
herein, the Company shall issue and sell to the Subscribers, as provided
herein,
and the Subscribers, in the aggregate, shall purchase a minimum of $3,000,000
and a maximum of up to $5,000,000 (the "Purchase
Price"
or
“Principal
Amount”)
of
principal amount of promissory notes of the Company (“Note”
or
“Notes”),
a
form of which is annexed hereto as Exhibit
A,
convertible into shares of the Company's Common Stock, $0.001 par value (the
"Common
Stock")
at a
per share conversion price set forth in the Note (“Conversion
Price”);
and
share purchase warrants (the “Warrants”),
in
the form annexed hereto as Exhibit
B,
to
purchase shares of Common Stock (the “Warrant
Shares”).
The
Notes, shares of Common Stock issuable upon conversion of the Notes (the
“Shares”),
the
Warrants and the Warrant Shares are collectively referred to herein as the
"Securities";
and
WHEREAS,
the
aggregate proceeds of the sale of the Notes and the Warrants contemplated
hereby
shall be held in escrow pursuant to the terms of a Funds Escrow Agreement
to be
executed by the parties substantially in the form attached hereto as
Exhibit
C
(the
“Escrow
Agreement”).
NOW,
THEREFORE,
in
consideration of the mutual covenants and other agreements contained in this
Agreement the Company and the Subscribers hereby agree as follows:
1. Closing
Date.
The
“Closing
Date”
shall
be the date that the Purchase Price is transmitted by wire transfer or otherwise
credited to or for the benefit of the Company. The consummation of the
transactions contemplated herein shall take place not later than December
31,
2007 at the offices of Grushko & Xxxxxxx, P.C., 000 Xxxxx Xxxxxx, Xxxxx
0000, Xxx Xxxx, Xxx Xxxx 00000, upon the satisfaction or waiver of all
conditions to closing set forth in this Agreement.
2. Closing.
Subject
to the satisfaction or waiver of the terms and conditions of this Agreement,
on
the Closing Date, each Subscriber shall purchase and the Company shall sell
to
each Subscriber a Note in the Principal Amount designated on the signature
page
hereto for the Purchase Price indicated thereon, and Warrants as described
in
Section 2 of this Agreement.
3. Warrants.
On the
Closing Date, the Company will issue and deliver Class A Warrants to the
Subscribers. One Class A Warrant will be issued for each Share which would
be
issued on the Closing Date assuming the complete conversion of the Note on
the
Closing Date at the Conversion Price as of the Closing Date. The exercise
price
to acquire a Warrant Share upon exercise of a Class A Warrant shall be $0.60,
subject to reduction as described in the Class A Warrant. The Class A Warrants
shall be exercisable commencing one hundred and eighty-one (181) days after
the
Closing date until five years thereafter.
4. Subscriber
Representations and Warranties.
Each
Subscriber hereby represents and warrants to and agrees with the Company
only as
to such Subscriber that:
(a) Organization
and Standing of the Subscribers.
If such
Subscriber is an entity, such Subscriber is a corporation, partnership or
other
entity duly incorporated or organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or
organization.
(b) Authorization
and Power.
Such
Subscriber has the requisite power and authority to enter into and perform
this
Agreement and the other Transaction Documents and to purchase the Notes and
Warrants being sold to it hereunder. The execution, delivery and performance
of
this Agreement and the other Transaction Documents by such Subscriber and
the
consummation by it of the transactions contemplated hereby and thereby have
been
duly authorized by all necessary corporate or partnership action, and no
further
consent or authorization of such Subscriber or its Board of Directors,
stockholders, partners, members, as the case may be, is required. This Agreement
and the other Transaction Documents have been duly authorized, executed and
delivered by such Subscriber and constitutes, or shall constitute when executed
and delivered, a valid and binding obligation of such Subscriber enforceable
against such Subscriber in accordance with the terms thereof.
(c) No
Conflicts.
The
execution, delivery and performance of this Agreement and the other Transaction
Documents and the consummation by such Subscriber of the transactions
contemplated hereby and thereby or relating hereto do not and will not (i)
result in a violation of such Subscriber’s charter documents or bylaws or other
organizational documents or (ii) conflict with, or constitute a default (or
an
event which with notice or lapse of time or both would become a default)
under,
or give to others any rights of termination, amendment, acceleration or
cancellation of any agreement, indenture or instrument or obligation to which
such Subscriber is a party or by which its properties or assets are bound,
or
result in a violation of any law, rule, or regulation, or any order, judgment
or
decree of any court or governmental agency applicable to such Subscriber
or its
properties (except for such conflicts, defaults and violations as would not,
individually or in the aggregate, have a material adverse effect on such
Subscriber). Such Subscriber is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court
or
governmental agency in order for it to execute, deliver or perform any of
its
obligations under this Agreement and the other Transaction Documents or to
purchase the Securities in accordance with the terms hereof, provided that
for
purposes of the representation made in this sentence, such Subscriber is
assuming and relying upon the accuracy of the relevant representations and
agreements of the Company herein.
(d) Information
on Company.
Such
Subscriber has been furnished with or has had access at the XXXXX Website
of the
Commission to the Company's Form 10-KSB filed on May 25, 2007 for the fiscal
year ended December 31, 2006, and the financial statements included therein
for
the year ended December 31, 2006, together with all subsequent filings made
with
the Commission available at the XXXXX website (hereinafter referred to
collectively as the "Reports").
In
addition, such
Subscriber may have received in writing from the Company such other information
concerning its operations, financial condition and other matters as such
Subscriber has requested in writing, identified thereon as OTHER WRITTEN
INFORMATION (such other information is collectively, the "Other
Written Information"),
and
considered all factors such
Subscriber deems material in deciding on the advisability of investing in
the
Securities.
(e) Information
on Subscriber.
Such
Subscriber is, and will be at the time of the conversion of the Notes and
exercise of the Warrants, an "accredited
investor",
as
such term is defined in Regulation D promulgated by the Commission under
the
1933 Act, is experienced in investments and business matters, has made
investments of a speculative nature and has purchased securities of United
States publicly-owned companies in private placements in the past and, with
its
representatives, has such knowledge and experience in financial, tax and
other
business matters as to enable such
Subscriber to utilize the information made available by the Company to evaluate
the merits and risks of and to make an informed investment decision with
respect
to the proposed purchase, which represents a speculative investment.
Such
Subscriber has the authority and is duly and legally qualified to purchase
and
own the Securities. Such
Subscriber is able to bear the risk of such investment for an indefinite
period
and to afford a complete loss thereof. The information set forth on the
signature page hereto regarding such
Subscriber is accurate.
2
(f) Purchase
of Notes and Warrants.
On the
Closing Date, such
Subscriber will purchase the Notes and Warrants as principal for its own
account
for investment only and not with a view toward, or for resale in connection
with, the public sale or any distribution thereof.
(g) Compliance
with Securities Act.
Such
Subscriber understands and agrees that the Securities have not been registered
under the 1933 Act or any applicable state securities laws, by reason of
their
issuance in a transaction that does not require registration under the 1933
Act
(based in part on the accuracy of the representations and warranties of
such
Subscriber contained herein), and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or any
applicable state securities laws or is exempt from such registration.
Such
Subscriber will comply with all applicable rules and regulations in connection
with the sales of the Securities including laws relating to short sales,
hedging
and derivative transactions.
(h) Shares
Legend.
The
Shares, and the Warrant Shares shall bear the following or similar
legend:
"THE
ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR APPLICABLE STATE
SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED
OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT
FOR
THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION
OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II)
UNLESS
SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES."
(i) Warrants
Legend.
The
Warrants shall bear the following or
similar legend:
"NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR
THE
SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES."
3
(j) Note
Legend.
The
Note shall bear the following legend:
"NEITHER
THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS NOTE NOR THE
SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED
(I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
(WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE
FORM,
THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT
TO
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
OTHER
LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
"
(k) Communication
of Offer.
The
offer to sell the Securities was directly communicated to such Subscriber
by the
Company or the Broker identified in Section 8(a). At no time was such Subscriber
presented with or solicited by any leaflet, newspaper or magazine article,
radio
or television advertisement, or any other form of general advertising or
solicited or invited to attend a promotional meeting otherwise than in
connection and concurrently with such communicated offer.
(l) Authority;
Enforceability.
This
Agreement and other agreements delivered together with this Agreement or
in
connection herewith have been duly authorized, executed and delivered by
such
Subscriber and are valid and binding agreements enforceable in accordance
with
their terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating
to
or affecting creditors’ rights generally and to general principles of equity;
and such Subscriber has full power and authority necessary to enter into
this
Agreement and such other agreements and to perform its obligations hereunder
and
under all other agreements entered into by such Subscriber relating
hereto.
(m) Restricted
Securities.
Such
Subscriber understands that the Securities have not been registered under
the
1933 Act and such Subscriber will not sell, offer to sell, assign, pledge,
hypothecate or otherwise transfer any of the Securities unless pursuant to
an
effective registration statement under the 1933 Act, or unless an exemption
from
registration is available. Notwithstanding anything to the contrary contained
in
this Agreement, such Subscriber may transfer (without restriction, without
the
consent of the Company and without the need for an opinion of counsel) the
Securities to its Affiliates (as defined below) provided that each such
Affiliate is an “accredited investor” under Regulation D (or, if such affiliate
is not an accredited investor then pursuant to such other exemption from
regulation under the 1933 Act), such Affiliate agrees to be bound by the
terms
and conditions of this Agreement, and written notice of such transfer is
provided the Company within ten (10) business days of said transfer. For
the
purposes of this Agreement, an “Affiliate”
of
any
person or entity means any other person or entity directly or indirectly
controlling, controlled by or under direct or indirect common control with
such
person or entity. Affiliate includes each Subsidiary of the Company. For
purposes of this definition, “control”
means
the power to direct the management and policies of such person or firm, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise.
4
(n) No
Governmental Review.
Such
Subscriber understands that no United States federal or state agency or any
other governmental or state agency has passed on or made recommendations
or
endorsement of the Securities or the suitability of the investment in the
Securities nor have such authorities passed upon or endorsed the merits of
the
offering of the Securities.
(o) Correctness
of Representations.
Such
Subscriber represents as to such Subscriber that the foregoing representations
and warranties are true and correct as of the date hereof and, unless such
Subscriber otherwise notifies the Company prior to the Closing Date shall
be
true and correct as of the Closing Date.
(p) Survival.
The
foregoing representations and warranties shall survive the Closing
Date.
5. Company
Representations and Warranties.
The
Company represents and warrants to and agrees with each Subscriber
that:
(a) Due
Incorporation.
The
Company is a corporation or other entity duly incorporated or organized,
validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has the requisite corporate power to own
its
properties and to carry on its business as presently
conducted. The Company is duly qualified as a foreign corporation to do business
and is in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary, other
than
those jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. For purposes of this Agreement, a “Material
Adverse Effect”
shall
mean a material adverse effect on the financial condition, results of
operations, prospects, properties or business of the Company and its
Subsidiaries taken as a whole. For purposes of this Agreement, “Subsidiary”
means,
with respect to any entity at any date, any corporation, limited or general
partnership, limited liability company, trust, estate, association, joint
venture or other business entity of which more than 30% of (i) the
outstanding capital stock having (in the absence of contingencies) ordinary
voting power to elect a majority of the board of directors or other managing
body of such entity, (ii) in the case of a partnership or limited liability
company, the interest in the capital or profits of such partnership or limited
liability company or (iii) in the case of a trust, estate, association,
joint venture or other entity, the beneficial interest in such trust, estate,
association or other entity business is, at the time of determination, owned
or
controlled directly or indirectly through one or more intermediaries, by
such
entity. The Company’s Subsidiaries as of the Closing Date are set forth on
Schedule
5(a).
(b) Outstanding
Stock.
