NOTE PURCHASE AGREEMENT BETWEEN SUN NEW MEDIA, INC. AND BARRON PARTNERS LP DATED DECEMBER 31, 2005
Exhibit 10.6
BETWEEN
SUN NEW MEDIA, INC.
AND
▇▇▇▇▇▇ PARTNERS LP
DATED
DECEMBER 31, 2005
This NOTE PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of the 31st
day of December, 2005 between Sun New Media, Inc., a corporation organized and existing under the
laws of the State of Minnesota (“SNMD” or the “Company”) and ▇▇▇▇▇▇ PARTNERS LP, a Delaware limited
partnership (“Investor”).
PRELIMINARY STATEMENT:
WHEREAS, the Investor wishes to purchase from the Company, upon the terms and subject to the
conditions of this Agreement, a convertible promissory note in the principal amount of Nine Hundred
and Eighteen Thousand ($918,000.00) Dollars in the form attached hereto as Exhibit A (the
“Note”) which will be convertible into Four Hundred and Fifty Thousand (450,000.0) shares
of common stock of the Company. If the Proposed Transaction, as defined in Exhibit C, is not
completed within the time specified in Exhibit C, the conversion price will be adjusted per Exhibit
C; and
WHEREAS, the parties intend to memorialize the purchase and sale of such Note.
NOW, THEREFORE, in consideration of the mutual covenants and premises contained herein, and
for other good and valuable consideration, the receipt and adequacy of which are hereby
conclusively acknowledged, the parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
INCORPORATION BY REFERENCE, SUPERSEDER AND DEFINITIONS
1.1 Incorporation by Reference. The foregoing recitals and the Exhibits and Schedules
attached hereto and referred to herein, are hereby acknowledged to be true and accurate, and are
incorporated herein by this reference.
1.2 Superseder. This Agreement, to the extent that it is inconsistent with any other
instrument or understanding among the parties governing the affairs of the Company, shall supersede
such instrument or understanding to the fullest extent permitted by law. A copy of this Agreement
shall be filed at the Company’s principal office.
1.3 Certain Definitions. For purposes of this Agreement, the following capitalized terms
shall have the following meanings (all capitalized terms used in this Agreement that are not
defined in this Article 1 shall have the meanings set forth elsewhere in this Agreement):
1.3.1 “1933 Act” means the Securities Act of 1933, as amended.
1.3.2 “1934 Act” means the Securities Exchange Act of 1934, as amended.
1.3.3 “Affiliate” means a Person or Persons directly or indirectly, through one or
more intermediaries, controlling, controlled by or under common control with the Person(s) in
question. The term “control,” as used in the immediately preceding sentence, means, with respect
to a Person that is a corporation, the right to the exercise, directly or indirectly, of more than
fifty percent of the voting rights attributable to the shares of such controlled corporation and,
with respect to a Person that is not a corporation, the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such controlled Person.
1.3.4 “Articles” means the Articles of Incorporation of the Company, as the same may
be amended from time to time.
1.3.5 “Closing” shall mean the Closing of the transactions contemplated by this
Agreement on the Closing Date.
1.3.6 “Closing Date” means December 31, 2005.
1.3.7 “Common Stock” means shares of common stock of the Company, par value $0.01 per
share.
1.3.9 “Exempt Issuance” means the issuance of (a) shares of Common Stock or options to
employees, officers, consultants or directors of the Company pursuant to any stock or option plan
or arrangement duly adopted by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee directors established for
such purpose, (b) securities upon the exercise of or conversion of any securities issued hereunder,
and (c) securities issued pursuant to acquisitions or strategic transactions, provided any such
issuance shall only be to a Person which is, itself or through its subsidiaries, an operating
company in a business synergistic with the business of the Company and in which the Company
receives benefits in addition to the investment of funds, but shall not include a transaction in
which the Company is issuing securities primarily for the purpose of raising capital or to an
entity whose primary business is investing in securities.
1.3.10 “Material Adverse Effect” shall mean any adverse effect on the business,
operations, properties or financial condition of the Company that is material and adverse to the
Company and its subsidiaries and affiliates, taken as a whole and/or any condition, circumstance,
or situation that would prohibit or otherwise materially interfere with the ability of the Company
to perform any of its material obligations under this Agreement or the Registration Rights
Agreement.
1.3.11 “Minnesota Act” means the Minnesota General Corporation Law, as amended.
1.3.12 “Person” means an individual, partnership, firm, limited liability company,
trust, joint venture, association, corporation, or any other legal entity.
1.3.13 “Purchase Price” means the Nine Hundred and Eighteen Thousand Dollars
($918,000.0) paid by the Investor to the Company for the Note.
1.3.14 “Registration Rights Agreement” shall mean the registration rights agreement
between the Investor and the Company attached hereto as Exhibit B.
1.3.15 “Registration Statement” shall mean the registration statement under the 1933
Act to be filed with the Securities and Exchange Commission for the registration of the Shares
pursuant to the Registration Rights Agreement attached hereto as Exhibit B.
1.3.16 “SEC” means the Securities and Exchange Commission.
1.3.17 “SEC Documents” shall mean the Company’s latest Form 10-K or 10-KSB as of the
time in question, all Forms 10-Q or 10-QSB and 8-K filed thereafter, and the Proxy Statement for
its latest fiscal year as of the time in question until such time as the Company no longer has an
obligation to maintain the effectiveness of a Registration Statement as set forth in the
Registration Rights Agreement.
1.3.18 “Shares” shall mean, collectively, the shares of Common Stock of the Company
issued upon conversion of the Note subscribed for hereunder.
1.3.19 “Subsequent Financing” shall mean any offer and sale of shares of Preferred
Stock or debt that is initially convertible into shares of Common Stock or otherwise senior or
superior to the Note.
1.3.20 “Transaction Documents” shall mean this Agreement, all Schedules and Exhibits
attached hereto and all other documents and instruments to be executed and delivered by the parties
in order to consummate the transactions contemplated hereby, including, but not limited to the
documents listed in Sections 3.2 and 3.3 hereof.
ARTICLE II
SALE AND PURCHASE OF SUN NEW MEDIA, INC. NOTE PURCHASE PRICE~S.CONT
2.1 Sale of Note.
(a) Upon the terms and subject to the conditions set forth herein, and in accordance with
applicable law, the Company agrees to sell to the Investor, and the Investor agrees to purchase
from the Company, on the Closing Date the Note for the Purchase Price. The Purchase Price shall be
paid by the Investor to the Company on the Closing Date by a wire transfer of the Purchase Price.
The Company shall cause the Note to be issued to the Investor upon the release of the Purchase
Price to the Company. The Company shall register the shares of Common Stock into which the Note is
convertible pursuant to the terms and conditions of a Registration Rights Agreement attached hereto
as Exhibit B
(b) The Note is initially convertible into Four Hundred and Fifty Thousand (450,000.0) shares
of Common Stock; provided, however, that the Investor shall not be entitled to convert the Note
into shares of Common Stock that would result in beneficial ownership by the Investor and its
affiliates of more than 4.9% of the then outstanding number of shares of Common Stock on such date.
