CHINA TEL GROUP, Inc. US $45,000,000 CONVERTIBLE NOTES Due December 31, 2009 AMENDED AND RESTATED CONVERTIBLE NOTE PURCHASE AGREEMENT DATED NOVEMBER 17, 2008
EXHIBIT 10.14
CHINA
TEL GROUP, Inc.
US
$45,000,000
CONVERTIBLE
NOTES
Due
December 31, 2009
______________
AMENDED
AND RESTATED CONVERTIBLE NOTE
PURCHASE
AGREEMENT
_____________
DATED
NOVEMBER 17, 2008
NEITHER
THE NOTE DESCRIBED HEREIN NOR THE SHARES OF COMMON STOCK THAT MAY BE ISSUED UPON
CONVERSION THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
“ACT”), OR THE SECURITIES LAWS OF ANY JURISDICTION. SUCH SECURITIES MAY NOT BE
OFFERED, SOLD, HYPOTHECATED, GIVEN, BEQUEATHED, TRANSFERRED, ASSIGNED PLEDGED,
ENCUMBERED, OR OTHERWISE DISPOSED OF (“TRANSFERRED”) EXCEPT PURSUANT TO (I) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES THAT IS EFFECTIVE UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAW, OR (II) ANY EXEMPTION FROM
REGISTRATION UNDER THE ACT, AND APPLICABLE STATE SECURITIES LAW, RELATING TO THE
DISPOSITION OF SUCH SECURITIES, PROVIDED THAT AN OPINION OF COUNSEL IS FURNISHED
TO THE COMPANY, TO THE EXTENT REASONABLY REQUESTED BY THE COMPANY, IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND/OR APPLICABLE STATE
SECURITIES LAW IS AVAILABLE.
IN
ADDITION, THE NOTE MAY NOT BE TRANSFERRED UNLESS SUCH TRANSFER COMPLIES WITH THE
PROVISIONS OF THE NOTE. NO TRANSFER OF THE NOTE WILL BE MADE ON THE
BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS
OF THE NOTE. THE NOTE IS ALSO SUBJECT TO OTHER RIGHTS AND OBLIGATIONS
AS SET FORTH IN THE NOTE.
Convertible
Promissory Notes due December 31, 2009
THIS AMENDED AND RESTATED CONVERTIBLE
NOTE PURCHASE AGREEMENT (the “Agreement”), is
entered into on the date forth below, to be effective as of November 17, 2008
(the “Effective
Date”), by and among China Tel Group, Inc., a
Nevada corporation formerly known as Mortlock Ventures, Inc. (the “Company”),
and the undersigned as “Purchaser”.
RECITALS
This
Agreement is entered into with reference to the following facts:
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A.
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WHEREAS,
Purchaser previously executed that certain Convertible Note Purchase
Agreement dated February 12, 2008 with Mortlock Ventures, Inc. (the prior
name of China Tel Group, Inc.) (the “February 2008 Purchase
Agreement”).
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B.
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WHEREAS,
the February 2008 Purchase Agreement was amended on three occasions with
amendments dated March, 2008, April, 2008, and May, 2008 (the “2008
Amendments”);
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C.
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WHEREAS,
the purpose of this Agreement is to amend and restate the February 2008
Purchase Agreement in its entirety in order to: (i) incorporate all
of the 2008 Amendments; (ii) extend the maturity date of the Notes (as
defined herein) from December 31, 2008 to December 31, 2009; (iii) provide
the Purchaser with a 20% increase in the outstanding balance (principal
and interest) of the Note previously purchased and issued to Purchase,
provide the Purchaser with the right to call for the redemption of the
Note prior to December 31, 2009 under certain conditions, modify the
conversion rights of Purchaser on the Note, and provide certain
registrations rights on the converted shares as consideration for the
extension of the maturity date of the
Notes.
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NOW, THEREFORE, in
consideration of the promises and the mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties, by affixing their signature below, Purchaser
and the Company are agreeing to amend and restate the February 2008 Purchase
Agreement, the 2008 Amendments and all representations and warranties made in
connection with or in relation to the February 2008 Agreement as set forth in
this Agreement. All Exhibits and Schedules attached to the February
2008 Purchase Agreement shall remain in full force and effect and are
incorporated herein by this reference. Based upon the foregoing the
Purchaser and the Company hereby agree to be legally bound as
follows:
SECTION 1.
