NOTE PURCHASE AGREEMENT
THIS NOTE
PURCHASE AGREEMENT (this "Agreement"), dated as of June
30, 2009 by and between China Broadband, Inc. a Nevada corporation (the “Company”) and the subscribers
identified on the signature page hereto (each a “Subscriber” and collectively
the "Subscribers").
RECITALS
WHEREAS, subject to the terms
and conditions set forth in this Agreement and pursuant to Section 4(2) of the
Securities Act (as defined below), the Company desires to issue and sell to the
Subscribers, and the Subscribers desire to purchase from the Company certain
securities of the Company, as more fully described in this
Agreement;
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 $200,000 and a maximum of up to
$400,000 (the "Purchase
Price" or “Principal
Amount”) of principal amount of 5% Convertible 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”). The Notes and shares of Common Stock issuable upon
conversion of the Notes (the “Shares”), are collectively
referred to herein as the "Securities";
NOW, THEREFORE, IN
CONSIDERATION of the mutual covenants contained in this Agreement, and
for other good and valuable consideration the receipt and adequacy of which are
hereby acknowledged, the Company and the Subscribers agree as
follows:
1. Agreement to
Purchase.
1.1 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. This offering may be consummated in one or
more closings and each such date a “Closing Date.” The consummation
of the transactions contemplated herein shall take place not later than July 1,
2009 upon the satisfaction or waiver of all conditions to closing set forth in
this Agreement.
1.2 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.
2. Representations,
Warranties and Covenants of the Subscriber. Each
Subscriber represents and warrants to the Company, and covenants for
the benefit of the Company and each other Subscriber, as follows:
(a) The
Subscriber is an "accredited investor" as defined under Rule 501 of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Securities Act");
(b) The
Subscriber is acquiring the Notes for its own account and not with a view to any
distribution of the Notes in violation of the Securities Act;
(c) The
Subscriber acknowledges that it has significant prior investment experience,
including investment in non-listed and non-registered securities, and that the
Subscriber recognizes the highly speculative nature of this
investment. In particular, and without limitation, the Subscriber
represents that it understands that the Company’s securities have suffered
significant illiquidity and decline in stock price and that other restricted
shareholders are eligible to sell securities pursuant to Rule 144 of the
Securities Act. In addition, the Subscriber represents that it
understands the dilutive effect resulting from the issuance of these Notes as
well as from the issuance of Common Stock to certain investors in a separate
contemporaneous offering, and the resulting dilutive effect that will be caused
as a result of the adjustment to the conversion price of existing similar notes
issued to the Subscriber and/or other investors in January 2008. The
Subscriber represents that it has been furnished with, and has reviewed, all of
the Company’s securities filings and all documents and other information
regarding the Company that the Subscriber had requested or desired to know and
all other documents which could be reasonably provided have been made available
for the Subscriber’s inspection and review;
(d) The
Subscriber acknowledges that the Securities have not been passed upon or
reviewed by the Securities and Exchange Commission. The Subscriber
agrees that it will not sell, transfer or otherwise dispose of any of the Shares
until they are registered under the Securities Act, or unless an exemption from
such registration is available and that a legend substantially in the form as
provided in Section 4 below will be placed on the certificate(s) representing
the shares to such effect;
(e) This
Agreement constitutes a valid and binding agreement and obligation of the
Subscriber enforceable against the Subscriber in accordance with its terms,
subject to limitations on enforcement by general principles of equity and
bankruptcy or other laws affecting the enforcement of creditors' rights
generally;
(f) Subscriber
is not acquiring the Securities as part of a group, as such term is defined in
Section 13 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and is not
acting in concert with any person acting in such manner. Subscriber
makes its own voting and dispositive decisions and has not agreed to grant any
proxy or enter into any form of voting trust, agreement or similar arrangement
with respect to the Shares other than as set forth in the Waiver of even date
herewith; and
(g) This
Agreement has been duly authorized, validly executed and delivered on behalf of
the Subscriber, and the Subscriber has full power and authority to execute and
deliver this Agreement and the other agreements and documents contemplated
hereby and to perform his obligations hereunder and thereunder.