All
issued and outstanding shares of capital stock of the Company and Subsidiary
have been duly authorized and validly issued and are fully paid and
non-assessable, other than shares of the PRC based Jinan Broadband (as defined
in the Reports for which outstanding payment of approximately $3 million
due on
or before Closing which payment the Company undertakes to make using the
proceeds of the Offering and which shares and our ownership are subject to
an
Exclusive Cooperation Agreement.
(c) Authority;
Enforceability.
This
Agreement, the Note, the Warrants, and Escrow Agreement and any other agreements
delivered together with this Agreement or in connection herewith (collectively
“Transaction
Documents”)
have
upon receipt of payment therefore been duly authorized, executed and delivered
by the Company and Subsidiaries (as applicable) and are valid and binding
agreements of the Company enforceable in accordance with their terms, subject
to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights
generally and to general principles of equity. The Company has full corporate
power and authority necessary to enter into and deliver the Transaction
Documents and to perform its obligations thereunder.
5
(d) Additional
Issuances.
There
are
no outstanding agreements or preemptive or similar rights affecting the
Company's Common Stock or equity and no outstanding rights, warrants or options
to acquire, or instruments convertible into or exchangeable for, or agreements
or understandings with respect to the sale or issuance of any shares of Common
Stock or equity of the Company or Subsidiaries or other equity interest in
the
Company except as described in the Reports or on Schedule
5(d).
The
Common Stock of the Company on a fully diluted basis outstanding as of the
last
Business Day preceding the Closing Date is set forth on Schedule
5(d).
(e) Consents.
No
consent, approval, authorization or order of any court, governmental agency
or
body or arbitrator having jurisdiction over the Company, or any of its
Affiliates, The Pink Sheets LLC (the “Pink
Sheets”)
or the
Company's shareholders is required for the execution by the Company of the
Transaction Documents and compliance and performance by the Company of its
obligations under the Transaction Documents, including, without limitation,
the
issuance and sale of the Securities. The Transaction Documents and the Company’s
performance of its obligations thereunder has been unanimously approved by
the
Company’s Board of Directors. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with,
any
governmental authority in the world, including without limitation, People’s
Republic of China (“PRC”),
Hong
Kong, the United States, the Cayman Islands or elsewhere is required by the
Company or any Affiliate of the Company in connection with the consummation
of
the transactions contemplated by this Agreement, except as would not otherwise
have a Material Adverse Effect or the consummation of any of the other
agreements, covenants or commitments of the Company or any Subsidiary
contemplated by the other Transaction Documents. Any such qualifications
and
filings will, in the case of qualifications, be effective on the Closing
and
will, in the case of filings, be made within the time prescribed by law.
Under
the Regulations on the Acquisitions by Foreign Investors of Domestic Enterprises
jointly promulgated by the PRC Ministry of Commerce (“MOFCOM”),
the
China Securities Regulatory Commission (“CSRC”),
the
State Owned Assets Supervision and Management Commission, the General
Administration of Taxation and the State Administration of Foreign Exchange
in
effect on the Closing Date, neither the Company nor any Subsidiary is required,
as of the date of this Agreement and as of the Closing, to obtain any approvals
of the CSRC in connection with the transactions contemplated by the Transaction
Documents. No further approval by, or registration or filing with State
Administration of Foreign Exchange (“SAFE”)
other
than typical SAFE foreign exchange processing procedural registrations are
expressly required under the current effective and applicable governing
regulations for matters including but not limited to the payment by any
Subsidiary of dividends to the Company in foreign currency, such as U.S.
Dollars. The Company has obtained or made all necessary consents, approvals,
registrations and filings with relevant governmental authorities in the PRC
on
or before each Closing in accordance with the then effective and applicable
PRC
regulations to acquire the interests in “Jinan
Broadband”
(as
employed in the Company’s Form 10-KSB filed for the year ended December 31,
2006), and to complete the transactions contemplated in the Transaction
Documents, except as would not have a Material Adverse Effect.
(f) No
Violation or Conflict.
Assuming the representations and warranties of the Subscribers in Section
4 are
true and correct, neither the issuance and sale of the Securities nor the
performance of the Company’s obligations under this Agreement, the Transaction
Documents and all other agreements entered into by the Company relating thereto
by the Company will:
(i) violate,
conflict with, result in a breach of, or constitute a default (or an event
which
with the giving of notice or the lapse of time or both would be reasonably
likely to constitute a default) under (A) the articles or certificate of
incorporation, charter or bylaws of the Company, (B) to the Company's knowledge,
any decree, judgment, order, law, treaty, rule, regulation or determination
applicable to the Company of any court, governmental agency or body, or
arbitrator having jurisdiction over the Company or over the properties or
assets
of the Company or any of its Affiliates, (C) the terms of any bond, debenture,
note or any other evidence of indebtedness, or any agreement, stock option
or
other similar plan, indenture, lease, mortgage, deed of trust or other
instrument to which the Company or any of its Affiliates is a party, by which
the Company or any of its Affiliates is bound, or to which any of the properties
of the Company or any of its Affiliates is subject, or (D) the terms of any
"lock-up" or similar provision of any underwriting or similar agreement to
which
the Company, or any of its Affiliates is a party except the violation, conflict,
breach, or default of which would not have a Material Adverse Effect;
or
6
(ii) result
in
the creation or imposition of any lien, charge or encumbrance upon the
Securities or any of the assets of the Company or any of its Affiliates except
as described herein; or
(iii) except
as
described in Schedule
5(d),
result
in the activation of any anti-dilution rights or a reset or repricing of
any
debt or security instrument of any other creditor or equity holder of the
Company, nor result in the acceleration of the due date of any obligation
of the
Company; or
(iv) except
as
described on Schedule
5(f),
will
result in the triggering of any piggy-back registration rights of any person
or
entity holding securities of the Company or having the right to receive
securities of the Company.
(g) The
Securities.
The
Securities upon issuance:
(i) are,
or
will be, free and clear of any security interests, liens, claims or other
encumbrances, subject to restrictions upon transfer under the 1933 Act and
any
applicable state securities laws;
(ii) have
been, or will be, duly and validly authorized and on the date of issuance
of the
Shares upon conversion of the Notes and the Warrant Shares and upon exercise
of
the Warrants, the Shares and Warrant Shares will be duly and validly issued,
fully paid and non-assessable and if registered pursuant to the 1933 Act
and
resold pursuant to an effective registration statement will be free trading
and
unrestricted;
(iii) will
not
have been issued or sold in violation of any preemptive or other similar
rights
of the holders of any securities of the Company;
(iv) will
not
subject the holders thereof to personal liability by reason of being such
holders; and
(v) assuming
the representations warranties of the Subscribers as set forth in Section
4
hereof are true and correct, will not result in a violation of Section 5
under
the 1933 Act.
(h) Litigation.
There
is no pending or, to the best knowledge of the Company, threatened action,
suit,
proceeding or investigation before any court, governmental agency or body,
or
arbitrator having jurisdiction over the Company, or any of its Affiliates
that
would affect the execution by the Company or the performance by the Company
of
its obligations under the Transaction Documents. Except as disclosed in the
Reports, there is no pending or, to the best knowledge of the Company, basis
for
or threatened action, suit, proceeding or investigation before any court,
governmental agency or body, or arbitrator having jurisdiction over the Company,
or any of its Affiliates which litigation if adversely determined would have
a
Material Adverse Effect.
7
(i) No
Market Manipulation.
The
Company and its Affiliates have not taken, and will not take, directly or
indirectly, any action designed to, or that might reasonably be expected
to,
cause or result in stabilization or manipulation of the price of the Common
Stock to
facilitate the public sale or resale of the Securities or affect the price
at
which the Securities may be issued or resold.
(j) Information
Concerning Company.
The
Reports and Other Written Information contain all material information relating
to the Company and its operations and financial condition as of their respective
dates which information is required to be disclosed therein. Since the date
of
the financial statements included in the Reports, and except as modified
in the
Other Written Information or in the Schedules hereto, there has been no Material
Adverse Event relating to the Company's business, financial condition or
affairs
not disclosed in the Reports. The Reports and Other Written Information do
not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein,
taken
as a whole, not misleading in light of the circumstances when made.
(k) Stop
Transfer.
The
Company will not issue any stop transfer order or other order impeding the
sale,
resale or delivery of any of the Securities, except as may be required by
any
applicable federal or state securities laws and unless contemporaneous notice
of
such instruction is given to the Subscriber.
(l) Defaults.
The
Company is not in violation of its articles of incorporation or bylaws. The
Company is (i) not in default under or in violation of any other material
agreement or instrument to which it is a party or by which it or any of its
properties are bound or affected, which default or violation would have a
Material Adverse Effect,
(ii)
not in default with respect to any order of any court, arbitrator or
governmental body or subject to or party to any order of any court or
governmental authority arising out of any action, suit or proceeding under
any
statute or other law respecting antitrust, monopoly, restraint of trade,
unfair
competition or similar matters, or (iii) not in violation of any statute,
rule
or regulation of any governmental authority which violation would have a
Material Adverse Effect.
(m) No
Integrated Offering.
Neither
the Company, nor to the Company’s knowledge, any of its Affiliates, or any
person acting on its or their behalf, has directly or indirectly made any
offers
or sales of any security or solicited any offers to buy any security under
circumstances that would cause the offer of the Securities pursuant to this
Agreement to be integrated with prior offerings by the Company for purposes
of
the 1933 Act or any applicable stockholder approval provisions, which would
impair the exemptions relied upon in this Offering or the Company’s ability to
timely comply with its obligations hereunder. The Company will not take any
action or steps that would cause the offer or issuance of the Securities
to be
integrated with other offerings which would impair the exemptions relied
upon in
this Offering or the Company’s ability to timely comply with its obligations
hereunder. The Company will not conduct any offering other than the transactions
contemplated hereby that will be integrated with the offer or issuance of
the
Securities that would impair the exemptions relied upon in this Offering
or the
Company’s ability to timely comply with its obligations hereunder.
(n) No
General Solicitation.
Neither
the Company, nor any of its Affiliates, nor to its knowledge, any person
acting
on its or their behalf, has engaged in any form of general solicitation or
general advertising (within the meaning of Regulation D under the 0000 Xxx)
in
connection with the offer or sale of the Securities.
(o) No
Undisclosed Liabilities.
The
Company has no liabilities or obligations which are material, individually
or in
the aggregate, other than those incurred in the ordinary course of the Company
businesses since December 31, 2006, and which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect,
except
as disclosed in the Reports or on Schedule
5(o).
8
(p) No
Undisclosed Events or Circumstances.
Since
December 31, 2006, no event or circumstance has occurred or exists with respect
to the Company or its businesses, properties, operations or financial condition,
that, under applicable law, rule or regulation, requires public disclosure
or
announcement prior to the date hereof by the Company but which has not been
so
publicly announced or disclosed in the Reports.
(q) Capitalization.
The
authorized and outstanding capital stock of the Company and Subsidiaries
as of
the date of this Agreement and the Closing Date (not including the Securities)
are set forth in the Reports. Except as set forth on in the Reports or on
Schedule
5(d),
there
are no options, warrants, or rights to subscribe to, securities, rights or
obligations convertible into or exchangeable for or giving any right to
subscribe for any shares of capital stock of the Company or any of its
Subsidiaries.
(r) Dilution.
The
Company's executive officers and directors understand the nature of the
Securities being sold hereby and recognize that the issuance of the Securities
will have a potential dilutive effect on the equity holdings of other holders
of
the Company’s equity or rights to receive equity of the Company. The board of
directors of the Company has concluded, in its good faith business judgment
that
the issuance of the Securities is in the best interests of the Company. The
Company specifically acknowledges that its obligation to issue the Shares
upon
conversion of the Notes, and the Warrant Shares upon exercise of the Warrants,
is binding upon the Company and enforceable regardless of the dilution such
issuance may have on the ownership interests of other shareholders of the
Company or parties entitled to receive equity of the Company.