AUTHORIZATION
OF NOTE.
The
Company has authorized the offering and sale (the “Offering”) of Convertible
Notes in the aggregate principal amount of up to $45 million, with such terms as
set forth below (the “Notes”). Certain capitalized terms used in this
Agreement are defined below in Section 22; references to a “Schedule” or an “Exhibit” are, unless
otherwise specified, to a Schedule or an Exhibit to the February 2008 Purchase
Agreement.
SECTION 2.
SALE AND
PURCHASE OF NOTE.
Subject
to the terms and conditions of this Agreement, the Company will issue and sell
to you and you will purchase from the Company, at the Closing provided for in
Section 3, the Note at the purchase price of 100% of the principal amount
of the Note (the “Purchase
Price”). Purchaser previously received a Note at the time of
the investment by Purchaser in the Company. All of the terms of the
Note provided to Purchaser remain in full force and effect except as amended and
modified as follows: (a) the Note shall now mature (become due) on
December 31, 2009, (the “Maturity Date”) rather than December 31, 2008 as
set forth in the Note issued to Purchaser; and (b) in outstanding balance
of the Note (principal and accrued interest) shall be increased by 20%
(”Increased Outstanding Balance”), and the Note shall accrue interest on the
Increased Outstanding Balance of the Note as set forth in Section 8 of this
Agreement as of the date of Purchaser’s execution of this
Agreement.
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SECTION
3. CLOSING.
The
Purchaser and the Company acknowledge that the Closing of the investment in the
Notes has occurred prior to the date of this Agreement (the
“Closing”). The date of delivery of the Note to the Purchaser shall
be referred to herein as the “Closing Date”.
SECTION 4.
CONDITIONS
TO CLOSING.
Section 4.1. Conditions to Purchaser's Obligation
to Purchase Notes. Both parties acknowledge that all
conditions precedent to the issuance of the Notes has been
satisfied.
Section 4.2 Additional
Conditions. The Purchaser acknowledges and agrees that the
Company’s obligation to sell the Note to
the Purchaser is further subject to the following conditions:
(a) that
the issue, sale and delivery of the Note is
exempt from all registration requirements and the requirements to file a
prospectus or registration statement, or deliver an offering memorandum under
applicable securities legislation relating to the sale of the Note or that the
Company has received such orders, consents, or approvals as may be required to
permit such sale without the requirement of filing a prospectus or registration
statement, or delivering an offering memorandum;
SECTION 5.
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to you as of the Closing Date that:
Section 5.1. Organization; Power and
Authority. The Company is a corporation validly existing and
in good standing under the laws of the State of California and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or in
good standing could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Company has the legal
power and authority to own or hold under lease the properties it purports to own
or hold under lease, to transact the business it transacts, to execute and
deliver the Loan Documents to which it is a party and to perform the provisions
hereof and thereof.
Section 5.2. Authorization,
etc. Each of the Loan Documents have been duly authorized by
all necessary corporate action on the part of the Company, and each such Loan
Document constitutes, and upon execution and delivery thereof each such Loan
Document will constitute (assuming due execution and delivery by the Purchaser
to the extent provided for therein), a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditors’ rights generally, and (ii) general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
Section 5.3. Disclosure. This
Agreement, the Loan Documents, the certificates or Schedules delivered to you by
or on behalf of the Company in connection with the transactions contemplated
hereby taken as a whole, do not contain any untrue statement of a Material fact
or omit to state any Material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were
made.
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Section 5.4. Compliance with Laws, Other
Instruments, etc. The execution, delivery and performance by
the Company of the Loan Documents will not: (i) contravene, result in any
breach of, or constitute a default under, or result in the creation of any Lien,
except as contemplated in the Loan Documents, in respect of any property of the
Company under, any indenture, mortgage, deed of trust, loan, purchase or credit
agreement, lease, Charter Document, or any other agreement or instrument to
which the Company is bound or by which the Company or any of its properties may
be bound or affected, (ii) conflict with or result in a breach of any of
the terms, conditions or provisions of any order, judgment, decree, or ruling of
any court, arbitrator or Governmental Authority applicable to the Company or
(iii) violate any provision of any current statute or other rule or
regulation of any Governmental Authority applicable to the Company, in each case
the effect of which could have a Material Adverse Effect.