(h) Subscriber
understands and acknowledges that certain existing holders of notes (the “Existing Notes”) and Warrants
(the “Warrants”) issued
in January of 2008 to Subscriber and certain other investors and the placement
agent in such transaction (the “Note Holders”) have certain
full ratchet and other anti dilutions protections attached to their Existing
Notes and Warrants, and that the Company has obtained waivers from the Note
Holders which generally provide, in relevant part, that (A) the Note Holders
waive their anti dilution rights in connection with a contemporaneous common
stock offering by the Company and (B) the conversion price (as defined in the
Notes) of such Existing Notes be reduced to (i) $0.20 if such Note Holder makes
an additional investment in the Company in the form of a convertible note or
(ii) $0.25 per share if such Note Holder does not make such an additional
investment. Subscriber further understands and acknowledges
that notwithstanding the terms of such waiver, the Company has subsequently
agreed to reduce the conversion price for those Note Holders that do not make
such an additional investment to $0.25.
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3. Representations,
Warranties and Covenants of the Seller. The Company
represents and warrants to the Subscriber, and covenants for the benefit of the
Subscriber, as follows:
(a) Organization and
Qualification. The Company is duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with the requisite power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. The Company is not in any material violation of any of the
provisions of its certificate of incorporation, bylaws or other organizational
or charter documents.
(b) Authorization;
Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated herein
and otherwise to carry out its obligations hereunder, subject to consents and
waiver of anti dilution provisions of various existing
shareholders. The execution and delivery of this Agreement by the
Company and the consummation by it of the transactions contemplated thereby have
been duly authorized by all necessary corporate action on the part of the
Company and no further action is required by the Company in connection
therewith. This Agreement has been duly executed by the Company and,
when delivered in accordance with the terms hereof, will constitute the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of, creditors’
rights and remedies, or (ii) laws relating to the availability of specific
performance, injunctive relief or other equitable principles of general
application.
(c) No Violation or
Conflict. Assuming the representations and warranties of the Subscribers
in Section 2 are true and correct, neither the issuance and sale of the
Securities nor the performance of the Company’s obligations under this
Agreement, the Note 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
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(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 have been waived, 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.
(d) Issuance of the
Securities. The Securities have been, or will be, duly and
validly authorized and on the date of issuance of the Shares upon conversion of
the Notes, the 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, free
and clear of all liens.
(e) SEC Reports; Financial
Statements. The Company has filed all reports required to be
filed by it under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the twelve months preceding the date hereof
(or such shorter period as the Company was required by law to file such reports)
(the foregoing materials, as finally amended being collectively referred to
herein as the "SEC
Reports") on a timely basis or has timely filed a valid extension of such
time of filing and has filed any such SEC Reports prior to the expiration of any
such extension. As of their respective dates, the SEC Reports, as
amended, complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except to the extent that such SEC Reports may have been
subsequently amended or supplemented to correct such misstatement or omission or
to correct information relating to the Company’s internal
controls. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting requirements
and the rules and regulations of the Commission with respect thereto as in
effect at the time of filing. Such financial statements have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material respects the
financial position of the as of and for the dates thereof and the results of
operations and cash flows for the periods then ended, subject, in the case of
unaudited statements, to normal, immaterial, year-end audit
adjustments.
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(e) Certain Registration
Matters. Assuming the accuracy of each Subscriber’s representations and
warranties, no registration under the Securities Act is required for the offer
and sale of the Securities by the Company to the Subscriber under this
Agreement.
4. Other
Agreements of the Parties.
4.1 Other
Agreements of the Parties. (a) The Company and each Subscriber agrees
that the Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of the Securities
other than pursuant to an effective registration statement, to the Company, to
an affiliate of a Subscriber or in connection with a pledge as contemplated in
Section 4.1(b),
the Company may require the transferor thereof to provide to the Company with an
opinion of counsel selected by the transferor, the form and substance of which
opinion shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred Shares under the
Securities Act. As a condition of transfer, any such transferee shall
agree in writing to be bound by the terms of this Agreement.
(b) (i)
Certificates evidencing the Shares will contain substantially the following
legend, until such time as such securities are sold pursuant to an exemption
from the Securities Act registration requirements:
THESE
SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.
(ii) 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. "
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4.2 Conversion
of Notes. (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 contradictory 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 Securities 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
Securities 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 Securities 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.
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(c) The
Company understands that a delay in the delivery of the Shares in the form
required pursuant to Section 4.2 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 4.2 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.
4.3 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 manner of sale and similar related
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 to the transferee
without any legends including the legend set forth in Section 4(b)(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.
(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.