For the purposes of 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 Regulation
13d-3 thereunder.
2.2 Purchase Price. The Purchase Price shall be delivered by the Investor in the form of a
check or wire transfer made payable to the Company in United States Dollars from the Investor on
the Closing Date.
ARTICLE III
CLOSING DATE AND DELIVERIES AT CLOSING
3.1 Closing Date. The closing of the transactions contemplated by this Agreement (the
“Closing”), unless expressly determined herein, shall be held at the offices of the
Company, at 5:00 P.M. local time, on the Closing Date or on such other date and at such other place
as may be mutually agreed by the parties, including closing by facsimile with originals to follow.
3.2 Deliveries by the Company. In addition to and without limiting any other provision of
this Agreement, the Company agrees to deliver, or cause to be delivered, to the Investor, the
following:
| (a) | At or prior to Closing, an executed copy of this Agreement and the Registration Rights Agreement with all exhibits and schedules attached hereto and thereto; and | ||
| (b) | Within ten business days of Closing evidence of approval of the Board of Directors of the Company of the Transaction Documents and the transactions contemplated hereby. |
3.3 Deliveries by Investor. In addition to and without limiting any other provision of
this Agreement, the Investor agrees to deliver, or cause to be delivered, to the Company, the
following:
| (a) | A deposit in the amount of the Investor Funds; | ||
| (b) | The executed Agreement with all Exhibits and Schedules attached hereto; | ||
| (c) | The executed Registration Rights Agreement; | ||
| (d) | Such other documents or certificates as shall be reasonably requested by the Company or its counsel. |
In the event any document provided to the other party in Paragraphs 3.2 and 3.3 herein are provided
by facsimile, the party shall forward an original document to the other party within thirty (30)
business days.
3.4 Further Assurances. The Company and the Investor shall, upon request, on or after the
Closing Date, cooperate with each other (specifically, the Company shall cooperate with the
Investor, and the Investor shall cooperate with the Company) by furnishing any additional
information, executing and delivering any additional documents and/or other instruments and doing
any and all such things as may be reasonably required by the parties or their counsel to consummate
or otherwise implement the transactions contemplated by this Agreement.
3.5 Waiver. The Investor may waive any of the requirements of Section 3.2 of this
Agreement, and the Company at its discretion may waive any of the provisions of Section 3.3 of this
Agreement. The Investor may also waive any of the requirements of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
SUN NEW MEDIA, INC.
SUN NEW MEDIA, INC.
The Company represents and warrants to the Investor as of the date hereof and as of Closing
(which warranties and representations shall survive the Closing regardless of what examinations,
inspections, audits and other investigations the Investor has heretofore made or may hereinafter
make with respect to such warranties and representations) as follows:
4.1 Organization and Qualification. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota, and has the requisite
corporate power and authority to own, lease and operate its properties and to carry on its business
as it is now being conducted and is duly qualified to do business in any other jurisdiction by
virtue of the nature of the businesses conducted by it or the ownership or leasing
of its properties, except where the failure to be so qualified will not, when taken together with
all other such failures, have a Material Adverse Effect on the business, operations, properties,
assets, financial condition or results of operation of the Company and its subsidiaries taken as a
whole.
4.2 Articles of Incorporation and By-Laws. The complete and correct copies of the
Company’s Articles and By-Laws, as amended or restated to date which have been filed with the
Securities and Exchange Commission are a complete and correct copy of such document as in effect
on the date hereof and as of the Closing Date.
4.3 Capitalization.
4.3.1 The authorized and outstanding capital stock of the Company is as set forth in the SEC
Documents. All shares of capital stock have been duly authorized and are validly issued, and are
fully paid and no assessable, and free of preemptive rights.
4.3.2 As of the date of this Agreement, the authorized capital stock of the Company consists
of 750,000,000 shares of common Stock ($.01 par value) and 250,000,000 shares of preferred stock
($.01 par value), of which approximately 65 million shares of Common Stock are issued and
outstanding. No shares of Preferred Stock are issued or outstanding. As of Closing, options to
purchase an aggregate of approximately 1 million shares of Common Stock are outstanding. All
outstanding shares of capital stock have been duly authorized and are validly issued, and are fully
paid and nonassessable and free of preemptive rights. All shares of capital stock described above
to be issued have been duly authorized and when issued, will be validly issued, fully paid and
nonassessable and free of preemptive rights. Schedule 4.3.2 hereby contains all shares and
derivatives currently and potentially outstanding under existing agreements, including employment
agreements, acquisition, consulting agreements, debts, payments, financing or business
relationships.
4.3.3 Except pursuant to this Agreement and as set forth in Schedule 4.3 hereto, and as set
forth in the Company’s SEC Documents, filed with the SEC, as of the date hereof and as of the
Closing Date, there are not now outstanding options, warrants, rights to subscribe for, calls or
commitments of any character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of any class of capital stock of the Company, or agreements,
understandings or arrangements to which the Company is a party, or by which the Company is or may
be bound, to issue additional shares of its capital stock or options, warrants, scrip or rights to
subscribe for, calls or commitment of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, any shares of any class of its capital stock. The Company
agrees to inform the Investors in writing of any additional warrants granted prior to the Closing
Date.
4.3.4 The Company on the Closing Date (i) will have full right, power, and authority to
sell, assign, transfer, and deliver, by reason of record and beneficial ownership, to the Investor,
the Shares hereunder, free and clear of all liens, charges, claims, options, pledges, restrictions,
and encumbrances whatsoever; and (ii) upon conversion of the Note, the Investor will acquire good
and marketable title to such Shares, free and clear of all liens, charges, claims, options,
pledges, restrictions, and encumbrances whatsoever, except as otherwise provided in this Agreement
as to the limitation on the voting rights of such Shares in certain circumstances.
4.4 Authority. The Company has all requisite corporate power and authority to execute and
deliver this Agreement and the Note to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and delivery of this
Agreement by the Company and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action and no other corporate proceedings on the part of
the Company is necessary to authorize this Agreement or to consummate the transactions contemplated
hereby except as disclosed in this Agreement. This Agreement has been duly executed and delivered
by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
4.5 No Conflict; Required Filings and Consents. The execution and delivery of this
Agreement by the Company does not, and the performance by the Company of its obligations hereunder
will not: (i) conflict with or violate the Articles or By-Laws of the Company; (ii) conflict with,
breach or violate any federal, state, foreign or local law, statute, ordinance, rule, regulation,
order, judgment or decree (collectively, “Laws”) in effect as of the date of this Agreement
and applicable to the Company; or (iii) result in any breach of, constitute a default (or an event
that with notice or lapse of time or both would become a default) under, give to any other entity
any right of termination, amendment, acceleration or cancellation of, require payment under, or
result in the creation of a lien or encumbrance on any of the properties or assets of the Company
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company is a party or by the Company or
any of its properties or assets is bound. Excluding from the foregoing are such violations,
conflicts, breaches, defaults, terminations, accelerations, creations of liens, or incumbency that
would not, in the aggregate, have a Material Adverse Effect.
