WAIVER, AMENDMENT AND AGREEMENT TO CONVERT
Exhibit
10.4
THIS
WAIVER, AMENDMENT AND AGREEMENT TO CONVERT (this “Waiver”)
is dated as of May 20, 2010, by and among CHINA BROADBAND, INC., a Nevada
corporation, (the “Company”)
and the holders of Notes and Class A Warrants (each as defined below) named on
the signature page hereto (each a “Holder”
and collectively, the “Holders”).
BACKGROUND
The
Company issued Promissory Notes dated as of January 11, 2008 in the aggregate
principal amount of $4,971,250, (as amended, restated, supplemented or otherwise
modified from time to time, the “Notes”)
pursuant to a Subscription Agreement dated as of January 11, 2008 (the “Subscription
Agreement”). In addition, in connection to the Subscription
Agreement, the Company issued the Holders warrants to purchase an aggregate of
6,628,333 shares of the Company’s common stock at a per share purchase price of
$0.60 (the “Class A
Warrants”).
The
Company intends to raise up to $15,000,000 through the sale of its securities at
a price per share (including a conversion or exercise price per share in the
case of securities of the Company that are convertible into or exercisable for
common stock of the Company) of no lower than $0.05 per share (the “Financing”).
The
Company has requested that the Holder consent to the Financing and waive its
rights under Section 12 of the Subscription Agreement as it relates to this
Financing only and in connection therewith make the amendments to the Notes and
Class A Warrants described below. The Holder is willing to do so on
the terms and conditions hereinafter set forth.
In
addition, the Company has requested that each Holder consent to the conversion
of at least fifty percent (50%) of the outstanding principal and interest owing
on the Notes into shares of the Company’s common stock at a per share conversion
price of $0.05.
AGREEMENT
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged by the parties, the parties hereto hereby agree as
follows:
1. All
capitalized terms not otherwise defined herein shall have the meanings given to
them in the Subscription Agreement, the Note and the Class A
Warrants.
2. Each
Holder hereby consents to the Financing and, concurrent with the closing of the
Financing, waives all rights to the anti-dilution protection under Section
12(a)-(d) of the Subscription Agreement, applicable only to the Notes, arising
as a result of the Financing.
3. Each
Holder hereby waives, concurrent with the closing of the Financing, all rights
to the anti-dilution protection under Section 12(a)-(d) of the Subscription
Agreement, applicable only to the Class A Warrants, arising as a result of the
Financing or any other transaction or event at any time in the future which
would otherwise result in anti-dilution adjustments to the Class A
Warrants. In connection with the waiver contained in this Section 3,
the Holders, by signing below, agree that all Class A Warrants shall be,
concurrent with the closing of the Financing, modified to delete Section 3.4 of
the Class A Warrants in its entirety.
4. The
Company hereby acknowledges that the Holder is not waiving any other rights
under the Subscription Agreement, including, without limitation, any future
application of the anti-dilution provisions contained in Section 12 applicable
to the Notes.
5. Section
4 of that certain Waiver, dated May __, 2009, provided in pertinent part that if
a Holder acquired securities in the Financing (as defined in such Waiver), then
such Holder’s Conversion Price in the Notes would be further reduced to $0.20
(down from $0.25) or such lower price as may result from the application of the
provisions of Section 12 of the Subscription Agreement. Through this
Waiver, the Holders, by signing below, agree that all Notes, including those
Notes held by Holders who did not participate in the 2009 Financing, shall be
modified such that they shall, immediately upon the closing of the Financing,
bear a Conversion Price of $0.10 (or such lower price as may result from the
application of the provisions of Section 12 of the Subscription Agreement), so
that all outstanding Notes shall thereafter have the same Conversion
Price.
6. Each
Holder hereby consents and agrees to the automatic conversion, immediately upon
the closing of the Financing, of such percentage (as indicated on the Holder’s
signature page hereto) of the outstanding principal and interest owing, as of
the date thereof, on the Notes held by each Holder into shares of the Company’s
common stock at a per share conversion price of $0.05; provided, however, that
the percentage of Notes converted into shares the Company’s common stock shall
not be less than fifty percent (50%). The mechanics of such
conversion shall be in accordance with Section 2.3 of the Notes; provided
however, that the Company is only obligated to issue the shares of common stock
upon such conversion on or before the fifth (5th)
business day following the closing of the Financing. The Company
hereby acknowledges that the shares issued upon any conversion pursuant to this
Section 6 by a Holder who is not an affiliate, and has not been an affiliate at
any time during the three months prior to the date of conversionm, as defined by
Rule 144 of the Securities Act of 1933, as amended (the ”1933 Act”), will not contain
a restrictive legend referring to the restrictions on transferability
under the 1933 Act and no stop transfer restrictions will be places against any
such shares.