(s) No
Disagreements.
There
are no material disagreements of any kind presently existing, or reasonably
anticipated by the Company to arise between the Company and the accountants,
lawyers and transfer agent presently employed by the Company, including but
not
limited to disputes or conflicts over payment owed to them, nor have there
been
any such disagreements during the two years prior to the Closing
Date.
(t) Investment
Company.
The
Company is not an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.
(u) Foreign
Corrupt Practices.
Neither
the Company, nor to the knowledge of the Company, any agent or other person
acting on behalf of the Company, has (i) directly or indirectly, used any
funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
related to foreign or domestic political activity, (ii) made any unlawful
payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds,
(iii)
failed to disclose fully any contribution made by the Company (or made by
any
person acting on its behalf of which the Company is aware) which is in violation
of law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.
(v) Reporting
Company.
The
Company is a publicly-held company subject to reporting obligations pursuant
to
Section 13 of the Securities Exchange Act of 1934, as amended (the "1934
Act")
and
has a class of Common Stock registered pursuant to Section 12(g) of the 0000
Xxx. The Company is not a “shell company” as that term is employed in the 1933
Act.
(w) Listing.
The
Company's Common Stock is quoted on the Pink Sheets under the symbol CBBD.
The
Company has not received any oral or written notice that its Common Stock
is not
eligible nor will become ineligible for quotation on the Pink Sheets nor
that
its Common Stock does not meet all requirements for the continuation of such
quotation. The Company satisfies all the requirements for the continued
quotation of its Common Stock on the Pink Sheets.
(x) DTC
Status.
The
Company’s transfer agent is a participant in, and the Common Stock is eligible
for transfer pursuant to, the Depository Trust Company Automated Securities
Transfer Program. The name, address, telephone number, fax number, contact
person and email address of the Company transfer agent is set forth on
Schedule
5(x)
hereto.
9
(y) Solvency.
Based
on the financial condition of the Company as of the Closing Date after giving
effect to the receipt by the Company of the proceeds from the sale of the
Notes
hereunder, (i) the Company’s fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities)
as
they mature; (ii) the Company’s assets do not constitute unreasonably small
capital to carry on its business for the current fiscal year as now conducted
and as proposed to be conducted including its capital needs taking into account
the particular capital requirements of the business conducted by the Company,
and projected capital requirements and capital availability thereof, after
the
receipt of proceeds from the sale of the Notes hereunder; and (iii) the current
cash flow of the Company, together with the proceeds the Company would receive,
were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or
in
respect of its debt when such amounts are required to be paid. The Company
does
not intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).
(z) Company
Predecessor and Subsidiaries.
The
Company makes each of the representations contained in Sections 5(a), (b),
(c),
(d), (e), (f), (h), (j), (l), (o), (p), (q), (s), (t), and (u) of this
Agreement, to the extent the same relate to the Subsidiary of the Company.
All
representations made by or relating to the Company of a historical or
prospective nature and all undertakings described in Sections 9(g) through
9(l)
shall relate, apply and refer to the Company and its predecessors. Except
as set
forth on Schedule
5(d),
the
Company owns 100% of the outstanding equity of the Subsidiaries and rights
to
receive equity of the Subsidiaries free and clear of all liens, encumbrances
and
claims. No person or entity other than the Company has the right to receive
any
equity interest in the Subsidiaries.
(AA) Correctness
of Representations.
The
Company represents that the foregoing representations and warranties are
true
and correct as of the date hereof in all material respects, and, unless the
Company otherwise notifies the Subscribers prior to the Closing Date, shall
be
true and correct in all material respects as of the Closing Date; provided,
that, if such representation or warranty is made as of a different date in
which
case such representation or warranty shall be true as of such date.
(BB) Survival.
The
foregoing representations and warranties shall survive the Closing
Date.
6. Regulation
D Offering/Legal Opinion.
The
offer and issuance of the Securities to the Subscribers is being made pursuant
to the exemption from the registration provisions of the 1933 Act afforded
by
Section 4(2) or Section 4(6) of the 1933 Act and/or Rule 506 of Regulation
D
promulgated thereunder. On the Closing Date, the Company will provide an
opinion
reasonably acceptable to the Subscribers’ counsel from the Company's legal
counsel opining on the availability of an exemption from registration under
the
1933 Act as it relates to the offer and issuance of the Securities and other
matters reasonably requested by Subscribers. A final form of the legal opinion
will be annexed hereto as Exhibit
D,
subsequent to delivery by the Company’s counsel. The Company will provide, at
the Company's expense, such other legal opinions, if any, as are reasonably
necessary in each Subscriber’s opinion for the issuance, delivery and resale of
the Common Stock issuable upon conversion of the Notes and exercise of the
Warrants pursuant to an effective registration statement, Rule 144 under
the
1933 Act or an exemption from registration.
10
7.1. Conversion
of Note.
(a) Upon
the
conversion of a Note or part thereof, the Company shall, at its own cost
and
expense, take all necessary action, including obtaining and delivering, an
opinion of counsel to assure that the Company's transfer agent shall issue
stock
certificates in the name of Subscriber (or its permitted nominee) or such
other
persons as designated by Subscriber and in such denominations to be specified
at
conversion representing the number of shares of Common Stock issuable upon
such
conversion. The Company warrants that no instructions other than these
instructions have been or will be given to the transfer agent of the Company's
Common Stock and that the certificates representing such shares shall contain
no
legend other than the usual 1933 Act restriction from transfer legend. In
the
event that the Shares are sold in a manner that complies with an exemption
from
registration, the Company will promptly instruct its counsel to issue to
the
transfer agent an opinion permitting removal of the legend indefinitely,
if
pursuant to Rule 144(k) of the 1933 Act, provided that Subscriber delivers
all
reasonably requested representations in support of such opinion. When referred
to herein, Rule
144(k)
shall
mean such sections of Rule 144 under the 1933 Act which allow resales of
“restricted
stock”
(as
employed in Rule 144) by non-affiliates of the Company without volume
limitations and without further restriction on transfer.
(b) A
Subscriber will give notice of its decision to exercise its right to convert
the
Note, interest, or part thereof by telecopying, or otherwise delivering a
completed Notice of Conversion (a form of which is annexed as “Exhibit A” to the
Note) to the Company via confirmed telecopier transmission or otherwise pursuant
to Section 13(a) of this Agreement. Such Subscriber will not be
required to surrender the Note
until
the Note has been fully converted or satisfied. Each date on which a Notice
of
Conversion is telecopied to the Company in accordance with the provisions
hereof
by 6 PM Eastern Time (“ET”) (or if received by the Company after 6 PM ET or at
any time or a non-business day then the next business day) shall be deemed
a
“Conversion
Date.”
The
Company will itself or cause the Company’s transfer agent to transmit the
Company's Common Stock certificates representing the Shares issuable upon
conversion of the Note to such Subscriber via express courier for receipt
by
such Subscriber within seven (7) business days after receipt by the Company
of
the Notice of Conversion (such seventh day being the "Delivery
Date").
In
the event the Shares are electronically transferable, then delivery of the
Shares must
be made
by electronic transfer provided request for such electronic transfer has
been
made by the Subscriber.
A Note representing the balance of the Note not so converted will be provided
by
the Company to such Subscriber if requested by Subscriber, provided such
Subscriber delivers the
original Note to the Company. In the event that a Subscriber elects not to
surrender a Note for reissuance upon partial payment or conversion of a Note,
such Subscriber hereby indemnifies the Company against any and all loss or
damage attributable to a third-party claim in an amount in excess of the
actual
amount then due under the Note.
(c) The
Company understands that a delay in the delivery of the Shares in the form
required pursuant to Section 7.1 hereof later than the Delivery Date could
result in economic loss to the Subscriber. As compensation to a Subscriber
for
such loss, the Company agrees to pay (as liquidated damages and not as a
penalty) to such Subscriber for late issuance of Shares in the form required
pursuant to Section 7.1 hereof upon Conversion of the Note in the amount
of $100
per business day after the Delivery Date for each $10,000 of Note principal
amount (and proportionately for other amounts) being converted of the
corresponding Shares which are not timely delivered. The Company shall pay
any
payments incurred under this Section in immediately available funds upon
demand.
Furthermore, in addition to any other remedies which may be available to
the
Subscriber, in the event that the Company fails for any reason to effect
delivery of the Shares within seven (7) business days after the Delivery
Date,
such Subscriber will be entitled to revoke all or part of the relevant Notice
of
Conversion by delivery of a notice to such effect to the Company whereupon
the
Company and such Subscriber shall each be restored to their respective positions
immediately prior to the delivery of such notice, except that the liquidated
damages described above shall be payable through the date notice of revocation
or rescission is given to the Company.
11
7.2. Mandatory
Redemption at Subscriber’s Election.
In the
event (i) the Company is prohibited from issuing Shares, (ii) upon the
occurrence of any other Event of Default (as defined in the Note or in this
Agreement), (iii) a Change in Control (as defined below), or (iv) of the
liquidation, dissolution or winding up of the Company, then at the Subscriber's
election, the Company must pay to the Subscriber ten (10) business days after
request by each Subscriber the outstanding principal amount of the Note
designated by each such Subscriber, plus accrued but unpaid interest and
any
other amounts that have accrued pursuant to the Transaction Documents
("Mandatory
Redemption Payment").
Upon
receipt of the Mandatory Redemption Payment, the corresponding Note principal,
interest and other amounts will be deemed paid and no longer outstanding.
The
Subscriber may rescind the election to receive a Mandatory Redemption Payment
at
any time until such payment is actually received. For purposes of this Section
7.2, “Change
in Control”
shall
mean (i) the Company no longer having a class of shares publicly traded,
quoted
or listed on any Principal Market (as defined in Section 9(b) hereto), (ii)
the
Company becoming a Subsidiary of another entity (other than a corporation
formed
by the Company for purposes of reincorporation in another U.S. jurisdiction),
(iii) a majority of the board of directors of the Company as of the Closing
Date
no longer serving as directors of the Company except due to natural causes,
and
(iv) the sale, lease or transfer of substantially all the assets of the Company
or its Subsidiaries.
7.3. Maximum
Conversion.
A
Subscriber shall not be entitled to convert on a Conversion Date that amount
of
the Note in connection with that number of shares of Common Stock which would
be
in excess of the sum of (i) the number of shares of Common Stock beneficially
owned by such Subscriber and its Affiliates on a Conversion Date, and (ii)
the
number of shares of Common Stock issuable upon the conversion of the Note
with
respect to which the determination of this provision is being made on a
Conversion Date, which would result in beneficial ownership by such Subscriber
and its or his Affiliates of more than 4.99% of the outstanding shares of
Common
Stock of the Company on such Conversion Date. For the purposes of the provision
to the immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934,
as
amended, and Rule 13d-3 thereunder. Subject to the foregoing, the Subscriber
shall not be limited to aggregate conversions of only 4.99% and aggregate
conversions by the Subscriber may exceed 4.99%. The Subscriber may increase
the
permitted beneficial ownership amount up to 9.99% upon and effective after
61
days’ prior written notice to the Company. Such Subscriber may allocate which of
the equity of the Company deemed beneficially owned by such Subscriber shall
be
included in the 4.99% amount described above and which shall be allocated
to the
excess above 4.99%.
7.4. Injunction
Posting of Bond.
In the
event a Subscriber shall elect to convert a Note or part thereof, the Company
may not refuse conversion or exercise based on any claim that such Subscriber
or
any one associated or affiliated with such Subscriber has been engaged in
any
violation of law, or for any other reason, unless, an injunction from a court,
on notice, restraining and or enjoining conversion of all or part of such
Note
shall have been sought and obtained by the Company or at the Company’s request
or with the Company’s assistance, and
the
Company has posted a surety bond for the benefit of such Subscriber in the
amount of 120% of the outstanding principal and interest of the Note, or
aggregate purchase price of the Shares which are sought to be subject to
the
injunction, which bond shall remain in effect until the completion of
arbitration/litigation of the dispute and the proceeds of which shall be
payable
to such Subscriber to the extent Subscriber obtains judgment in Subscriber’s
favor.