4.6 Report and Financial Statements. Each of the balance sheets contained in or
incorporated by reference into the SEC Documents since September 18, 2005 (the “Financial
Statements”) (including the related notes and schedules thereto) fairly presented the financial
position of the Company, as of its date, and each of the statements of income and changes in
stockholders’ equity and cash flows or equivalent statements in such Financial Statements
(including any related notes and schedules thereto) fairly presents, for the periods to which they
relate, in each case in accordance with United States generally accepted accounting principles
(“U.S. GAAP”) consistently applied during the periods involved, except in each case as may
be noted therein, subject to normal year-end audit adjustments in the case of unaudited statements.
The books and records of the Company have been, and are being, maintained in all material respects
in accordance with U.S. GAAP and any other applicable legal and accounting requirements and reflect
only actual transaction.
4.7 Compliance with Applicable Laws. The Company is not in violation of, or, to the
knowledge of the Company is under investigation with respect to or has been given notice or has
been charged with the violation of any Law of a governmental agency, except for violations which
individually or in the aggregate do not have a Material Adverse Effect.
4.8 Brokers. Except as set forth on Schedule 4.8, no broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or Commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of the Company.
4.9 SEC Documents. The Company acknowledges that the Company is a publicly held company and
has made available to the Investor after demand true and complete copies of any requested SEC
Documents. The Company has registered its Common Stock pursuant to the 1934 Act, and the Common
Stock is quoted and traded on the OTC Bulletin Board of the National Association of Securities
Dealers, Inc. The Company has received no notice, either oral or written, with respect to the
continued quotation or trading of the Common Stock on the OTC Bulletin Board. The Company has not
provided to the Investor any information that, according to applicable law, rule or regulation,
should have been disclosed publicly prior to the date hereof by the Company, but which has not been
so disclosed. As of their respective dates, the SEC Documents complied in all material respects
with the requirements of the 1934 Act, and rules and regulations of the SEC promulgated thereunder
and the SEC Documents did not contain any untrue statement of a material fact or omit 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.
NOTE PURCHASE AGREEMENT BETWEEN
SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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4.10 Litigation. To the knowledge of the Company, no litigation, claim, or other proceeding
before any court or governmental agency is pending or to the knowledge of the Company, threatened
against the Company, the prosecution or outcome of which may have a Material Adverse Effect.
4.11 Exemption from Registration. Subject to the accuracy of the Investor’s representations
in Article V, except as required pursuant to the Registration Rights Agreement, the sale of the
Common Stock by the Company to the Investor will not require registration under the 1933 Act, but
may require registration under New York state securities law if applicable to the Investor. When
validly converted in accordance with the terms of the Note in accordance with their terms, the
Shares underlying the Note will be duly and validly issued, fully paid, and non-assessable. The
Company is issuing the Note in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D as promulgated by the SEC under
the 1933 Act, and/or Section 4(2) of the 1933 Act; provided, however, that certain filings and
registrations may be required under state securities “blue sky” laws depending upon the residency
of the Investor.
4.12 No General Solicitation or Advertising in Regard to this Transaction. Neither the
Company nor any of its Affiliates nor, to the knowledge of the Company, any Person acting on its or
their behalf (i) has conducted or will conduct any general solicitation (as that term is used in
Rule 502(c) of Regulation D as promulgated by the SEC under the ▇▇▇▇ ▇▇▇) or general advertising
with respect to the sale of the Note, or (ii) made any offers or sales of any security or solicited
any offers to buy any security under any circumstances that would require registration of the Note,
under the 1933 Act, except as required herein.
4.13 No Material Adverse Effect. Since September 30th, 2005, no event or
circumstance resulting in a Material Adverse Effect has occurred or exists with respect to the
Company. No material supplier or customer has given notice, oral or written, that it intends to
cease or reduce the volume of its business with the Company from historical levels. Since September
30, 2005, no event or circumstance has occurred or exists with respect to the Company or its
businesses, properties, prospects, operations or financial condition, that, under any 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 writing to the Investor.
4.14 Material Non-Public Information. The Company has not disclosed to the Investors any
material non-public information that (i) if disclosed, would reasonably be expected to have a
material effect on the price of the Common Stock or (ii) according to applicable law, rule or
regulation, should have been disclosed publicly by the Company prior to the date hereof but which
has not been so disclosed.
NOTE PURCHASE AGREEMENT BETWEEN
SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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4.15 Internal Controls And Procedures. The Company maintains books and records and internal
accounting controls which provide reasonable assurance that (i) all transactions to which the
Company or any subsidiary is a party or by which its properties are bound are executed with
management’s authorization; (ii) the recorded accounting of the Company’s consolidated assets is
compared with existing assets at regular intervals; (iii) access to the Company’s consolidated
assets is permitted only in accordance with management’s authorization; and (iv) all transactions
to which the Company or any subsidiary is a party or by which its properties are bound are
recorded as necessary to permit preparation of the financial statements of the Company in
accordance with U.S. generally accepted accounting principles.
4.16 Full Disclosure. No representation or warranty made by the Company in this Agreement
and no certificate or document furnished or to be furnished to the Investor pursuant to this
Agreement contains or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
The Investor represents and warrants to the Company that:
5.1 Organization and Standing of the Investor. The Investor is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of Delaware. The state in
which any offer to purchase shares hereunder was made or accepted by such Investor is the state
shown as such Investor’s address. The Investor was not formed for the purpose of investing solely
in the Note or the shares of Common Stock which are the subject of this Agreement.
5.2 Authorization and Power. The Investor has the requisite power and authority to enter
into and perform this Agreement and to purchase the securities being sold to it hereunder. The
execution, delivery and performance of this Agreement by the Investor and the consummation by the
Investor of the transactions contemplated hereby have been duly authorized by all necessary
partnership action where appropriate. This Agreement and the Registration Rights Agreement have
been duly executed and delivered by the Investor and at the Closing shall constitute valid and
binding obligations of the Investor enforceable against the Investor in accordance with their
terms, except as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to,
or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable
principles of general application.
NOTE PURCHASE AGREEMENT BETWEEN
SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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5.3 No Conflicts. The execution, delivery and performance of this Agreement and the
consummation by the Investor of the transactions contemplated hereby or relating hereto do not and
will not (i) result in a violation of such Investor’s charter documents or bylaws where appropriate
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 to which the Investor is a
party, 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 the Investor 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 Investor). The Investor 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 such Investor’s obligations under this
Agreement or to purchase the securities from the Company in accordance with the terms hereof,
provided that for purposes of the representation made in this sentence, the Investor is assuming
and relying upon the accuracy of the relevant representations and agreements of the Company herein.
