THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.
Principal
Amount: [25,000.00]
|
Issue Date: August ___,
2006
|
7% CONVERTIBLE PROMISSORY
NOTE
FOR VALUE RECEIVED, China Broadband, Ltd., a
Cayman Islands Company (the “ Borrower
”), hereby promises to pay to _____________________,
__________________, ________________ (the “
Holder ”) or its registered assigns or
successors in interest or order, without demand, the sum of
[Twenty Five Thousand Dollars ($25,000.00)]
(“ Principal Amount ”), with simple
and unpaid interest thereon, on February 28, 2007(said date, as may
be accelerated herein, is referred to herein as the “
Maturity Date ”).
This Note (the “ Note
”) has been issued into pursuant to the terms of a Note
Purchase Agreement (the “ Note Purchase
Agreement ”) between the Borrower, the Holder, and
certain other holders (the “ Other Holders
”) of Notes (the “ Other Notes
”), dated of even date herewith, and shall be governed by the
terms of such Note Purchase Agreement. Unless otherwise separately
defined herein, all capitalized terms used in this Note shall have
the same meaning as is set forth in the Note Purchase
Agreement.
1.
INTEREST;
AMORTIZATION
1.1. Interest Rate . Subject to Section 5.5 hereof, interest
payable on this Note shall accrue at a rate per annum (the “
Interest Rate ”) equal to seven percent
(7%). Interest shall be calculated on the basis of a 360-day year.
Interest on the Principal Amount shall accrue from the date of this
Note and be payable pursuant to Section 2.1 hereof on the Maturity
Date, whether by acceleration or otherwise.
1.2. Transfer . Subject to compliance with applicable
securities laws, this Note, and the rights evidenced hereby, may be
transferred, sold, pledged, hypothecated or otherwise granted as
security by any registered holder hereof (a “
Transferor ”). On the surrender for exchange
of this Note, with a duly executed Transferor’s endorsement
(the “ Transferor Endorsement Form ”)
and an opinion of counsel reasonably satisfactory to the Company
(which requirement may be waived by the Company), that the transfer
of this Note will be in compliance with applicable securities laws,
the Company at the expense of the Transferor, will issue and
deliver to or on the order of the Transferor thereof a new Note or
Notes of like tenor, in the name of the Transferor and/or the
transferee(s) specified in such Transferor Endorsement Form (each a
“ Transferee ”), calling in the
aggregate on the face or faces thereof for the Principal Amount
called for on the face or faces of the Note so surrendered by the
Transferor. No such transfers shall result in a public distribution
of the Note.
1.3. Replacement . Upon receipt of a duly executed, notarized and
written statement (which shall include (a) a covenant from the
Holder to indemnify the Borrower 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, and (b) an express
authorization that the Borrower may offset any such amounts against
amounts then due under the Note) from the Holder with respect to
the loss, theft or destruction of this Note (or any replacement
hereof), or, in the case of a mutilation of this Note, upon
surrender and cancellation of such Note, the Maker shall issue a
new Note, of like tenor and amount, in lieu of such lost, stolen,
destroyed or mutilated Note.
2.1. Payment of Interest . All interest and Principal shall be paid on
the earlier to occur of the Maturity Date or the date that this
Note is converted.
2.2. Prepayment . The Borrower has the option of prepaying the
outstanding Principal Amount of this Note and any accrued interest
(to the extent not previously paid) thereon, in whole or in part,
at any time prior to the Maturity Date upon giving the Holder
hereof 30 days written notice and right to convert into such number
of Conversion Shares of the Company as would result in the Holder
receiving the same number of shares in a Business Combination as it
would receive in section 3.2 below.
3.1 Mandatory
Conversion . This Note shall become convertible in its
entirety at the discretion of the Holder at any time on or after
the consummation of a Business Combination into such number of
shares of Common Stock of the Parent Company as equals 2.4% of the
aggregate issued and outstanding shares of the Parent Company on a
fully diluted basis (other then certain shares that may be issued
upon exercise of warrants that may be issued in connection
with a Major Financing), multiplied by a fraction, the numerator of
which is the principal amount of this Note and the denominator of
which is 300,000.
3.2
Exercise of Conversion Right- Issuance of Shares .
Upon conversion of this Note, Holders shall receive upon surrender
of the Note to the Parent Company along with the instructions for
conversion duly executed by the Holder, (i) such number of shares
as set forth in 3.1 above and (ii) interest accrued and unpaid
through the date of conversion.
3.3
Reservation of Shares . The Company shall, as a
condition to entering into any Business
Combination, require any Parent Company to assume all of
the Company's obligations under the Note, Registration Rights
Agreement and Purchase Agreement and to reserve sufficient number
of shares for issuance to the Holders upon conversion of this Note
in accordance with its terms.
4.1. The occurrence of any of the following events,
after written notice thereof by the Holder to the Borrower, shall
be an “Event of Default” under this Note:
4.1.1. the Borrower shall fail to make the payment of
any amount of principal or interest outstanding the date such
payment is due hereunder, which failure is not cured within ten
(10) business days of receipt of notice to the Borrower; or
4.1.2. the Borrower shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of