7.5. Buy-In.
In
addition to any other rights available to a Subscriber, if the Company fails
to
deliver to a Subscriber such shares issuable upon conversion of a Note by
the
Delivery Date and if after three (3) business days after the Delivery Date
such
Subscriber or a broker on such Subscriber’s behalf purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction
of a
sale by such Subscriber of the Common Stock which such Subscriber was entitled
to receive upon such conversion (a "Buy-In"),
then
the Company shall pay in cash to such Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) such
Subscriber's total purchase price (including brokerage commissions, if any)
for
the shares of Common Stock so purchased exceeds (B) the aggregate principal
and/or interest amount of the Note for which such conversion was not timely
honored together
with interest thereon at a rate of 15% per annum, or the maximum amount legally
allowed under the jurisdiction in which the subscriber resides, accruing
until
such amount and any accrued interest thereon is paid in full (which amount
shall
be paid as liquidated damages and not as a penalty. For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted
conversion of $10,000 of note principal and/or interest, the Company shall
be
required to pay such Subscriber $1,000 plus interest. Such Subscriber shall
provide the Company written notice and evidence indicating the amounts payable
to such Subscriber in respect of the Buy-In.
12
7.6 Adjustments.
The
Conversion Price, Warrant exercise price and amount of Shares issuable upon
conversion of the Notes and exercise of the Warrants shall be equitably adjusted
and as otherwise described in this Agreement, the Notes and
Warrants.
7.7. Redemption.
The
Notes shall not be redeemable or prepayable except as described in the Notes.
8. Broker/Due
Diligence Fee/Legal Fees.
(a) Broker’s
Commission.
The
Company on the one hand, and each Subscriber (for himself only) on the other
hand, agrees to indemnify the other against and hold the other harmless from
any
and all liabilities to any persons claiming brokerage commissions or similar
fees other than Chardan Capital Markets, LLC, (the “Broker”)
on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby and arising out of such party’s actions. Anything in this
Agreement to the contrary notwithstanding, each Subscriber is providing
indemnification only for such Subscriber’s own actions and not for any action of
any other Subscriber. Each Subscriber’s liability hereunder is several and not
joint. The Broker will be paid a cash fee of two and one-half percent (2.5%)
of
the Purchase Price paid by all Subscribers (except the Broker). Such cash
fee
will be applied towards the Purchase Price of Notes and Warrants to be issued
by
the Company to the Broker on the same terms and conditions as same are issued
to
the Subscribers except that no fees will be payable to the Broker in connection
with the Broker’s subscription (which amount shall be applied to the minimum
offering amount herein). The Company will also pay the broker a due diligence
Fee of $10,000 (“Due
Diligence Fee”).
The
Due Diligence Fee will be paid on the Closing Date out of funds held pursuant
to
the Escrow Agreement. The Company represents that there are no other parties
entitled to receive fees, commissions, or similar payments in connection
with
the offering described in this Agreement except the Broker. On the Closing
Date,
the Company will issue to the Broker or the Broker’s designees, Class A Warrants
(“Broker’s
Warrants”).
The
Broker and/or its designees will receive, in the aggregate, seventeen and
one-half (17.5) Broker’s Warrants for each one hundred (100) Warrants issued to
the Subscribers on the Closing Date and the number of Shares issuable upon
conversion of the Notes at the conversion price in effect on the Closing
Date,
in the aggregate. The Broker’s Warrants will be identical to the Class A
Warrants issued to the Subscribers except that the exercise price to purchase
each Warrant Share shall be $0.50 and the Broker’s Warrants will be exercisable
at the discretion of the Broker on a cash, cashless or combination of cash
and
cashless basis during the exercise period of the Warrants, whether or not
the
Warrant Shares issuable upon exercise of the Broker’s Warrants are included in
an effective registration statement or transferable pursuant to Rule 144(k)
under the 1933 Act, as amended. All the representations, covenants, warranties,
undertakings, remedies, liquidated damages, indemnification, and other rights
including but not limited to reservation rights made or granted to or for
the
benefit of the Subscribers are hereby also made by the Company and granted
to
the holders of the Broker’s Warrants.
(b) Subscriber’s
Legal Fees.
The
Company shall pay to Grushko & Xxxxxxx, P.C., a fee of $30,000 and to
issuer’s counsel, Xxxxxxx Xxxx LLP a fee of $25,000 plus disbursements
(“Legal
Fees”)
as
reimbursement for services in connection with this Agreement and the purchase
and sale of the Notes and Warrants (the “Offering”).
Legal
Fees and expenses will be payable out of funds held pursuant to the Escrow
Agreement.
13
9. Covenants
of the Company.
The
Company covenants and agrees with the Subscribers as follows:
(a) Stop
Orders.
The
Company will advise the Subscribers, within twenty-four hours after it receives
notice of issuance by the Commission, any state securities commission or
any
other regulatory authority of any stop order or of any order preventing or
suspending any offering of any securities of the Company, or of the suspension
of the qualification of the Common Stock of the Company for offering or sale
in
any jurisdiction, or the initiation of any proceeding for any such
purpose.
(b) Listing/Quotation.
The
Company shall promptly secure the quotation or listing of the Shares and
Warrant
Shares upon each national securities exchange, or automated quotation system
upon which they are or become eligible for quotation or listing (subject
to
official notice of issuance) and shall maintain same so long as any Warrants
are
outstanding. The Company will maintain the quotation or listing of its Common
Stock on the American Stock Exchange, Nasdaq Capital Market, Nasdaq Global
Market, Nasdaq Global Select Market, OTC Bulletin Board, Pink Sheets or New
York
Stock Exchange (whichever of the foregoing is at the time of conversion or
exercise the principal trading exchange or market for the Common Stock (the
“Principal
Market”),
and
will comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Principal Market, as applicable.
The Company will provide the Subscribers copies of all notices it receives
notifying the Company of the threatened and actual delisting of the Common
Stock
from any Principal Market. As of the date of this Agreement and the Closing
Date, the Pink Sheets is and will be the Principal Market.
(c) Market
Regulations.
The
Company shall notify the Commission, the Principal Market and applicable
state
authorities, in accordance with their requirements, of the transactions
contemplated by this Agreement, and shall take all other necessary action
and
proceedings as may be required and permitted by applicable law, rule and
regulation, for the legal and valid issuance of the Securities to the
Subscribers and promptly provide copies thereof to the Subscribers.
(d) Filing
Requirements.
From
the
date of this Agreement and until the last to occur of (i) two (2) years after
the Closing Date, (ii) until all the Shares and Warrant Shares have been
resold
or transferred by all the Subscribers pursuant to a registration statement
or
pursuant to Rule 144(k), or (iii) the Notes and Warrants are no longer
outstanding (the date of occurrence of the last such event being the
“End
Date”),
the
Company will (A) cause its Common Stock to be registered under Section 12(b)
or
12(g) of the 1934 Act, (B) comply in all respects with its reporting and
filing
obligations under the 1934 Act, and (C) voluntarily comply with all reporting
requirements that are applicable to an issuer with a class of shares registered
pursuant to Section 12(g) of the 1934 Act, if Company is not subject to such
reporting requirements. The Company will not take any action or file any
document (whether or not permitted by the 1933 Act or the 1934 Act or the
rules
thereunder) to terminate or suspend its reporting and filing obligations
under
said acts until the End Date. Until the End Date, the Company will continue
the
listing or quotation of the Common Stock on a Principal Market and will comply
in all respects with the Company's reporting, filing and other obligations
under
the bylaws or rules of the Principal Market. The Company agrees to timely
file a
Form D with respect to the Securities if required under Regulation D and
to
provide a copy thereof to each Subscriber promptly after such
filing.
(e) Use
of
Proceeds.
The
proceeds of the Offering will be employed by the Company to complete the
acquisition of Jinan Broadband substantially upon the terms and conditions
described in the Form 10-KSB filed with the Commission for the year ended
December 31, 2006, for expenses of the Offering and thereafter for working
capital. The Purchase Price may not and will not be used for accrued and
unpaid
officer and director salaries, payment of financing related debt, redemption
of
outstanding notes or equity instruments of the Company nor non-trade obligations
outstanding on a Closing Date. For so long as any Notes are outstanding,
the
Company will not prepay any financing related debt obligations nor redeem
any
equity instruments of the Company.
14
(f) Reservation.
Prior
to the Closing Date, and at all times thereafter, the Company shall have
reserved, pro rata,
on
behalf of each holder of a Note or Warrant, from its authorized but unissued
Common Stock, a number of common shares equal to 150%
of
the amount of Common Stock necessary to allow each holder of a Note to be
able
to convert all such outstanding Notes and interest (if any) and reserve the
amount of Warrant Shares issuable upon exercise of the Warrants.
(g)
DTC
Program.
At all
times that Notes or Warrants are outstanding, the Company will employ as
the
transfer agent for the Common Stock, Shares and Warrant Shares a participant
in
the Depository Trust Company Automated Securities Transfer Program.
(h) Taxes.
From
the date of this Agreement and until the End Date, the Company will promptly
pay
and discharge, or cause to be paid and discharged, when due and payable,
all
lawful taxes, assessments and governmental charges or levies imposed upon
the
income, profits, property or business of the Company; provided, however,
that
any such tax, assessment, charge or levy need not be paid if the validity
thereof shall currently be contested in good faith by appropriate proceedings
and if the Company shall have set aside on its books adequate reserves with
respect thereto, and provided, further, that the Company will pay all such
taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security
therefore.
(i) Insurance.
From
the date of this Agreement and until the End Date, the Company will keep
its
assets which are of an insurable character in the locations where they are
situated, insured by financially sound and reputable insurers against loss
or
damage by fire, explosion and other risks customarily insured against by
companies in the Company’s line of business, in amounts sufficient to prevent
the Company from becoming a co-insurer and not in any event less than one
hundred percent (100%) of the insurable value of the property insured less
reasonable deductible amounts; and the Company will maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary
for
companies in similar businesses similarly situated and to the extent available
on commercially reasonable terms.
(j) Books
and Records.
From the
date of this Agreement and until the End Date, the Company will keep true
records and books of account in which full, true and correct entries will
be
made of all dealings or transactions in relation to its business and affairs
in
accordance with generally accepted accounting principles applied on a consistent
basis.
(k) Governmental
Authorities.
From the
date of this Agreement and until the End Date, the Company shall duly observe
and conform in all material respects to all valid requirements of governmental
authorities relating to the conduct of its business or to its properties
or
assets.
(l) Intellectual
Property.
From
the date of this Agreement and until the End Date, the Company shall maintain
in
full force and effect its corporate existence, rights and franchises and
all
licenses and other rights to use intellectual property owned or possessed
by it
and reasonably deemed to be necessary to the conduct of its business, unless
it
is sold for value.
(m) Properties.
From the
date of this Agreement and until the End Date, the Company will keep its
properties in good repair, working order and condition, reasonable wear and
tear
excepted, and from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company will at
all
times comply with each provision of all leases to which it is a party or
under
which it occupies property if the breach of such provision could reasonably
be
expected to have a Material Adverse Effect.
15
(n) Confidentiality/Public
Announcement.
From the
date of this Agreement and until the End Date, the Company agrees that except
in
connection with a Form 8-K or in correspondence with the SEC regarding same,
it
will not disclose publicly or privately the identity of the Subscribers unless
expressly agreed to in writing by a Subscriber or only to the extent required
by
law and then only upon not less than four days prior notice to Subscriber.