Section 5.5. Governmental Authorizations,
etc. No consent, approval or authorization of, or
registration, filing or declaration with, any Governmental Authority is required
in connection with the execution, delivery or performance by the Company of this
Agreement or the Notes that will not have been obtained prior to the
Closing.
Section 5.6.
Litigation; Observance of Agreements, Statutes and Orders.
(a) There
are no actions, suits or proceedings pending or, to the Knowledge of the
Company, threatened against or affecting the Company or any property of the
Company in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could reasonably
be expected, if adversely determined, to have a Material Adverse
Effect.
(b) The
Company is not in default under any term of any agreement or instrument to which
it is a party or by which it is bound, or any order, judgment, decree or ruling
of any court, arbitrator or Governmental Authority or is in violation of any
applicable law, ordinance, rule or regulation (including without limitation
Environmental Laws) of any Governmental Authority, which default or violation,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
Section 5.7.
Licenses, Permits, etc.
(a) The
Company owns or possesses all licenses, permits, franchises, authorizations,
patents, copyrights, service marks, trademarks and trade names, or rights
thereto, that individually or in the aggregate are Material to the conduct of
its business as currently being conducted, without, to the Knowledge of the
Company, conflict with the rights of others;
(b) To
the Knowledge of the Company, no product of the Company infringes in any
Material respect any license, permit, franchise, authorization, patent,
copyright, service ▇▇▇▇, trademark, trade name or other right owned by any other
Person; and
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(c) To
the Knowledge of the Company, there is no Material violation by any Person of
any right of any the Company with respect to any patent, copyright, service
▇▇▇▇, trademark, trade name or other right owned or used by the
Company.
Section 5.8. Private Offering by the
Company. Neither the Company nor to the Knowledge of the
Company anyone authorized to act on its behalf has offered the Note or any
similar securities for sale to, or solicited any offer to buy any of the same
from, or otherwise approached or negotiated in respect thereof with, any Person
other than you and not more than thirty-five (35) other investors, each of which
has been offered the Note at a private sale for investment and not with a view
to the distribution thereof or any interest therein. Neither the
Company nor to the Knowledge of the Company anyone authorized to act on its
behalf has taken, or will take, any action that would subject the issuance or
sale of the Note to the registration requirements of Section 5 of the
Securities Act; provided,
however, the availability of an exemption from the registration
requirements of Section 5 is based upon the accuracy and completeness of the
representations and warranties of each Purchaser (and each other Person
acquiring the Note from such Purchaser) set forth in Section 6 on which the
Company will rely. In connection with the offer and sale of the Note, the
Company has not conducted any form of general solicitation or general
advertising including advertisements, articles, notices or other communications
published in any newspaper, magazine or similar media, or broadcast over radio,
the Internet or television, or any seminar or meeting whose attendees have been
invited by general solicitation or general advertising.
Section 5.9. Capitalization. As
of the date of this Agreement, the authorized capital of the Company consists of
two classes of common stock: Series A common shares of which there are
85,525,595 shares issued and outstanding and Class B common shares of which
there are 66,909,088 shares issued and outstanding.
SECTION 6.
REPRESENTATIONS
OF THE PURCHASER.
Section 6.1.
Due Authorization; Absence of Conflicts; Enforceability; Purchase for
Investment, etc.