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(c) The Company understands that a
delay in the delivery of the Unlegended Shares pursuant to Section 4 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, then the Subscriber may elect to
receive liquidated damages under this Section 4.3(c) or Section 4.6 below. If
during any 360 day period, the Company fails to deliver Unlegended Shares as
required by this Section 4.3 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 subject to such
default at a price per share equal to the greater of (i) 120% of the purchase
price of such 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, during such 30 day
period, multiplied by the purchase price of the Shares (“Unlegended Redemption
Amount”). The Company shall pay any payments incurred under this Section in
immediately available funds upon demand.
(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 4.3 and the Company is required to deliver such Unlegended Shares
pursuant to Section 4.3, the Company may not refuse to deliver Unlegended 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 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 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.
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4.4. 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 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 owned by the Subscriber during the pendency of the 144
Default.
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4.5.
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Anti-Dilution.
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(a) Other
than in connection with an Excepted Issuance (as defined in Section 4.5(c)
below), if within three years after the Closing Date and to the extent that the
Notes 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 which shall be less than the Conversion
Price in respect of the Shares, (“Lower Price Issuance”), without the consent of
each Subscriber, then the Conversion Price and Notes then outstanding shall
automatically and without further action be reduced to such other lower
price.
(b)
Effective Price. For purposes of Section 4.5 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 4.5 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.
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(d)
Excepted Issuances. Each Subscriber is granted the rights described in Section
4.4 hereof in relation to the additional shares of Common Stock issuable in
connection with the adjustment described in this Section 4.5. The rights of each
Subscriber set forth in this Section 4.5 are in addition to any other rights the
Subscriber has pursuant to this Agreement, the Note, 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 4.5, “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 conversion of Notes which are granted or
issued pursuant to this Agreement.
4.6 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.
4.7 Existing
Notes. The Company hereby acknowledges and agrees that in accordance with
the Waiver agreements between the Company and the Subscriber and certain other
Subscribers as holders of Existing Notes and Warrants investing herein, the
Conversion Price (as such term is defined in the Existing Notes) shall be
reduced to $0.20 per share, subject to further reduction in accordance with the
Subscription Agreement, dated January 11, 2008, pursuant to which such Existing
Notes were issued without effect to any of the Warrants (or Placement Agent
Warrants).
5. Binding
Effect; Assignment. This Agreement is
not assignable by the Company or the Subscriber without the prior written
consent of the other party. This Agreement and the provisions hereof
shall be binding and shall inure to the benefit of the Company and its
successors and permitted assigns with respect to the obligations of the
Subscriber under this Agreement, and to the benefit of the Subscriber and its
successors and permitted assigns with respect to the obligations of the Company
under this Agreement.
6. Governing
Law; Jurisdiction. This Agreement
shall be governed by and interpreted in accordance with the laws of the State of
New York without giving effect to conflicts of law principles that would result
in the application of the substantive laws of another jurisdiction.
7. Entire
Agreement. This Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter hereof and
supersedes all prior and/or contemporaneous oral or written proposals or
agreements relating thereto all of which are merged herein. This
Agreement may not be amended or any provision hereof waived in whole or in part,
except by a written amendment signed by both of the parties.
10
8. Survival. The
representations and warranties of the Company and the Subscriber shall survive
the Closing hereunder.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
11
[Counter
Part Signature Page of China Broadband, Inc., to Note Purchase Agreement Between
Subscriber and China Broadband, Inc., Dated as of June 30, 2009]
IN
WITNESS WHEREOF, this Agreement was duly executed on the date first written
above.
CHINA BROADBAND, INC. | |||
|
By:
|
||
Name: Xxxx Xxxxxx | |||
Title: President | |||
12
[Counter
Part Signature Page of Subscriber, to Note Purchase Agreement Between
Subscriber
and China Broadband, Inc., Dated as of June 30, 2009]
.
Print
Name of Subscriber:
__________________________________________
(Signature)
__________________________________________
Print
name and title, if Subscriber is an entity
Investment
Amount:
$
Principal
Amount of Note: $_ ___________
Social
Security
No./EIN:
ADDRESS
FOR NOTICE
Street:
_______________________________________
City/State/Zip:
_________________________________
Attention:
____________________________________
Tel:
__________________________________________
Fax:
__________________________________________
DELIVERY
INSTRUCTIONS
(if
different from above)
c/o:
Street:
_______________________________________
City/State/Zip:
_________________________________
Attention:
____________________________________
Tel:
__________________________________________
|