In
any event and subject to the foregoing, the Company undertakes to file a
Form
8-K or make a public announcement describing the Offering not later than
four
business days after the Closing Date. Prior to filing or announcement, such
Form
8-K or public announcement will be provided to Subscribers for their review
and
approval. In the Form 8-K or public announcement, the Company will specifically
disclose the amount of Common Stock outstanding immediately after the Closing.
Upon delivery by the Company to the Subscribers after the Closing
Date of any notice or information, in writing, electronically or otherwise,
and
while a Note, Shares, Warrants, or Warrant Shares are held by such Subscribers,
unless the Company has in good faith determined that the matters
relating to such notice do not constitute material, nonpublic
information relating to the Company or
Subsidiaries, the Company shall within four business days after
any such delivery, publicly disclose such material, nonpublic
information on a Report on Form 8-K or otherwise.
In
the event that the Company believes that a
notice or communication to a Subscriber contains material, nonpublic
information, relating to the Company or Subsidiaries, the Company shall so
indicate to such Subscriber contemporaneously with delivery of such notice
or
information. In the absence of any such indication, such Subscriber shall
be allowed to presume that all matters relating to such notice and information
do not constitute proprietary, confidential nor material, nonpublic
information relating to the Company or its Subsidiaries.
(o) Non-Public
Information.
The
Company covenants and agrees that except for the Reports, Other Written
Information and schedules and exhibits to this Agreement, which information
the
Company undertakes to publicly disclose not later than the sooner of the
required or actual filing date of the Form 8-K described in Section 9(n)
above,
neither it nor any other person acting on its behalf will at any time provide
any Subscriber or its agents or counsel with any information that the Company
believes constitutes material non-public information, unless prior thereto
such
Subscriber shall have agreed in writing to keep such information in confidence.
The Company understands and confirms that each Subscriber shall be relying
on
the foregoing representations in effecting transactions in securities of
the
Company.
(p) Negative
Covenants.
So long
as a Note is outstanding, without the consent of the Subscribers, the Company
will not and will not permit any of its Subsidiaries to directly or
indirectly:
(i) create,
incur, assume or suffer to exist any pledge, hypothecation, assignment, deposit
arrangement, lien, charge, claim, security interest, security title, mortgage,
security deed or deed of trust, easement or encumbrance, or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing,
and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Uniform Commercial Code or comparable law of
any
jurisdiction) (each, a “Lien”)
upon
any of its property, whether now owned or hereafter acquired except for:
(A) the
Excepted Issuances (as defined in Section 12 hereof), and (B) (a) Liens imposed
by law for taxes that are not yet due or are being contested in good faith
and
for which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) carriers’, warehousemen’s, mechanics’,
material men’s, repairmen’s and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue
by
more than 30 days or that are being contested in good faith and by appropriate
proceedings; (c) pledges and deposits made in the ordinary course of business
in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations; (d) deposits to secure the performance of bids,
trade contracts, leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature, in each case in
the
ordinary course of business; (e) Liens created with respect to the financing
of
the purchase of new property in the ordinary course of the Company’s business up
to the amount of the purchase price of such property; and (f) easements,
zoning
restrictions, rights-of-way and similar encumbrances on real property imposed
by
law or arising in the ordinary course of business that do not secure any
monetary obligations and do not materially detract from the value of the
affected property (each of (a) through (f), a “Permitted
Lien”);
16
(ii) amend
its
articles of incorporation, bylaws or its charter documents so as to materially
and adversely affect any rights of the Subscriber (an increase in the amount
of
authorized shares or designation of a series of Preferred Shares and an
increase
in the number of directors will not be deemed adverse to the rights of
the
Subscribers);
(iii) repay,
repurchase or offer to repay, repurchase or otherwise acquire or make any
dividend or distribution in respect of any of its Common Stock, preferred
stock,
or other equity securities other than to the extent permitted or required
under
the Transaction Documents.
(iv) engage
in
any transactions with any officer, director, employee or any Affiliate of
the
Company, including any contract, agreement or other arrangement providing
for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any entity
in
which any officer, director, or any such employee has a substantial interest
or
is an officer, director, trustee or partner, in each case in excess of $100,000
other than (i) for payment of salary or consulting fees for services rendered,
(ii) reimbursement for expenses incurred on behalf of the Company, (iii)
for
other employee benefits, including stock option agreements under any stock
option plan of the Company, and (iv) pursuant to commitments described in
the
Reports; or
(v) prepay
or
redeem any financing related debt or past due obligations outstanding as
of the
Closing Date, other than the payment to Jinan Broadband described in Section
5(b).
(q) Seniority.
Except
as otherwise provided for herein, until the Notes are fully satisfied or
converted, the Company shall not grant nor allow any security interest to
be
taken in the assets of the Company or any Subsidiary; nor issue any debt,
equity
or other instrument which would give the holder thereof directly or indirectly,
a right in any assets of the Company or any Subsidiary, superior to any right
of
the holder of a Note in or to such assets..
(r) Notices.
For so
long as the Subscribers hold any Securities, the Company will maintain as
United
States address and United States fax number for notices purposes under the
Transaction Documents.
10. Covenants
of the Company Regarding Indemnification. The
Company agrees to indemnify, hold harmless, reimburse and defend the
Subscribers, the Subscribers' officers, directors, agents, Affiliates, members,
managers, control persons, and principal shareholders, against any claim,
cost,
expense, liability, obligation, loss or damage (including reasonable legal
fees)
of any nature, incurred by or imposed upon the Subscriber or any such person
which results, arises out of or is based upon (i) any material misrepresentation
by Company or breach of any representation or warranty by Company in this
Agreement or in any Exhibits or Schedules attached hereto, or other agreement
delivered pursuant hereto; or (ii) after any applicable notice and/or cure
periods, any breach or default in performance by the Company of any covenant
or
undertaking to be performed by the Company hereunder, or any other agreement
entered into by the Company and Subscriber relating hereto.
17
11.1. Delivery
of Unlegended Shares.
(a) Within
seven business days (such seventh business day being the “Unlegended
Shares Delivery Date”)
after
the business day on which the Company has received (i) a notice that Shares
or
Warrant Shares or any other Common Stock held by a Subscriber have been sold
pursuant to a registration statement, if any, or Rule 144, (ii) a representation
that the prospectus delivery requirements, or the requirements of Rule 144,
as
applicable and if required, have been satisfied, (iii) the original share
certificates representing the shares of Common Stock that have been sold,
and
(iv) in the case of sales under Rule 144, customary representation letters
of
the Subscriber and/or a Subscriber’s broker regarding compliance with the
requirements of Rule 144, the Company at its expense, (y) shall deliver,
and
shall cause legal counsel selected by the Company to deliver to its transfer
agent (with copies to Subscriber) an appropriate instruction and opinion
of such
counsel, directing the delivery of shares of Common Stock without any legends
including the legend set forth in Section 4(i) above (the “Unlegended
Shares”);
and
(z) cause the transmission of the certificates representing the Unlegended
Shares together with a legended certificate representing the balance of the
submitted certificate, if any, to the Subscriber at the address specified
in the
notice of sale, via express courier, by electronic transfer or otherwise
on or
before the Unlegended Shares Delivery Date. In the event that the Shares
are
sold in a manner that complies with an exemption from registration, the Company
will promptly instruct its counsel to issue to the Company’s transfer agent an
opinion permitting removal of the legend indefinitely if pursuant to Rule
144(k).
(b) In
lieu
of delivering physical certificates representing the Unlegended Shares, upon
request of a Subscriber, so long as the certificates therefor do not bear
a
legend and the Subscriber is not obligated to return such certificate for
the
placement of a legend thereon, the Company will cause its transfer agent
to
electronically transmit the Unlegended Shares by crediting the account of
Subscriber’s prime broker with the Depository Trust Company through its Deposit
Withdrawal Agent Commission system, if such transfer agent participates in
such
DWAC system. Such delivery must be made on or before the Unlegended Shares
Delivery Date.
(c) The
Company understands that a delay in the delivery of the Unlegended Shares
pursuant to Section 11 hereof later than the Unlegended Shares Delivery Date
could result in economic loss to a Subscriber. As compensation to a Subscriber
for such loss, the Company agrees to pay late payment fees (as liquidated
damages and not as a penalty) to the Subscriber for late delivery of Unlegended
Shares in the amount of $100 per business day after the Delivery Date for
each
$10,000 of purchase price of the Unlegended Shares subject to the delivery
default. In the event damages are payable pursuant to the foregoing sentence
and
pursuant to Section 1.7 of the Warrant in connection with the same Warrant
Shares, then the Subscriber may elect to receive liquidated damages under
this
Section 11.1(c) or Section 1.7 of the Warrant or Section 13(g) below. If
during
any 360 day period, the Company fails to deliver Unlegended Shares as required
by this Section 11.1 for an aggregate of 30 days, then each Subscriber or
assignee holding Securities subject to such default may, at its option, require
the Company to redeem all or any portion of the Shares and Warrant Shares
subject to such default at a price per share equal to the greater of (i)
120% of
the purchase price of such Shares and Warrant Shares, or (ii) a fraction
in
which the numerator is the highest closing price of the Common Stock during
the
aforedescribed 30 day period and the denominator of which is the purchase
price
of the Shares and Exercise Price of the Warrant Shares, as the case may be,
during such 30 day period, multiplied by the purchase price of the Shares
and
Exercise Price of the Warrant Shares, as the case may be (“Unlegended
Redemption Amount”).
The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand.
18
(d)
In
addition to any other rights available to a Subscriber, if the Company fails
to
deliver to a Subscriber Unlegended Shares as required pursuant to this
Agreement, within three business days after the Unlegended Shares Delivery
Date
and the Subscriber or a broker on the Subscriber’s behalf, purchases (in an open
market transaction or otherwise) shares of common stock to deliver in
satisfaction of a sale by such Subscriber of the shares of Common Stock which
the Subscriber was entitled to receive from the Company (a "Buy-In"),
then
the Company shall pay in cash to the Subscriber (in addition to any remedies
available to or elected by the Subscriber) the amount by which (A) the
Subscriber's total purchase price (including brokerage commissions, if any)
for
the shares of Common Stock so purchased exceeds (B) the aggregate purchase
price
of the shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares together
with interest thereon at a rate of 15% per annum accruing until such amount
and
any accrued interest thereon is paid in full (which amount shall be paid
as
liquidated damages and not as a penalty). For
example, if a Subscriber purchases shares of Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to $10,000 of purchase
price of shares of Common Stock delivered to the Company for reissuance as
Unlegended Shares, the Company shall be required to pay the Subscriber $1,000,
plus interest. The Subscriber shall provide the Company written notice
indicating the amounts payable to the Subscriber in respect of the
Buy-In.
(e) In
the
event a Subscriber shall request delivery of Unlegended Shares as described
in
Section 11.1 or Warrant Shares upon exercise of Warrants and the Company
is
required to deliver such Unlegended Shares pursuant to Section 11.1 or the
Warrant Shares pursuant to the Warrants, the Company may not refuse to deliver
Unlegended Shares or Warrant Shares based on any claim that such Subscriber
or
any one associated or affiliated with such Subscriber has been engaged in
any
violation of law, or for any other reason, unless, an injunction or temporary
restraining order from a court, on notice, restraining and or enjoining delivery
of such Unlegended Shares or exercise of all or part of said Warrant shall
have
been sought and obtained by the Company or at the Company’s request or with the
Company’s assistance,
and the
Company has posted a surety bond for the benefit of such Subscriber in the
amount of 120% of the amount of the aggregate purchase price of the Shares
and
Warrant Shares which are subject to the injunction or temporary restraining
order, which bond shall remain in effect until the final unappealable
disposition of the litigation of the dispute and the proceeds of which shall
be
payable to such Subscriber to the extent Subscriber obtains judgment in
Subscriber’s favor.