(a) You
represent and warrant to Company that you have the full legal capacity, power
and authority to execute, deliver and perform the Loan Documents to which you
are a party; the execution, delivery and performance by you of each Loan
Document to which you are a party has been duly authorized by all necessary
legal action on your part; your execution, delivery and performance of the Loan
Documents to which you are a party and the consummation of the transactions
contemplated hereby and thereby will not: (a) conflict with, (i) any
provision of any governing instrument applicable to you, or (ii) any Material
permit, franchise, judgment, decree, law, rule or regulation applicable to you
or your assets; or (b) result in any Material breach of any terms or provisions
of, or constitute a Material default under, any Material contract, agreement or
instrument to which you are a party or by which you are bound; and such Loan
Document constitutes a legal, valid and binding obligation enforceable against
you in accordance with its terms, except as such enforceability may be limited
by (a) applicable bankruptcy, insolvency, reorganization, moratorium, or
other similar laws affecting the enforcement of creditors’ rights generally and
(b) general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
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(b) You
represent and warrant to the Company that you are purchasing for your own
account or for one or more separate accounts maintained by you and not with a
view to the distribution thereof or any interest therein: (i) the Note and, (ii)
upon conversion of the Note, the Shares; provided that the disposition
of your or their property shall at all times be within your or their control and
in compliance with applicable Securities Laws. You understand that
the Note and the Shares have not been and will not be registered under any
Securities Laws and may be resold only if registered pursuant to the provisions
of applicable Securities Laws or if an exemption from such registration is
available, except under circumstances where neither such registration nor such
an exemption is required by law. You represent and warrant to the
Company that you are an “accredited investor” as defined under Rule 501(a) of
the Securities Act.
(c) You
understand that you must bear the economic risk of an investment in the
Securities because, among other reasons, the offering and sale of Note and the
Shares have not been and will not be registered under applicable Securities
Laws; the Note and the Shares are “restricted securities” as defined in Rule 144
promulgated under the Securities Act and, therefore, the Securities cannot be
re-sold unless such sales are subsequently registered under applicable
Securities Laws or an exemption from such registration is
available. A legend to this effect shall be set forth on the face of
the Note and absent an effective registration under the Securities Act each
certificate evidencing any Shares issued upon conversion of the
Note.
(d) You
have sufficient knowledge and experience in financial and business matters so as
to be capable of evaluating the merits and risks of your investment in the
Securities and you are capable of bearing the economic risks of such investment,
including a complete loss of your investment.
Section 6.2 Access to
Information. Without affecting your right to rely on the
Company’s representations and warranties set forth herein, you have been given
the opportunity to examine all documents and to ask questions of, and to receive
answers from, the Company and its representatives and to obtain any additional
information which the Company possesses or can acquire without unreasonable
effort or expense concerning the Company, its business affairs, financial
condition and terms and conditions of the purchase of the Note and conversion of
the Note as you have requested in order to enable you to evaluate the merits and
risks of an investment in the Note and upon its conversion to Common
Stock.
Section 6.3 Risks, Lack of Information, Resale
Restrictions. The Purchaser is aware and represents,
acknowledges and/or agrees that:
(a) AN
INVESTMENT IN THE SECURITIES INCLUDES A HIGH DEGREE OF RISK
AND THE PURCHASER MAY LOSE ITS ENTIRE INVESTMENT;
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(b) IT HAS HAD THE OPPORTUNITY TO ASK QUESTIONS AND RECEIVED
ANSWERS FROM AN EXECUTIVE OFFICER OF THE COMPANY REGARDING THE OPERATIONS OF THE COMPANY, INCLUDING, BUT NOT LIMITED TO, RISK FACTORS APPLICABLE TO THE
COMPANY;
(c) The
Company may complete additional financings in the future in order to develop the
business of the Company and fund its ongoing development, and such future
financings may have a dilutive effect on current security holders of the
Company, including the Purchaser;
(d) The
Purchaser has not been provided with, nor has it requested, an offering
memorandum or any similar document in connection with its subscription for the
Note, and its decision to execute this Agreement and to purchase the Note has
been based upon the representations and warranties of the Company made herein,
the publicly available information
concerning the Company and the
Purchaser's own due diligence regarding the Company and not upon any
verbal or other written representation as to fact or otherwise made by or on
behalf of the Company or any employees, agents or affiliates thereof, and the
Company assumes no responsibility or liability of any nature whatsoever for the
accuracy or adequacy of the publicly available information upon which the
investment decision may have been made or as to whether all information
concerning the Company required to be disclosed by the Company has been
disclosed;
(e) No
agency, governmental authority, regulatory body, stock exchange or other entity
has made any finding or determination as to the merit for investment of, nor
have any such agencies or governmental authorities made any recommendation or
endorsement with respect to the Securities or the Offering;
(f) The
purchase of the Note has not been made through, or as a result of, and the
distribution of the Note is not being accompanied by, and the Purchaser is not
aware of, any form of general solicitation or general advertising, including
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar media, or broadcast over radio, internet or
television, or any seminar or meeting whose attendees have been invited by
general solicitation or general advertising;
(g) The
Note is being offered for sale on a “private placement” basis only;
(h) The
issuance, sale and delivery of the Note to the Purchaser or (if applicable) to
any purchaser on whose behalf it is contracting hereunder, is conditional upon
such issuances and sales being exempt from the registration requirements and the
prospectus requirements, or the requirement to file a registration statement, of
all applicable securities legislation relating to the issuance and sale of the
Note, or upon the issuance of such orders, consents or approvals as may be
required to permit such sales without the requirement of filing a prospectus or
complying with the registration requirements;
(i) The
Company, or its successors, may be required to disclose to applicable securities
regulatory authorities the identity of the beneficial purchasers of the
Note;
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(j) The
certificates representing the Securities shall bear a legend to the effect that
transfer is prohibited except: (i) pursuant to registration under the U.S.