5.4 Financial Risks. The Investor acknowledges that such Investor is able to bear the
financial risks associated with an investment in the securities being purchased by the Investor
from the Company and that it has been given full access to such records of the Company and the
subsidiaries and to the officers of the Company and the subsidiaries as it has deemed necessary or
appropriate to conduct its due diligence investigation. The Investor is capable of evaluating the
risks and merits of an investment in the securities being purchased by the Investor from the
Company by virtue of its experience as an investor and its knowledge, experience, and
sophistication in financial and business matters and the Investor is capable of bearing the entire
loss of its investment in the securities being purchased by the Investor from the Company.
5.5 Accredited Investor. The Investor is (i) an “accredited investor” as that term is
defined in Rule 501 of Regulation D promulgated under the 1933 Act by reason of Rule 501(a)(3) and
(6), (ii) experienced in making investments of the kind described in this Agreement and the related
documents, (iii) able, by reason of the business and financial experience of its officers (if an
entity) and professional advisors (who are not affiliated with or compensated in any way by the
Company or any of its affiliates or selling agents), to protect its own interests in connection
with the transactions described in this Agreement, and the related documents, and (iv) able to
afford the entire loss of its investment in the securities being purchased by the Investor from the
Company.
5.6 Brokers. Except as set forth in Schedule 4.8, no broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or Commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of the Investor.
NOTE PURCHASE AGREEMENT BETWEEN
SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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5.7 Knowledge of Company. The Investor and such Investor’s advisors, if any, have been,
upon request, furnished with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the securities being purchased by the
Investor from the Company. The Investor and such Investor’s advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received complete and satisfactory answers
to any such inquiries.
5.8 Risk Factors. The Investor understands that such Investor’s investment in the
securities being purchased by the Investor from the Company involves a high degree of risk. The
Investor understands that no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of the securities being
purchased by the Investor from the Company. The Investor warrants that such Investor is able to
bear the complete loss of such Investor’s investment in the securities being purchased by the
Investor from the Company.
5.9 Full Disclosure. No representation or warranty made by the Investor in this Agreement
and no certificate or document furnished or to be furnished to the Company pursuant to this
Agreement contains or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained herein or therein not
misleading. Except as set forth or referred to in this Agreement, Investor does not have any
agreement or understanding with any person relating to acquiring, holding, voting or disposing of
any equity securities of the Company.
5.10 Payment of Due Diligence Expenses. Within ten (10) business days of the Closing, the
Company shall disperse to the Investor Fifty Thousand Dollars ($50,000.00) for due diligence
expenses.
ARTICLE VI
COVENANTS OF THE COMPANY
6.1 Registration Rights. The Company shall cause the Registration Rights Agreement to
remain in full force and effect according to the provisions of the Registration Rights Agreement
and the Company shall comply in all material respects with the terms thereof.
6.2 Reservation of Common Stock. As of the date hereof, the Company has reserved and the
Company shall continue to reserve and keep available at all times, free of preemptive rights,
shares of Common Stock for the purpose of enabling the Company to issue the shares of Common Stock
underlying the Note.
NOTE PURCHASE AGREEMENT BETWEEN
SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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6.3 Compliance with Laws. The Company hereby agrees to comply in all respects with the
Company’s reporting, filing and other obligations under the Laws.
6.4 Exchange Act Registration. The Company will continue its obligation to report to the
SEC under the 1934 Act and will use its best efforts to comply in all respects with its reporting
and filing obligations under Section 12 of the 1934 Act, and will not take any action or file any
document (whether or not permitted by the 1934 Act or the rules thereunder) to terminate or
suspend any such registration or to terminate or suspend its reporting and filing obligations under
the 1934 until the Investors have disposed of all of their Shares.
6.5 Corporate Existence; Conflicting Agreements. The Company will take all steps necessary
to preserve and continue the corporate existence of the Company. The Company shall not enter into
any agreement, the terms of which agreement would restrict or impair the right or ability of the
Company to perform any of its obligations under this Agreement or any of the other agreements
attached as exhibits hereto.
6.6 Reset Equity Deals. On or prior to the Closing Date, the Company will cause to be
cancelled any and all reset features related to any shares outstanding that could result in
additional shares being issued, that do not contain a floor price or a number of share maximum
issuance. For a period of two years from the Closing the Company will not enter into any
transactions that have any reset features that could result in additional shares being issued based
upon the trading price of the Company’s stock on a date after such transaction.
6.7 Use of Proceeds. The Company will use the proceeds from the sale of the Note (excluding
amounts paid by the Company for legal and administrative fees in connection with the sale of such
securities) for working capital and acquisitions.
6.8 Right of First Refusal. Each Investor shall have the right to participate in any
subsequent cash funding by the Company on a pro rata basis (based upon their percentage holding of
the Company’s then fully diluted outstanding shares) at One Hundred percent (100%) of the offering
price within 5 US business days after any subsequent offer of shares is completed.
6.9 Price Adjustment. For two years from the Closing Date, if other than in an Exempt
Issuance the Company closes on the sale of a convertible note or notes, shares of Common Stock, or
shares of any class of Preferred Stock at a price per share of Common Stock, or with a conversion
right to acquire Common Stock at a price per share of Common Stock, that is less than the
Conversion Price (as adjusted pursuant to the terms of the applicable instrument) (collectively, a
“Dilutive Issuance”) , the Company shall make a post-Closing adjustment in the Conversion Price so
that the effective price per share to be paid by the Investor upon conversion of the Note, to the
extent then not yet converted, or any warrants issued pursuant to the Stock Purchase Agreement of
even date herewith (the “Warrants”), to the extent then not yet exercised, is reduced to being
equivalent to such lower conversion price.
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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6.10 Adjustment Based on Earnings Per Share. In the event the Company earns below $0.30 per
share (where such earnings in this paragraph shall always be defined as earnings before interest,
tax, depreciation and amortization on a fully diluted basis as reported for the audited fiscal year
ended March 31st, 2007 (or the unaudited results for the twelve months ended March 31,
2007 if the Company’s fiscal year does not then end on March 31) from continuing operations before
any non-recurring items) then the conversion price of the Convertible Note
shall be reduced at the time the audited numbers are reported. The conversion price shall be
reduced by the pro rata percentage decline in earnings before interest, tax, depreciation and
amortization on a fully diluted basis as reported to the SEC. For example, Conversion Price shall
be reduced proportionately by 0% if the earnings are $0.30 per share or greater and by a maximum of
a 50% reduction if the earnings are $0.15 per share (50% decrease) or below. Notwithstanding
anything to the contrary set forth herein, in the event that more than one event triggers a
reduction in the conversion price pursuant to this Agreement, no such adjustment for any single
event shall be greater then 80% of the then current conversion price. Adjustments pursuant to this
Section shall be made within five business days of the audited numbers being reported to the SEC.