11.2. In
the
event commencing one hundred and eighty-one (181) days after the Closing
Date
and ending five years thereafter, the Subscriber is not permitted to resell
any
of the Shares or Warrant Shares without any restrictive legend or if such
sales
are permitted but subject to volume limitations or further restrictions on
resale as a result of the unavailability to Subscriber of Rule 144(k) under
the
1933 Act or any successor rule (a “144
Default”),
for
any reason except for Subscriber’s status as an Affiliate or “control person” of
the Company, then the Company shall pay such Subscriber as liquidated damages
(“Liquidated
Damages”)
and
not as a penalty an amount equal to one percent (1%) for the first day of
such
occurrence and one percent (1%) for each thirty (30) days (or such lesser
pro-rata amount for any period less than thirty (30) days) thereafter of
the
purchase price of the Shares and Warrant Shares owned by the Subscriber during
the pendency of the 144 Default.
11.3. Subscriber
Questionnaire.
Each
Seller shall answer the questions set forth in Selling Shareholder Questionnaire
(“Subscriber
Questionnaire”)
in the
form attached as Exhibit
E
and
deliver such completed Subscriber Questionnaire to the Company and Broker
on or
prior to the Closing Date. Seller represents that the information provided
by
such Seller shall be true and correct as of the Closing Date and the date
such
Subscriber Questionnaire is delivered to the Company and Broker.
12. Anti-Dilution.
(a) Initial
Three Years.
Other
than in connection with an Excepted Issuance (as defined in Section 12(d)
below), if within three years after the Closing Date and to the extent that
the
Notes or Warrants are outstanding, the Company shall agree to or actually
issue
or grant the right to receive any Common Stock or securities convertible,
exercisable or exchangeable for shares of Common Stock (or modify any of
the
foregoing which may be outstanding) (“Common
Stock Equivalent”)
to any
person or entity at a price per share or Conversion Price or exercise price
per
share which shall be less than the Conversion Price in respect of the Shares,
or
less than the Warrant exercise price in respect of the Warrant Shares
(“Lower
Price Issuance”),
without the consent of each Subscriber, then the Conversion Price and Warrant
exercise prices for Warrants and Notes then outstanding shall automatically
and
without further action be reduced to such other lower price.
19
(b) After
Initial Three Years.
Commencing three years after the Closing Date and for so long as a Note is
outstanding, upon the occurrence of a Lower Price Issuance, the Conversion
Price
shall be reduced to an amount equal to the product of the Conversion Price
then
in effect multiplied by a fraction of which the numerator shall be the number
of
shares of Common Stock outstanding prior to such issuance plus the number
of
shares of Common Stock which the aggregate purchase price or exercise price
for
such Common Stock (plus, if applicable, the aggregate consideration received
from the issuance of the Common Stock Equivalents) would purchase at the
then
current Conversion Price and the denominator shall be the number of shares
of
Common Stock outstanding or deemed to be outstanding immediately after such
issuance. Commencing three years after the Closing Date and for so long as
a
Warrant is outstanding upon the occurrence of a Lower Price Issuance, the
Warrant exercise price shall be reduced to an amount equal to the product
of the
Warrant exercise price then in effect multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding prior
to
such issuance plus the number of shares of Common Stock which the aggregate
purchase price or exercise price for such Common Stock (plus, if applicable,
the
aggregate consideration received from the issuance of the Common Stock
Equivalents) would purchase at the then current Warrant exercise price and
the
denominator shall be the number of shares of Common Stock outstanding or
deemed
to be outstanding immediately after such issuance.
(c) Effective
Price.
For
purposes of Section 12 in connection with any issuance of any Common Stock
Equivalents, (A) the maximum number of shares of Common Stock potentially
issuable at any time upon conversion, exercise or exchange of such Common
Stock
Equivalents (the “Deemed
Number”)
shall
be deemed to be outstanding upon issuance of such Common Stock Equivalents,
(B)
the deemed issue price (“Effective
Price”)
applicable to such Common Stock shall equal the minimum dollar value of
consideration payable to the Company to purchase such Common Stock Equivalents
and to convert, exercise or exchange them into Common stock (net of any
discounts, fees, commissions and other expenses), divided by the Deemed number,
and (C) no further adjustment shall be made to the Conversion Price upon
the
actual issuance of Common Stock upon conversion exercise or exchange of such
Common Stock Equivalents if issued at or higher than the Effective Price.
If, at
any time while the Note is outstanding, the Company directly or indirectly
issues Common Stock Equivalents with an Effective Price or a number of
underlying shares that floats or resets or otherwise varies or is subject
to
adjustment based (directly or indirectly) on market prices of the Common
Stock
(a “Floating
Price Security”),
then
for purposes of Section 12 in connection with any subsequent conversion,
the
Effective Price will be determined separately on each Conversion Date and
will
be deemed to equal the lowest Effective Price at which any holder of such
Floating Price Security is entitled to acquire Common Stock on such Conversion
Date (regardless of whether any such holder actually acquires any shares
on such
date). Common Stock issued or issuable by the Company for no consideration
will
be deemed to have been issued or to be issuable for $0.0001 per share of
Common
Stock.
(d) Excepted
Issuances.
Each
Subscriber is granted the rights described in Section 11 hereof in relation
to
the additional shares of Common Stock issuable in connection with the adjustment
described in this Section 12. The rights of each Subscriber set forth in
this
Section 12 are in addition to any other rights the Subscriber has pursuant
to
this Agreement, the Note, any Transaction Document, and any other agreement
referred to or entered into in connection herewith or to which such Subscriber
and Company are parties. For purposes of Section 12, “Excepted
Issuance”
shall
mean (i) the Company’s issuance of Common Stock or Common Stock Equivalent
described in Reports filed not later than five business days before the Closing
Date, and (ii) as a result of the exercise of Warrants or conversion of Notes
which are granted or issued pursuant to this Agreement.
20
13. Miscellaneous.
(a) Notices.
All
notices, demands, requests, consents, approvals, and other communications
required or permitted hereunder shall be in writing and, unless otherwise
specified herein, shall be (i) personally served, (ii) deposited in the mail,
registered or certified, return receipt requested, postage prepaid, (iii)
delivered by reputable air courier service with charges prepaid, or (iv)
transmitted by hand delivery, telegram, or facsimile, addressed as set forth
below or to such other address as such party shall have specified most recently
by written notice. Any notice or other communication required or permitted
to be
given hereunder shall be deemed effective (a) upon hand delivery or delivery
by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or
the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be: (i) if to the Company, to: China Broadband, Inc.,
1900
Xxxxx Xxxxxx, 0xx
Xxxxx,
Xxxxxxx, XX 00000, Attn: Xxxxx Xx, President, Fax:
(000)
000-0000, with a copy by facsimile only to: Xxxxxxx Xxxx LLP, 1500 Xxxxxxxx,
00xx
Xxxxx,
Xxx Xxxx, XX 00000, Attn: Xxxxxxx Xxxx, Esq., Fax: (000) 000-0000, (ii) if
to
the Subscriber, to: the one or more addresses and facsimile numbers indicated
on
the signature pages hereto, with an additional copy by facsimile only to:
Grushko & Xxxxxxx, P.C., 550 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx
00000, Fax: (000) 000-0000, and (iii) if to the Broker, to: Chardan Capital
Markets, LLC, 17 Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxx, XX 00000, Attn: Xxxxx
Xxxxxxx, CEO, Fax: (000) 000-0000.
(b) Entire
Agreement; Assignment.
This
Agreement and other documents delivered in connection herewith represent
the
entire agreement between the parties hereto with respect to the subject matter
hereof and may be amended only by a writing executed by both parties. Neither
the Company nor the Subscribers have relied on any representations not contained
or referred to in this Agreement and the documents delivered herewith. No
right
or obligation of the Company shall be assigned without prior notice to and
the
written consent of the Subscribers.
(c) Counterparts/Execution.
This
Agreement may be executed in any number of counterparts and by the different
signatories hereto on separate counterparts, each of which, when so executed,
shall be deemed an original, but all such counterparts shall constitute but
one
and the same instrument. This Agreement may be executed by facsimile signature
and delivered by facsimile transmission.
(d) Law
Governing this Agreement.
This
Agreement shall be governed by and construed in accordance with the laws
of the
State of New York without regard to principles of conflicts of laws. Any
action
brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in the state courts
of New
York or in the federal courts located in the state and county of New York.
The
parties to this Agreement hereby irrevocably waive any objection to jurisdiction
and venue of any action instituted hereunder and shall not assert any defense
based on lack of jurisdiction or venue or based upon forum
non conveniens.
The
parties executing this Agreement and other agreements referred to herein
or
delivered in connection herewith on behalf of the Company agree to submit
to the
in personam jurisdiction of such courts and hereby irrevocably waive trial
by
jury. The
prevailing party shall be entitled to recover from the other party its
reasonable attorney's fees and costs. In the event that any provision of
this
Agreement or any other agreement delivered in connection herewith is invalid
or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith
and
shall be deemed modified to conform with such statute or rule of law. Any
such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or enforceability of any other provision of any agreement.
Each party hereby irrevocably waives personal service of process and consents
to
process being served in any suit, action or proceeding in connection with
this
Agreement or any other Transaction Document by mailing a copy thereof via
registered or certified mail or overnight delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this Agreement
and agrees that such service shall constitute good and sufficient service
of
process and notice thereof. Nothing contained herein shall be deemed to limit
in
any way any right to serve process in any other manner permitted by
law.
21
(e) Specific
Enforcement, Consent to Jurisdiction.
The
Company and Subscriber acknowledge and agree that irreparable damage would
occur
in the event that any of the provisions of this Agreement were not performed
in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to seek an injunction
or
injunctions to prevent or cure breaches of the provisions of this Agreement
and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
Subject to Section 13(d) hereof, the Company hereby irrevocably waives, and
agrees not to assert in any such suit, action or proceeding, any claim that
it
is not personally subject to the jurisdiction in New York of such court,
that
the suit, action or proceeding is brought in an inconvenient forum or that
the
venue of the suit, action or proceeding is improper. Nothing in this Section
shall affect or limit any right to serve process in any other manner permitted
by law.
(f) Independent
Nature of Subscribers.
The
Company acknowledges that the obligations of each Subscriber under the
Transaction Documents are several and not joint with the obligations of any
other Subscriber, and no Subscriber shall be responsible in any way for the
performance of the obligations of any other Subscriber under the Transaction
Documents. The
Company acknowledges that each Subscriber has represented that the decision
of
each Subscriber to purchase Securities has been made by such Subscriber
independently of any other Subscriber and independently of any information,
materials, statements or opinions as to the business, affairs, operations,
assets, properties, liabilities, results of operations, condition (financial
or
otherwise) or prospects of the Company which may have been made or given
by any
other Subscriber or by any agent or employee of any other Subscriber, and
no
Subscriber or any of its agents or employees shall have any liability to
any
Subscriber (or any other person) relating to or arising from any such
information, materials, statements or opinions. The
Company acknowledges that nothing contained in any Transaction Document,
and no
action taken by any Subscriber pursuant hereto or thereto (including, but
not
limited to, the (i) inclusion of a Subscriber in the Registration Statement
and
(ii) review by, and consent to, such Registration Statement by a Subscriber)
shall be deemed to constitute the Subscribers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that
the
Subscribers are in any way acting in concert or as a group with respect to
such
obligations or the transactions contemplated by the Transaction Documents.
The Company acknowledges that each Subscriber shall be entitled to independently
protect and enforce its rights, including without limitation, the rights
arising
out of the Transaction Documents, and it shall not be necessary for
any other Subscriber to be joined as an additional party in any proceeding
for
such purpose. The Company acknowledges that it has elected to provide all
Subscribers with the same terms and Transaction Documents for the convenience
of
the Company and not because Company was required or requested to do so by
the
Subscribers. The Company acknowledges that such procedure with respect to
the Transaction Documents in no way creates a presumption that the Subscribers
are in any way acting in concert or as a group with respect to the Transaction
Documents or the transactions contemplated thereby.