7. In
order to induce the Holders to provide the waivers contained herein and consent
to the conversion of at least 50% of the outstanding principal and interest
owing on the Notes in accordance with Section 6 hereof, the Company and the
Holders hereby agree, effective concurrent with the closing of the Financing,
(i) to amend the definition of “Maturity Date” contained in the Notes so that
the “Maturity Date” of the Notes is now December 31, 2012; (ii) to amend the
definition of “Purchase Price” contained in the Class A Warrants so that the
“Purchase Price” of the Class A warrants is $0.20 (down from $0.60) (or such
lower price as may result from the application of the provisions of Section 12
of the Subscription Agreement); and (iii) that each Holder will receive a
five-year warrant to purchase such number of shares of the Company’s common
stock, at a per share price of $0.05, equal to the number of shares issued to
such Holder in connection with the conversion of the Holder’s Notes in
accordance with Section 6 hereof.
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8. The
Company hereby represents, warrants and covenants as follows:
(a) This
Waiver constitutes legal, valid and binding obligations of the Company and is
enforceable against the Company in accordance with its respective
terms.
(b) Except
as set forth in this Waiver or as disclosed in the Company’s reports or other
documents filed with the Securities and Exchange Commission on or prior to the
date hereof, the Company hereby reaffirms, as of the date hereof (or if any such
representation, covenant or warranty is expressly stated to have been made as of
a specific date, as of such specific date), all covenants, representations and
warranties made in the Subscription Agreement, the Notes, the Class A Warrants
and all documents, instruments and agreements entered into in connection with
the transactions contemplated thereby (collectively, the “Purchase
Documents”).
(c) Except
as set forth in this Waiver, all terms and conditions of the Purchase Documents
shall continue unchanged and in full force and effect, including, without
limitation, the provisions set forth in Section 12 of the Subscription
Agreement.
(d) No
Event of Default has occurred and is continuing or would exist after giving
effect to this Waiver.
9. The
Holder hereby represents and warrants as follows:
(a) It
has the power and authority to execute, deliver and perform this Waiver and that
this Waiver is a legal, valid and binding obligation, enforceable against
it.
(b) It
owns, of record and beneficially, and has valid title to, the Note, free and
clear of any and all liens.
(c) It
owns, of record and beneficially, and has valid title to, the Class A Warrant,
free and clear of any and all liens
10. Each
Holder hereby acknowledges that any conversion of Notes pursuant to Section 6
hereof by Xx. Xxxxxx Xxxxxxxx, a Holder of $2,000,000 in principal amount of the
Notes, will convert into shares of the Company’s Series B Preferred Stock at a
per share conversion price of $0.50. Each share of Series B Preferred
Stock is convertible into 10 shares of the Company’s common stock, however,
prior to any such conversion into the Company’s common stock, the shares of the
Series B Preferred Stock will not have full voting rights and powers equal to
the voting rights and powers of holders of the Company’s common
stock.
11. The
execution, delivery and effectiveness of this Waiver shall not operate as a
waiver of any right, power or remedy of the Holder, nor constitute a waiver of
any provision of any Purchase Documents.
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12. Each
party agrees to execute and deliver promptly any and all such further reasonable
documents, instruments and certificates, and to undertake all such further acts,
as may be necessary, desirable or appropriate to effectuate the terms of this
Waiver, including, without limitation, the execution of an amendment to the Note
and Class A Warrant, if such amendments are deemed necessary or desirable by
legal counsel to the Company, to effectuate the intention of the foregoing
provisions.
13. Each
party agrees that it will reasonably cooperate with the other party to
effectuate the intention of this Waiver. The waivers and other
agreements contained herein by the Holder are irrevocable.
14. This
Waiver constitutes the entire understanding of the parties relating to the
subject matter hereof and supersedes all prior agreements and understandings,
whether oral or written.
15. This
Waiver shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns and shall be governed by and construed
in accordance with the laws of the State of New York.
16. Section
headings in this Waiver are included herein for convenience of reference only
and shall not constitute a part of this Waiver for any other
purpose.
17.
This Waiver may be executed by the parties hereto in one or more counterparts,
each of which shall be deemed an original and all of which when taken together
shall constitute one and the same agreement. Any signature delivered
by a party by facsimile transmission shall be deemed to be an original signature
hereto.
[Signature
Page Follows]
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IN
WITNESS WHEREOF, this Waiver has been duly executed as of the day and year first
written above.
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COMPANY
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CHINA
BROADBAND, INC.
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By:
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Name:
Xxxx Xxxxxx
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Title:
President
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HOLDER
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For
Entities
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Name
of Entity
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By:
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Name:
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Title:
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For
Individuals
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Name:
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$
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Amount
of outstanding principal and interest owing on the Notes converted in
accordance with Section 6 of this Waiver
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%
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Percentage
of outstanding principal and interest owing on the Notes converted in
accordance with Section 6 of this
Waiver
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