6.11 Insider Selling. No executive officers of the Company shall sell any Company Common
Stock prior to one year following the Closing. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ and the Investor shall not be
considered subject to the foregoing restriction. In addition, the foregoing restriction shall not
apply to Sun Media Investment Holdings (“SM Holdings”), it being understood that SM Holdings
intends to transfer certain shares to third parties in consideration of matters unrelated to the
Company and may also consider transfers or other transactions with third parties in connection with
transactions believed to have strategic benefit to the Company.
6.12 Employment and Consulting Contracts. For two years after the Closing, any equity
grants to executive officers shall be subject to a unanimous determination by the Compensation
Committee of the Board of Directors that such awards are fair and reasonable to the Company.
6.13 Subsequent Equity Sales. From the date hereof until such time as Investor no longer
holds any of the Securities, the Company shall be prohibited from effecting or entering into an
agreement to effect any Subsequent Financing involving a “Variable Rate Transaction” (as
defined below). The term “Variable Rate Transaction” shall mean a transaction in which the
Company issues or sells (i) any debt or equity securities that are convertible into, exchangeable
or exercisable for, or include the right to receive additional shares of Common Stock at a
conversion, exercise or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the shares of Common Stock at any time after the initial
issuance of such debt or equity securities. Investor shall be entitled to obtain injunctive relief
against the Company to preclude any such issuance, which remedy shall be in addition to any right
to collect damages. Notwithstanding the foregoing, this Section 6.16 shall not apply in
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respect of
an Exempt Issuance, except that no Variable Rate Transaction shall be an Exempt Issuance.
6.14 Amendment to Certificate of Incorporation. At or before the next annual meeting of
the stockholders of the Company, the Board of Directors shall propose and submit to the holders of
the Common Stock for approval, an amendment to the Articles of Incorporation that provides
substantially as follows:
“The terms and conditions of any rights, options and warrants approved by the Board of
Directors may provide that any or all of such terms and conditions may be waived or
amended only with the consent of the holders of a designated percentage of a
designated class or classes of capital stock of the Corporation (or a designated group
or groups of holders within such class or classes, including but not limited to
disinterested holders), and the applicable terms and conditions of any such rights,
options or warrants so conditioned may not be waived or amended absent such consent.”.
6.15 Stock Splits. For as long as the Warrants remain outstanding, the Company shall not
effect any forward or reverse stock splits in a manner that favors any holder of any class of
securities over the holders of the Note and the Warrants.
ARTICLE VII
COVENANTS OF THE INVESTOR
7.1 Compliance with Law. The Investor’s trading activities with respect to shares of the
Company’s Common Stock will be in compliance with all applicable state and federal securities laws,
rules and regulations and rules and regulations of any public market on which the Company’s Common
Stock is listed.
7.2 Transfer Restrictions. The Investor’s acknowledge that (1) the Note and shares
underlying the Note have not been registered under the provisions of the 1933 Act, and may not be
transferred unless (A) subsequently registered thereunder or (B) the Investor shall have delivered
to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the
Company, to the effect that the Note and shares underlying the Note to be sold or transferred may
be sold or transferred pursuant to an exemption from such registration; and (2) any sale of the
Note and shares underlying the Note made in reliance on Rule 144 promulgated under the 1933 Act may
be made only in accordance with the terms of said Rule and further, if said Rule is not applicable,
any resale of such securities under circumstances in
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which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may
require compliance with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder.
7.3 Restrictive Legend. The Investor acknowledges and agrees that the Note and the Shares
underlying the Note, and, until such time as the Shares underlying the Note have been registered
under the 1933 Act and sold in accordance with an effective Registration Statement, certificates
and other instruments representing any of the Shares, shall bear a restrictive legend in
substantially the following form (and a stop-transfer order may be placed against transfer of any
such securities):
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH
SHARES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED
UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND
ANY APPLICABLE STATE SECURITIES LAWS, OR (2) IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S, OR
(3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.” 7.4
7.4 Amendment to Certificate of Incorporation. Investor hereby agrees to vote any shares of
capital stock that it may own directly or beneficially, for the amendment to the Certificate of
Incorporation referenced in Section 6.14. Pending adoption of such amendment, Investor hereby
agrees for itself and its successors and assigns that neither this Section 7.4 or Section 6.14
above, or any restriction on exercise of the Warrant shall be amended, modified or waived without
the consent of the holders of a majority of the shares of Common Stock held by Persons who are not
Affiliates of the Company, or the Investor or Affiliates of the Investor.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS
The obligation of the Company to consummate the transactions contemplated hereby shall be
subject to the fulfillment, on or prior to Closing Date, of the following conditions:
8.1 No Termination. This Agreement shall not have been terminated pursuant to Article X
hereof.
8.2 Representations True and Correct. The representations and warranties of the Investor
contained in this Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if made on as of the Closing Date.
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8.3 Compliance with Covenants. The Investor shall have performed and complied in all
material respects with all covenants, agreements, and conditions required by this Agreement to be
performed or complied by it prior to or at the Closing Date.
8.4 No Adverse Proceedings. On the Closing Date, no action or proceeding shall be pending
by any public authority or individual or entity before any court or administrative body to
restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions
contemplated hereby or to recover any damages or obtain other relief as a result of the
transactions proposed hereby.
ARTICLE IX
CONDITIONS PRECEDENT TO INVESTOR’S OBLIGATIONS
The obligation of the Investors to consummate the transactions contemplated hereby shall be
subject to the fulfillment, on or prior to Closing Date unless specified otherwise, of the
following conditions:
9.1 No Termination. This Agreement shall not have been terminated pursuant to Article X
hereof.
9.2 Representations True and Correct. The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if made on as of the Closing Date.
9.3 Compliance with Covenants. The Company shall have performed and complied in all
material respects with all covenants, agreements, and conditions required by this Agreement to be
performed or complied by it prior to or at the Closing Date.
9.4 No Adverse Proceedings. On the Closing Date, no action or proceeding shall be pending
by any public authority or individual or entity before any court or administrative body to
restrain, enjoin, or otherwise prevent the consummation of this Agreement or the transactions
contemplated hereby or to recover any damages or obtain other relief as a result of the
transactions proposed hereby.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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10.1 Termination. This Agreement may be terminated at any time prior to the Closing Date
10.1.1 by mutual written consent of the Investor and the Company;
10.1.2 by the Company upon a material breach of any representation, warranty, covenant or
agreement on the part of the Investor set forth in this Agreement, or the Investor upon a material
breach of any representation, warranty, covenant or agreement on the part of the Company set forth
in this Agreement, or if any representation or warranty of the Company or the Investor,
respectively, shall have become untrue, in either case such that any of the conditions set
forth in Article VIII or Article IX hereof would not be satisfied (a “Terminating Breach”),
and such breach shall, if capable of cure, not have been cured within five (5) business days after
receipt by the party in breach of a notice from the non-breaching party setting forth in detail the
nature of such breach.