(g) Damages.
In the
event the Subscriber is entitled to receive any liquidated damages pursuant
to
the Transactions, the Subscriber may elect to receive the greater of actual
damages or such liquidated damages.
(h) Consent.
As used
in the Agreement, “consent of the Subscribers” or similar language means the
consent of holders of not less than 75% of the total of the Shares issued
and
issuable upon conversion of outstanding Notes owned by Subscribers on the
date
consent is requested.
22
(i) Equal
Treatment.
No
consideration shall be offered or paid to any person to amend or consent
to a
waiver or modification of any provision of the Transaction Documents unless
the
same consideration is also offered and paid to all the Subscribers and their
permitted successors and assigns.
(j) Maximum
Payments.
Nothing
contained herein or in any document referred to herein or delivered in
connection herewith shall be deemed to establish or require the payment of
a
rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest or dividends required
to
be paid or other charges hereunder exceed the maximum permitted by such law,
any
payments in excess of such maximum shall be credited against amounts owed
by the
Company to the Subscriber and thus refunded to the Company.
(k) Calendar
Days.
All
references to “days” in the Transaction Documents shall mean calendar days
unless otherwise stated. The terms “business days” and “trading days” shall mean
days that the New York Stock Exchange is open for trading for three or more
hours. Time periods shall be determined as if the relevant action, calculation
or time period were occurring in New York City. Any deadline that falls on
a
non-business day in any of the Transaction Documents shall be automatically
extended to the next business day and interest, if any, shall be calculated
and
payable through such extended period.
(l) Captions:
Certain Definitions.
The
captions of the various sections and paragraphs of this Agreement have been
inserted only for the purposes of convenience; such captions are not a part
of
this Agreement and shall not be deemed in any manner to modify, explain,
enlarge
or restrict any of the provisions of this Agreement. As used in this Agreement
the term “person”
shall
mean and include an individual, a partnership, a joint venture, a corporation,
a
limited liability company, a trust, an unincorporated organization and a
government or any department or agency thereof.
(m) Severability.
In the
event that any term or provision of this Agreement shall be finally determined
to be superseded, invalid, illegal or otherwise unenforceable pursuant to
applicable law by an authority having jurisdiction and venue, that determination
shall not impair or otherwise affect the validity, legality or enforceability:
(i) by or before that authority of the remaining terms and provisions of
this
Agreement, which shall be enforced as if the unenforceable term or provision
were deleted, or (ii) by or before any other authority of any of the terms
and
provisions of this Agreement.
(n) Successor
Laws.
References in the Transaction Documents to laws, rules, regulations and forms
shall also include successors to and functionally equivalent replacements
of
such laws, rules, regulations and forms.
23
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By: /s/
Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated: January
11, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
PLATINUM
PARTNERS VALUE ARBITRAGE FUND, L.P.
000
Xxxx 00xx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX 00000
Fax
No.: _______________________________________
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
$1,500,000.00
|
2,000,000
|
24
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By:
/s/ Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated:
January 11, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
GLOBIS
CAPITAL PARTNERS, LP
00
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX 00000
Fax
No.: _______________________________________
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
$325,000.00
|
433,333
|
25
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By:
/s/ Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated:
January 11, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
GLOBIS
OVERSEAS FUND, LTD.
00
Xxxxx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx, XX 00000
Fax
No.: _______________________________________
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
$100,000.00
|
133,333
|
26
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By:
/s/ Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated:
January 11, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
GLOBIS
ASIS LLC
0000
Xxxxxx Xxxxx
Xxxxxxx,
Xxx Xxxx 00000
Fax
No.: _______________________________________
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
$125,000.00
|
166,667
|
27
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By:
/s/ Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated:
January 11, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
XXXXXX
XXXXXXXXX
Address:_______________________________________
______________________________________________
Fax
No.: _______________________________________
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
$50,000.00
|
66,667
|
28
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By:
/s/ Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated:
January 11, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
XXXXXXXX
CAPITAL, LLC
00
Xxxxxxxxxx Xxxxx
Xxx
Xxxx, XX 00000
Fax:
(000) 000-0000
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
$2,000,000
|
2,666,667
|
29
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By:
/s/ Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated:
January 11, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
XXXXXX
XXXXX
0000
Xxxx Xxxxxx
Xxx
Xxxx, XX 00000
Fax
No.: ______________________________________
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
$250,000.00
|
333,333
|
30
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By:
/s/ Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated:
January 11, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
XXXX
XXXXX
000
X. Xxxxxx Xxxxx
Xxx
Xxxxxxx, XX 00000
Fax:
(310) _____________
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
$100,000.00
|
133,333
|
31
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By:
/s/ Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated:
January, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
XXXXX
XXXXXXX
00000
Xxxxxx Xxxxxx Xxxx
Xxx
Xxxxx, XX 00000
Fax:
____________________
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
$400,000.00
|
533,333
|
32
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By:
/s/ Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated:
January __, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
CHARDAN
CAPITAL MARKETS, LLC
00
Xxxxx Xxxxxx, Xxxxx 0000
Xxx
Xxxx, XX 00000
Fax:
(000) 000-0000
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
$121,250.00
|
161,667
|
33
SIGNATURE
PAGE TO SUBSCRIPTION AGREEMENT
Please
acknowledge your acceptance of the foregoing Subscription Agreement by signing
and returning a copy to the undersigned whereupon it shall become a binding
agreement between us.
CHINA
BROADBAND, INC.
a
Nevada corporation
By:
/s/ Clive Ng_________________
Name:
Xxxxx Xx
Title:
Chairman
Dated:
January __, 2008
|
SUBSCRIBER
|
PURCHASE
PRICE AND PRINCIPAL AMOUNT OF NOTE
|
CLASS
A WARRANTS
|
Name
of Subscriber:
_______________________________________________
Address:
______________________________________
______________________________________________
Fax
No.: _______________________________________
Email
address (not for notice purposes):
______________________________________________
Social
Security Number or Taxpayer ID# (if applicable):
______________________________________________
Jurisdiction
of organization (for entities):
______________________________________________
______________________________________________
(Signature)
By:
___________________________________________
Name:
_________________________________________
Title:
__________________________________________
|
34
LIST
OF EXHIBITS AND SCHEDULES
Exhibit
A
|
Form
of Note
|
Exhibit
B
|
Form
of Class A Warrant
|
Exhibit
C
|
Escrow
Agreement
|
Exhibit
D
|
Form
of Legal Opinion
|
Exhibit
E
|
Investor
Questionnaire
|
Schedule
5(a)
|
Subsidiaries
|
Schedule
5(d)
|
Additional
Issuances / Capitalization / Reset Rights
|
Schedule
5(f)
|
Outstanding
Registration Rights
|
Schedule
5(o)
|
Undisclosed
Liabilities
|
Schedule
5(x)
|
Transfer
Agent
|
35
EXHIBIT E
SUBSCRIBER
QUESTIONNAIRE
I. The
Subscriber represents and warrants that he or it comes within one category
marked
below,
and
that for any category marked, he or it has truthfully set forth, where
applicable, the factual basis or reason the Subscriber comes within that
category. ALL INFORMATION IN RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY
CONFIDENTIAL. The undersigned shall furnish any additional information which
China Broadband, Inc. (the “Company”) deems necessary in order to verify the
answers set forth below.
Category
A __
|
The
undersigned is an individual (not a partnership, corporation,
etc.) whose
individual net worth, or joint net worth with his or her spouse,
presently
exceeds $1,000,000.
|
Explanation.
In calculating net worth you may include equity in personal
property and
real estate, including your principal residence, cash, short-term
investments, stock and securities. Equity in personal property
and real
estate should be based on the fair market value of such property
less debt
secured by such property.
|
|
Category
B __
|
The
undersigned is an individual (not a partnership, corporation,
etc.) who
had an individual income in excess of $200,000 in each of the
two most
recent years, or joint income with his or her spouse in excess
of $300,000
in each of those years (in each case including foreign income,
tax exempt
income and full amount of capital gains and losses but excluding
any
income of other family members and any unrealized capital appreciation)
and has a reasonable expectation of reaching the same income
level in the
current year.
|
Category
C __
|
The
undersigned is a director or executive officer of the Company
which is
issuing and selling the Company’s $.001 par value Common Stock (the
“Shares”)
and common stock purchase warrants (the “Warrants”)
(collectively referred to as the “Securities”).
|
Category
D __
|
The
undersigned is a bank; savings and loan association; registered
broker-dealer; insurance company; registered investment company;
registered business development company; licensed small business
investment company (“SBIC”);
any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or
its political
subdivisions, for the benefit of its employees, if such plan
has total
assets in excess of $5,000,000; or employee benefit plan within
the
meaning of Title 1 of ERISA and (a) the investment decision
is made by a
plan fiduciary which is either a bank, savings and loan association,
insurance company or registered investment advisor, or (b)
the plan has
total assets in excess of $5,000,000 or is a self directed
plan with
investment decisions made solely by persons that are accredited
investors.
|
____________________________________
____________________________________
(describe
entity)
|
36
Category
E __
|
The
undersigned is a private business development company as defined
in
section 202(a)(22) of the Investment Advisors Act of
1940.
|
____________________________________
____________________________________
(describe
entity)
|
|
Category
F __
|
The
undersigned is either a corporation, partnership, Massachusetts
business
trust, or non-profit organization within the meaning of Section
501(c)(3)
of the Internal Revenue Code, in each case not formed for the
specific
purpose of acquiring the Securities and with total assets in
excess of
$5,000,000.
|
____________________________________
____________________________________
(describe
entity)
|
|
Category
G __
|
The
undersigned is a trust with total assets in excess of $5,000,000,
not
formed for the specific purpose of acquiring the Securities,
where the
purchase is directed by a “sophisticated person” as defined in Regulation
506(b)(2)(ii) under the Securities Act.
|
Category
H __
|
The
undersigned is an entity (other than a trust) all the equity
owners of
which are “accredited investors” within one or more of the above
categories. If relying upon this Category alone, each equity
owner must
complete a separate copy of this Agreement.
|
____________________________________
____________________________________
(describe
entity)
|
|
Category
I __
|
The
undersigned is not within any of the categories above and is
therefore not
an accredited investor.
|
(a)
As
used herein, the term “net worth” means the excess of total assets at fair
market value (including home and personal property) over total liabilities
(including mortgage). For purposes hereof, “individual income” means adjusted
gross income less any income attributable to a spouse or to property owned
by a
spouse, increased by the following amounts (but not including any amounts
attributable to a spouse or to property owned by a spouse): (i) the amount
of
any interest income received which is tax-exempt under Section 103 of the
Internal Revenue Code of 1986, as amended (the “Code”),
(ii)
the amount of losses claimed as a limited partner in a limited partnership
(as
reported on Schedule E of Form 1040), (iii) any deduction claimed for depletion
under Section 611 et seq. of the Code, and (iv) any amount by which income
from
long-term capital gains has been reduced in arriving at adjusted gross income
pursuant to the provisions of Section 12.02 of the Code.
The
undersigned agrees that the undersigned will notify the Company at any time
on
or prior to the execution of this Agreement in the event that the
representations and warranties in this Agreement shall cease to be true,
accurate and complete.
37
II. SUITABILITY
(please
answer each question)
(a) For
an
individual Subscriber, please describe your current employment, including
the
company by which you are employed and its principal business:
(b) For
an
individual Subscriber, please describe any college or graduate degrees held
by
you:.