10.2 Effect of Termination. Except as otherwise provided herein, in the event of the
termination of this Agreement pursuant to Section 10.1 hereof, there shall be no liability on the
part of the Company or the Investor or any of their respective officers, directors, agents or other
representatives and all rights and obligations of any party hereto shall cease; provided that in
the event of a Terminating Breach, the breaching party shall be liable to the non-breaching party
for all costs and expenses incurred by the non-breaching party not to exceed $50,000.00.
10.3 Amendment. This Agreement may be amended by the parties hereto any time prior to the
Closing Date by an instrument in writing signed by the parties hereto.
10.4 Waiver. At any time prior to the Closing Date, the Company or the Investor, as
appropriate, may: (a) extend the time for the performance of any of the obligations or other acts
of other party or; (b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto which have been made to it or them; or (c)
waive compliance with any of the agreements or conditions contained herein for its or their
benefit. Any such extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party or parties to be bound hereby.
ARTICLE XI
GENERAL PROVISIONS
11.1 Transaction Costs. Except as otherwise provided herein, each of the parties
shall pay all of his or its costs and expenses (including attorney fees and other legal costs and
expenses and accountants’ fees and other accounting costs and expenses) incurred by that party in
connection
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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with this Agreement; provided, the Company shall pay Investor such due diligence
expenses as described in section 5.10.
11.2 Indemnification. The Investor agrees to indemnify, defend and hold the Company
(following the Closing Date) and its officers and directors harmless against and in respect of any
and all claims, demands, losses, costs, expenses, obligations, liabilities or damages, including
interest, penalties and reasonable attorney’s fees, that it shall incur or suffer, which arise out
of or result from any breach of this Agreement by such Investor or failure by such Investor to
perform with respect to any of its representations, warranties or covenants contained in this
Agreement or in any exhibit or other instrument furnished or to be furnished under this
Agreement. The Company agrees to indemnify, defend and hold the Investor harmless against and in
respect of any and all claims, demands, losses, costs, expenses, obligations, liabilities or
damages, including interest, penalties and reasonable attorney’s fees, that it shall incur or
suffer, which arise out of, result from or relate to any breach of this Agreement or failure by the
Company to perform with respect to any of its representations, warranties or covenants contained in
this Agreement or in any exhibit or other instrument furnished or to be furnished under this
Agreement. In no event shall the Company or the Investors be entitled to recover consequential or
punitive damages resulting from a breach or violation of this Agreement nor shall any party have
any liability hereunder in the event of gross negligence or willful misconduct of the indemnified
party. In the event of a breach of this Agreement by the Company, the Investor shall be entitled
to pursue a remedy of specific performance upon tender into the Court an amount equal to the
Purchase Price hereunder.
11.3 Headings. The table of contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement.
11.4 Entire Agreement. This Agreement (together with the Schedule, Exhibits and documents
referred to herein) constitute the entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the parties, or any of them, with
respect to the subject matter hereof.
11.5 Notices. All notices and other communications hereunder shall be in writing and shall
be deemed to have been given (i) on the date they are delivered if delivered in person; (ii) on the
date initially received if delivered by facsimile transmission followed by registered or certified
mail confirmation; (iii) on the date delivered by an overnight courier service; or (iv) on the
third business day after it is mailed by registered or certified mail, return receipt requested
with postage and other fees prepaid as follows:
If to the Company:
Sun New Media, Inc.
Sun New Media, Inc.
NOTE PURCHASE AGREEMENT BETWEEN
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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22 f/Sino Favour Centre
▇▇. ▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇
▇▇. ▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇
With a copy to:
DLA ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ US LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to the Investor:
▇▇▇▇▇▇ Partners L.P.
c/▇ ▇▇▇▇▇▇ Capital Advisors, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
c/▇ ▇▇▇▇▇▇ Capital Advisors, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
11.6 Severability. If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any such term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as closely as possible
in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the
extent possible.
11.7 Binding Effect. All the terms and provisions of this Agreement whether so expressed or
not, shall be binding upon, inure to the benefit of, and be enforceable by the parties and their
respective administrators, executors, legal representatives, heirs, successors and assignees.
11.8 Preparation of Agreement. This Agreement shall not be construed more strongly against
any party regardless of who is responsible for its preparation. The parties acknowledge each
contributed and is equally responsible for its preparation.
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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11.9 Governing Law. This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without giving effect to applicable principles of conflicts of
law.
11.10 Jurisdiction. This Agreement shall be exclusively governed by and construed in
accordance with the laws of the State of New York. If any action is brought among the parties with
respect to this Agreement or otherwise, by way of a claim or counterclaim, the parties agree that
in any such action, and on all issues, the parties irrevocably waive their right to a trial by
jury. Exclusive jurisdiction and venue for any such action shall be the Federal Courts serving the
State of New York. In the event suit or action is brought by any party under this Agreement to
enforce any of its terms, or in any appeal therefrom, it is agreed that the prevailing party shall
be entitled to reasonable attorneys fees to be fixed by the arbitrator, trial court, and/or appellate
court.
11.11 Preparation and Filing of Securities and Exchange Commission filings. The Investor
shall reasonably assist and cooperate with the Company in the preparation of all filings with the
SEC after the Closing Date due after the Closing Date.
11.12 Further Assurances, Cooperation. Each party shall, upon reasonable request by the
other party, execute and deliver any additional documents necessary or desirable to complete the
transactions herein pursuant to and in the manner contemplated by this Agreement. The parties
hereto agree to cooperate and use their respective best efforts to consummate the transactions
contemplated by this Agreement.
11.13 Survival. The representations, warranties, covenants and agreements made herein shall
survive the Closing of the transaction contemplated hereby.
11.14 Third Parties. Except as disclosed in this Agreement, nothing in this Agreement,
whether express or implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties hereto and their respective administrators,
executors, legal representatives, heirs, successors and assignees. Nothing in this Agreement is
intended to relieve or discharge the obligation or liability of any third persons to any party to
this Agreement, nor shall any provision give any third persons any right of subrogation or action
over or against any party to this Agreement.
11.15 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the
part of any party hereto in the exercise of any right hereunder shall impair such right or be
construed to be a waiver of, or acquiescence in, any breach of any representation, warranty,
covenant or agreement herein, nor shall nay single or partial exercise of any such right preclude
other or further exercise thereof or of any other right. All rights and remedies existing under
this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available.
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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11.16 Counterparts. This Agreement may be executed in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed shall be deemed to
be an original, but all of which taken together shall constitute one and the same agreement. A
facsimile transmission of this signed Agreement shall be legal and binding on all parties
hereto.
[SIGNATURES ON FOLLOWING PAGE]
NOTE PURCHASE AGREEMENT BETWEEN
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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IN WITNESS WHEREOF, the Investors and the Company have as of the date first written above
executed this Agreement.
THE COMPANY:
SUN NEW MEDIA, INC.
/s/ ▇▇▇▇▇ ▇▇
By: ▇▇▇▇▇ ▇▇
Title: Chairman
Title: Chairman
INVESTOR:
▇▇▇▇▇▇ PARTNERS LP
By: ▇▇▇▇▇▇ Capital Advisors, LLC, its General Partners
By: ▇▇▇▇▇▇ Capital Advisors, LLC, its General Partners
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
President
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
President
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇
NOTE PURCHASE AGREEMENT BETWEEN
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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Schedule A
| NUMBER OF SHARES | ||||||||
| OF COMMON STOCK | ||||||||
| AMOUNT OF | INTO WHICH | |||||||
| NAME AND ADDRESS | INVESTMENT | NOTE IS CONVERTIBLE | ||||||
▇▇▇▇▇▇ Partners LP |
||||||||
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ |
||||||||
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ |
||||||||
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ |
$ | 918,000.0 | 450,000.0 | |||||
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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Schedule 4.3.2 – Capitalization
The Company is currently obligated to issues shares in accordance with terms of the following
transactions:
| • | The Company will issue up to 26,700,000 shares of its Common Stock to Sun Business Networks, Ltc. for the Publishing Assets. | ||
| • | The Company will issue up to 19,998,320 shares of its common stock to Sun Business Network Ltd. for Beijing properties and shares of Asia Premium Television Group. | ||
| • | The Company will issue up to 20,900,000 shares of its common stock to certain individuals for the China Focus Channel | ||
| • | The Company will issue up to 2,008,929 shares to Sun Media Investment Holdings for shares of Sun Business Network Ltd. | ||
| • | The Company will issue up to 853,333 shares to certain individuals in connection with the Telefaith transaction. |
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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Schedule 4.8 – List of Brokers
▇▇▇▇ ▇▇▇▇
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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Exhibit A
Promissory Note
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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Exhibit B
Registration Rights Agreement
NOTE PURCHASE AGREEMENT BETWEEN
SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
PAGE 28 OF 24
Exhibit C
Conversion Price Adjustment
If the acquisition of Focus Channel Development (the “The Proposed Transaction”) does
not close within 90 days post Closing the conversion price reduced by 65% per share.
NOTE PURCHASE AGREEMENT BETWEEN
SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
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SUN NEW MEDIA, INC. AND ▇▇▇▇▇▇ PARTNERS LP
PAGE 29 OF 24
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE SECURITIES ISSUABLE UPON
CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE BORROWER THAT SUCH REGISTRATION IS NOT REQUIRED.
A NOTE PURCHASE AGREEMENT DATED AS OF DECEMBER 31, 2005 (THE “PURCHASE AGREEMENT”), A COPY OF WHICH
MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICE, CONTAINS CERTAIN ADDITIONAL
AGREEMENTS BETWEEN THE PARTIES WITH RESPECT TO THIS NOTE. IN PARTICULAR, THE PURCHASE AGREEMENT
INCLUDES A PROVISION THAT WAIVES ADJUSTMENT OF THE CONVERSION PRICE OF THIS NOTE IN CERTAIN
CIRCUMSTANCES.
CONVERTIBLE NOTE
FOR VALUE RECEIVED, SUN NEW MEDIA, INC, a Minnesota corporation (hereinafter called “Borrower”),
hereby promises to pay to ▇▇▇▇▇▇ PARTNERS, LP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇▇▇ (the “Holder”), or order, the sum of Nine Hundred and Eighteen Thousand and No
Cents ($918,000.00) (“Principal”), on December 31, 2008 (the “Maturity Date”), but the maturity of
this Note is automatically extended on a month by month basis.
ARTICLE I
GENERAL PROVISIONS
GENERAL PROVISIONS
1.1 Note Purchase Agreement. This Convertible Note (“Note”) is issued pursuant to that certain
Note Purchase Agreement between Borrower and Holder of even date herewith and is subject to the
terms and conditions of that agreement.
1.2 Paid-In-Kind Interest. This Note will bear an interest rate paid in kind of twenty-two
percent annually until maturity.
ARTICLE II
CONVERSION RIGHTS
CONVERSION RIGHTS
The Holder shall have the right or obligation to convert the Principal of this Note into
shares of the Borrower’s Common Stock as set forth below.
2.1. Conversion into Borrower’s Stock.
(a) The Holder shall have the right, exercisable at any time from and after the date of
issuance of this Note until this Note is fully paid, to convert the entire outstanding and unpaid
Principal of this Note upon delivery of a Notice of Conversion in the form attached hereto (the
date of giving of such Notice of Conversion being the “Conversion Date”) into fully paid and
nonassessable shares of Borrower’s Common Stock, par value $0.01 per share, at the Conversion
Price (defined below);
(b) Subject to clause (c) below and Section 6.14 of the Note Purchase Agreement, the
“Conversion Price” per share of Borrower’s Common Stock shall be $2.04.
(c) The character and amount of securities or other property issuable upon conversion of this
Note and the Conversion Price are subject to adjustment upon the occurrence of the following
events, and all such adjustments shall be cumulative:
(i) The Conversion Price of this Note and the number of shares of Common Stock issuable
upon conversion of this Note shall be appropriately adjusted to reflect any stock dividend,
stock split, combination of shares, reclassification, recapitalization or other similar
event affecting the number of outstanding shares of stock or securities.
(ii) In case of any consolidation or merger of the Company with or into any other
corporation, entity or person, or any other corporate reorganization, in which the Company
shall not be the continuing or surviving entity of such consolidation, merger or
reorganization (any such transaction being hereinafter referred to as a “Reorganization”),
then, in each case, the Holder, on conversion hereof at any time after the consummation or
effective date of such Reorganization (the “Effective Date”), shall receive, in lieu of the
shares of Borrower’s stock or other securities at any time issuable upon the conversion of
the Note prior to the Effective Date, the stock and other securities and property (including
cash) to which such Holder would have been entitled upon the Effective Date if such Holder
had converted this Note immediately prior thereto.
(iii) If a Dilutive Issuance (as that term is defined in the Note Purchase Agreement)
occurs, then the Company shall adjust the Conversion Price in accordance with the provisions
of Section 6.9 of such Note Purchase Agreement.
(d) In case of any adjustment or readjustment in the price or kind of securities issuable on
the conversion of this Note pursuant to clause (c) above, the Company will promptly give written
notice thereof to the Holder in the form of a certificate, certified and confirmed by an officer of
the Company, setting forth such adjustment or readjustment and showing in reasonable detail the
facts upon which such adjustment or readjustment is based.
(e) Borrower covenants and agrees to reserve out of its authorized and unissued Common Stock
the number of shares of capital stock into which this Note may be converted. Borrower represents
that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable.