(c) For
all
Subscribers, please list types of prior investments:
(d) For
all
Subscribers, please state whether you have you participated in other
private
placements
before:
YES
|
______ |
NO
|
______ |
(e) If
your
answer to question (d) above was “YES”, please indicate frequency of such prior
participation in private
placements
of:
Public
|
Private
|
||||
Companies
|
Companies
|
||||
Frequently
|
_______ | _________ | |||
Occasionally
|
_______ | _________ | |||
Never
|
_______ | _________ |
(f) For
individual Subscribers, do you expect your current level of income to
significantly decrease in the foreseeable future:
YES
|
______ |
NO
|
______ |
(g) For
trust, corporate, partnership and other institutional Subscribers, do you
expect
your total assets to significantly decrease in the foreseeable future:
YES
|
______ |
NO
|
______ |
(h) For
all
Subscribers, do you have any other investments or contingent liabilities
which
you reasonably anticipate could cause you to need sudden cash requirements
in
excess of cash readily available to you:
YES
|
______ |
NO
|
______ |
(i) For
all
Subscribers, are you familiar with the risk aspects and the non-liquidity
of
investments such as the Securities for which you seek to subscribe?
YES
|
______ |
NO
|
______ |
38
(j) For
all
Subscribers, do you understand that there is no guarantee of financial return
on
this investment and that you run the risk of losing your entire
investment?
YES
|
______ |
NO
|
______ |
III. MANNER
IN WHICH TITLE IS TO BE HELD.
(circle one)
(a) |
Individual
Ownership
|
(b) |
Community
Property
|
(c) |
Joint
Tenant with Right of Survivorship (both parties must
sign)
|
(d) |
Partnership*
|
(e) |
Tenants
in Common
|
(f) |
Corporation*
|
(g) |
Trust*
|
(h) |
Limited
Liability Company*
|
(i) |
Other
|
*If
Securities are being subscribed for by an entity, the attached Certificate
of
Signatory must also be completed.
IV. NASD
AFFILIATION.
Are
you
affiliated or associated with an NASD member firm (please
check one):
Yes
_________ No
__________
If
Yes,
please describe:
_________________________________________________________
_________________________________________________________
_________________________________________________________
*If
Subscriber is a Registered Representative with an NASD member firm, have
the
following acknowledgment signed by the appropriate party:
The
undersigned NASD member firm acknowledges receipt of the notice required
by Rule
3050 of the NASD Conduct Rules.
_________________________________
Name
of
NASD Member Firm
By:
______________________________
Authorized
Officer
Date:
____________________________
V. The
undersigned is informed of the significance to the Company of the foregoing
representations and answers contained in the Confidential Investor Questionnaire
contained herein and such answers have been provided under the assumption
that
the Company will rely on them.
39
VI. In
furnishing the above information, the undersigned acknowledges that the Company
will be relying thereon in determining, among other things, whether there
are
reasonable grounds to believe that the undersigned qualifies as a Purchaser
under Section 4(2), Section 4(6) and/or Regulation D as promulgated by the
United States Securities and Exchange Commission under the Securities Act
of
1933 and applicable state securities laws for the purposes of the proposed
investment.
VII. The
undersigned understands and agrees that the Company may request further
information of the undersigned in verification or amplification of the
undersigned's knowledge of business affairs, the undersigned's assets and
the
undersigned's ability to bear the economic risk involved in an investment
in the
securities of the Company.
VIII. The
undersigned represents to you that (a) the information contained herein is
complete and accurate on the date hereof and may be relied upon by you and
(b)
the undersigned will notify you immediately of any change in any such
information occurring prior to the acceptance of the subscription and will
promptly send you written confirmation of such change. The undersigned hereby
certifies that he, she or it has read and understands the Subscription Agreement
related hereto.
IX. In
order
for the Company to comply with applicable anti-money laundering/U.S. Treasury
Department Office of Foreign Assets Control (“OFAC”)
rules
and regulations, Subscriber is required to provide the following
information:
1. Payment
Information
(a)
Name
and address (including country) of the bank from which Subscriber’s payment to
the Company is being wired (the “Wiring
Bank”):
_______________________________________
_______________________________________
_______________________________________
_______________________________________
(b) Subscriber’s
wiring instructions at the Wiring Bank:
_______________________________________
_______________________________________
_______________________________________
(c)
Is
the Wiring Bank located in the U.S. or another “FATF
Country”
_____
Yes
______
No
__________________________
*
As of
the date hereof, countries that are members of the Financial Action Task
Force
on Money Laundering (“FATF
Country”)
are:
Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland,
France, Germany, Greece, Hong Kong, Iceland, Ireland, Italy, Japan, Luxembourg,
Mexico, Kingdom of the Netherlands, New Zealand, Norway, Portugal, Russian
Federation, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey,
United
Kingdom and the United States of America.
40
(d)
Is
Subscriber a customer of the Wiring Bank?
_____
Yes ______
No
2. Additional
Information
(N.B.:
this Section applies only to prospective investors who responded “no” to either
of Question I(c) or I(d) above.)
The
following materials must be provided to the Company (forms will be provided
by
the Company upon request):
For
Individual Investors:
_____ |
A government issued form of picture identification
(e.g.,
passport or drivers
license).
|
_____
|
Proof
of the individual’s current address (e.g.,
current utility xxxx), if not included in the form of picture
identification.
|
For
Funds of Funds or Entities that Invest on Behalf of Third Parties Not Located
in
the U.S. or Other FATP Countries:
_____
|
A
certificate of due formation and organization and continued authorization
to conduct business in the jurisdiction of its organization (e.g.,
certificate of good standing).
|
_____
|
An
“incumbency certificate” attesting to the title of the individual
executing these subscription materials on behalf of the prospective
investor.
|
_____
|
A
completed copy of a certification that the entity has adequate
anti-money
laundering policies and procedures (“AML
Policies and Procedures”)
in place that are consistent with the USA PATRIOT Act, OFAC and
other
relevant federal, state or non-U.S. anti-money laundering laws
and
regulations (with a copy of the entity’s current AML Policies and
Procedures to which such certification
relates).
|
_____
|
A
letter of reference from the entity’s local office of a reputable bank or
brokerage firm that is incorporated, or has its principal place
of
business located, in the U.S. or other FATF Country certifying
that the
prospective investor maintains an account at such bank/brokerage
firm for
a length of time and containing a statement affirming the prospective
investor’s integrity.
|
For
all other Entity Investors:
_____
|
A
certificate of due formation and organization and continued authorization
to conduct business in the jurisdiction of its organization (e.g.,
certificate of good
standing).
|
_____
|
An
“incumbency certificate” attesting to the title of the individual
executing these subscription materials on behalf of the prospective
investor.
|
_____
|
A
letter of reference from the entity’s local office of a reputable bank or
brokerage firm that is incorporated, or has its principal place
of
business located, in the U.S. or other FATF Country certifying
that the
prospective investor maintains an account at such bank/brokerage
firm for
a length of time and containing a statement affirming the prospective
investor’s integrity.
|
41
_____
|
If
the prospective investor is a privately-held entity, a certified
list of
the names of every person or entity who is directly or indirectly
the
beneficial owner of 25% or more of any voting or non-voting class
of
equity interests of the Subscriber, including (i) country of citizenship
(for individuals) or principal place of business (for entities)
and, (ii)
for individuals, such individual’s principal employer and
position.
|
_____
|
If
the prospective investor is a trust, a certified list of (i) the
names of
the current beneficiaries of the trust that have, directly or indirectly,
25% or more of any interest in the trust, (ii) the name of the
settler of
the trust, (iii) the name(s) of the trustee(s) of the trust, and
(iv) the
country of citizenship (for individuals) or principal place of
business
(for entities).
|
ARTICLE
X. ADDITIONAL
INFORMATION
A
TRUST
MUST ATTACH A COPY OF ITS DECLARATION OF TRUST OR OTHER GOVERNING INSTRUMENT,
AS
AMENDED, AS WELL AS ALL OTHER DOCUMENTS THAT AUTHORIZE THE TRUST TO INVEST
IN
THE SECURITIES. ALL RESOLUTIONS AND DOCUMENTATION MUST BE COMPLETE AND CORRECT
AS OF THE DATE HEREOF.
42
EXECUTION
PAGE
PURCHASE
PRICE = $_____________(US Dollars)
NUMBER
OF SHARES OF COMMON STOCK = ______________
NUMBER
OF
WARRANTS = _________________
_________________________________
Signature
|
_________________________________
Signature
(if purchasing jointly)
|
_________________________________
Name
Typed or Printed
|
_________________________________
Name
Typed or Printed
|
_________________________________
Entity
Name
|
_________________________________
Entity
Name
|
_________________________________
Address
|
_________________________________
Address
|
_________________________________
City,
State and Zip Code
|
_________________________________
City,
State and Zip Code
|
_________________________________
Telephone-Business
|
_________________________________
Telephone-Business
|
_________________________________
Telephone-Residence
|
_________________________________
Telephone-Residence
|
_________________________________
Facsimile-Business
|
_________________________________
Facsimile-Business
|
_________________________________
Facsimile-Residence
|
_________________________________
Facsimile-Residence
|
_________________________________
Tax
ID # or Social Security #
|
_________________________________
Tax
ID # or Social Security #
|
_________________________________
Email
Address
Name
in which the Securities should be issued:
_________________________
Dated:
________________, 2007
This
Confidential Subscriber Questionnaire is executed as of
___________________,2007.
By:
_______________________________________
Name:
Title:
|
43
CONFIRMATION
Prior
to
the date hereof, the undersigned has delivered executed agreements in connection
with an investment by the undersigned together with other investors in
convertible notes (“Notes”) and common stock purchase warrants (“Warrants”) to
be issued by China Broadband, Inc. (OTCBB Symbol: CBBD) (the “Company”) and in
common stock of the Company (the “Shares”) to be sold to the undersigned and
other purchasers by Xxxxx Xx.
The
undersigned reconfirms the execution and delivery of the Subscription Agreement,
Funds Escrow Agreement, Purchase and Escrow Agreement and Subscriber
Questionnaire in connection with the purchase and sale of the Notes, Warrants
and Shares and agrees that the Closing Date is extended to not later than
January 11, 2008.
The
undersigned acknowledges receipt of the confidential updated Schedules to
the
Subscription Agreement prepared by the Company and transmitted by Chardan
Capital Markets, LLC, which include, among other things, the Settlement
Agreement to be entered into by the Company and certain affiliates, and
amendments to the employment agreements of Xxxxx Xx and Pu Yue and describes
the
appointment of director to the Company’s board of directors and a new Chief
Executive Officer and President. Such Schedules are deemed to have been
delivered to the undersigned in connection with the Subscription Agreement
and
the Purchase and Escrow Agreement. The undersigned further acknowledges that
the
OTC Bulletin Board is the Principal Market, as that term is defined in the
Subscription Agreement.
The
undersigned acknowledges that Xxxxx Xx is an affiliate of the Company, as
defined in Rule 405 of the Securities Act of 1933, and that the Shares will
be
sold by one or more entities controlled by Xx. Xx who collectively own more
than
the amount of Shares being sold to all of the undersigned.
The
undersigned consents and agrees that until February 15, 2008, notwithstanding
Section 12 of the Subscription Agreement, the Company may offer and sell
to
other purchasers additional Notes in the principal amount of up to $1,500,000
and Warrants on the same terms and conditions as offered and sold to the
undersigned.
Dated:
January ___, 2008
________________________________________
|
______________________________________
|
|
PLATINUM
PARTNERS VALUE
|
GLOBIS
CAPITAL PARTNERS, LP
|
|
ARBITRAGE
FUND, L.P.
|
_______________________________________
|
_______________________________________
|
|
GLOBIS
OVERSEAS FUND, LTD.
|
GLOBIS
ASIA LLC
|
_______________________________________
|
_______________________________________
|
|
XXXXXX
XXXXXXXXX
|
XXXXXXXX
CAPITAL, LLC
|
________________________________________
|
_______________________________________
|
|
XXXXXX
XXXXX
|
XXXX
XXXXX
|
________________________________________
|
_______________________________________
|
|
XXXXX
XXXXXXX
|
CHARDAN
CAPITAL MARKETS, LLC
|
44