Borrower agrees that its issuance of this Note shall constitute full authority to its officers,
agents, and transfer agents who are charged with the duty of executing and issuing stock
certificates to execute and issue the necessary certificates for shares upon the conversion of this
Note.
a. (f) If the weighted average public market trading price of the Company’s common stock is
equal to or in excess of $4.00 for a period of thirty (30) consecutive Trading Days and (i) there
is an effective Registration Statement covering the shares of common stock underlying this Note
during such thirty (30) consecutive day period or (ii) the Holder has been provided with an
opportunity to effect a transaction the result of which provides the Holder with liquidity with an
effect substantially the same as if such registration statement were effective (but only as to the
number of shares with respect to which such liquidity is provided), the Company may require that
the Holder convert the Note (“Automatic Conversion Notice”). Upon receipt of the Automatic
Conversion Notice, the Holder must convert the Note into common stock of the Company at an amount
no less than 20% of the current daily trading volume of the common stock until fully converted. In
no event may the Company require the Investor to exercise any such warrant that would force the
Investor to violate the 4.9% provision in the Stock Purchase Agreement or this Note Agreement;
provided that so long as such limitation is effective, the Investor must sell or otherwise dispose
of shares of Common Stock upon conversion of this Note or upon the exercise of any Company warrants
upon issuance. This Note does not expire if the provisions of this paragraph are triggered by the
4.9% limitation as stated above; provided however, that upon delivery of the Automatic Conversion
Notice, all ongoing covenants of the Company or other provisions with respect to adjustment of the
conversion price of the Notes shall terminate and be of no further force or effect.
2.2 Method of Conversion. This Note may be converted by the Holder in whole or in part.
2.3 Maximum Exercise.
(a) The Holder shall not be entitled to convert this 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” (defined below) by the Holder and its affiliates on the Conversion Date,
and (ii) the number of shares of Common Stock issuable upon the conversion of this Note with
respect to which the determination of this limitation is being made on the Conversion Date, which,
would result in “beneficial ownership” by the Holder and its affiliates of more than 4.9% of the
outstanding shares of Common Stock on the Conversion Date. For the purposes of 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 Regulation 13d-3 thereunder. Subject to the
foregoing, the Holder shall not be limited to aggregate conversion which would result in the
issuance of more than 4.9% of the outstanding shares of Common Stock.
(b) This Section 2.3 may be waived or amended only with the consent of the Holder and the
consent of holders of a majority of the shares of outstanding Common Stock of the Company who are
not Affiliates. For the purposes of the immediately preceding sentence, the term “Affiliate” shall
mean: (a) any person that directly, or indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with, the Company or any Holder; and (b) any Holder
who beneficially owns any shares of the Company’s Common Stock.
ARTICLE III
EVENT OF DEFAULT
EVENT OF DEFAULT
The occurrence of any of the following events of default (“Event of Default”) shall, at the
option of the Holder hereof, make all sums of Principal then remaining unpaid hereon and all other
amounts payable hereunder immediately due and payable, upon demand, without presentment, or grace
period, all of which hereby are expressly waived, except as set forth below:
3.1 Failure to Pay Principal. The Borrower fails to pay the Principal or other sum due under
this Note when due.
3.2 Breach of Covenant. The Borrower breaches any material covenant or other term or
condition of the Note Purchase Agreement or this Note in any material respect and such breach, if
subject to cure, continues for a period of fifteen (15) business days after the earlier of (i)
written notice to the Borrower from the Holder or (ii) the date that the Borrower learns of such
breach.
3.3 Breach of Representations and Warranties. Any material representation or warranty of the
Borrower made herein, in the Note Purchase Agreement, or in any agreement, statement or certificate
given in writing pursuant hereto or in connection therewith shall be false or misleading in any
material respect as of the date made and the Closing Date (as defined in the Note Purchase
Agreement).
3.4 Receiver or Trustee. The Borrower shall make an assignment for the benefit of creditors,
or apply for or consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business; or such a receiver or trustee shall otherwise be appointed.
3.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed
against Borrower or any of its property or other assets for more than $150,000, and shall remain
unvacated, unbonded or unstayed for a period of forty-five (45) days.
3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other
proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in
relation to such event, for the relief of debtors shall be instituted by or against the Borrower
and if instituted against Borrower are not dismissed within 45 days of initiation.
3.7 Delisting. Delisting of the Borrower’s Common Stock from the OTC Bulletin Board (“OTCBB”)
or such other principal exchange on which the Common Stock is listed for trading; failure to comply
with the requirements for continued listing on the OTCBB for a period of thirty consecutive trading
days after receiving written notice thereof.
3.8 Stop Trade. An SEC or judicial stop trade order or principal market trading suspension
that lasts for five or more consecutive trading days.
ARTICLE IV
MISCELLANEOUS
MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof in the
exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 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 delivered in the manner and to the address specified in the Purchase Agreement.
4.3 Amendment Provision. The term “Note” and all reference thereto, as used throughout this
instrument, shall mean this instrument as originally executed, or if later amended or supplemented,
then as so amended or supplemented.
4.4 Assignability. The Borrower may not assign its rights and obligations hereunder without
the Holder’s prior written consent, which may be withheld in its sole discretion. This Note shall
be binding upon the Borrower and its successors and permitted assigns, and shall inure to the
benefit of the Holder and its successors and assigns.
4.5 Cost of Collection. If default is made in the payment of this Note, Borrower shall pay
the Holder hereof reasonable costs of collection, including reasonable attorneys’ fees.
4.6 Governing Law. This Note shall be governed by and construed in accordance with the laws
of the State of New York. Any action brought by either party against the other concerning the
transactions contemplated by this Note shall be brought only in the state courts of New York or in
the federal courts located in the state of New York. Both parties and the individual signing this
Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. If any
action is brought between the parties with respect to this Note or otherwise, by way of a claim or
counterclaim, the parties irrevocably waive their right to a trial by jury in any such action and
on all issues. The prevailing party shall be entitled to recover from the other party its
reasonable attorney’s fees and costs.
4.7 Shareholder Status. The Holder shall not have rights as a shareholder of the Borrower
prior to conversion of this Note. However, after the Conversion Date, the Holder will have the
right of a shareholder of the Borrower with respect to the shares of Common Stock to be received
upon conversion of this Note.
IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer
on this 31st day of December, 2005.
SUN NEW MEDIA, INC.
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/s/ ▇▇▇▇▇ ▇▇ |
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Title: Chairman |
NOTICE OF CONVERSION
(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert the principal of the Note issued by SUN NEW MEDIA, INC on
, 2006 into shares of Common Stock of SUN NEW MEDIA, INC. (the
“Borrower”) according to the terms set forth in such Note, as of the date written below.
Date of
Conversion:
, 2006
Shares To Be Delivered: shares of Common Stock
Signature: |
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Print Name: |
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Address: |
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