Securities Act, or (ii) pursuant to an available exemption from registration;
provided that an opinion of counsel is furnished to the Company, to the extent
reasonably requested by the Company, in form and substance reasonably
satisfactory to the Company, to the effect that an exemption from the
registration requirements of the Securities Act of 1933 and/or applicable state
securities law is available;
(k) The
Securities will be subject to resale
restrictions under applicable securities legislation, rules, regulations and
policies, and the Purchaser or (if applicable) others for whom it is contracting
hereunder will comply with all relevant securities legislation, rules,
regulations and policies concerning the
Securities and will consult with its own legal advisers with respect to
complying with all restrictions applying to any such resale and further agrees
that it, or (if applicable) others for whom it is contracting, is solely
responsible for compliance with all applicable resale restrictions and will only
resell the Securities in compliance with all applicable securities
laws;
Section 6.4.
Qualification for
Offering and Purchase of Note. The Purchaser further
represents and warrants as to the following:
(a) it
is either: (i) an accredited investor at the time of the purchase of the
Securities and is purchasing the Securities as principal for its own account or
for the account of another accredited investor as to which it exercises sole
investment discretion, and not with a view to the resale, distribution or other
disposition of all or any of the Securities, and is delivering concurrently with
this Agreement the Certification for U.S. Securities Law Compliance – Regulation
D in the form attached to this Agreement as Schedule B; or (ii) a non-U.S.
Person, is outside of the U.S. at the time of the purchase of the Securities and
is purchasing the Securities as principal for its own account or for the account
of another non-U.S. person as to which it exercises sole investment discretion,
and not with a view to the resale, distribution or other disposition of all or
any of the Securities, and is delivering concurrently with this Agreement the
Certificate of Non-U.S. Person in the form attached to this Agreement as
Schedule C;
(b) it
consents to the Company making a notation on its records or giving instructions
to any transfer agent of the Securities in
order to implement the restriction on transfer set forth and described
herein;
(c) it
(and if the Purchaser is acting as agent for a disclosed principal, such
disclosed principal) was offered the Note in, and does business in, the
jurisdiction of the Purchaser’s place of business as referenced on Schedule A
attached hereto;
(d) it
(and any beneficial purchaser for whom it is acting) has been independently
advised as to, and is aware of, the restrictions with respect to trading in the
Securities pursuant to the applicable
securities laws and the rules of any applicable stock exchanges and further
agrees that it (and any beneficial purchaser for whom it is acting) is solely
responsible for compliance with all such restrictions;
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(e) if
required by applicable securities laws or order of a securities regulatory
authority, stock exchange or other regulatory authority, it will execute,
deliver, file and otherwise assist the Company in filing such reports,
undertakings and other documents with respect to the issuance of the Note and the underlying Common Shares;
(f) it
(and if the Purchaser is acting as agent for a disclosed principal, such
disclosed principal) is responsible for obtaining such legal, including tax,
advice as it considers necessary or appropriate in connection with the
execution, delivery and performance by it of this Agreement and the transactions
contemplated herein;
(g) it
is solely responsible for its own due diligence investigation of the
Company, its business and financial condition, for its own analysis of
the merits and risks of its investment in the Securities made pursuant to this Agreement and
for its own analysis of the terms of its investment;
(h) it
is solely responsible for obtaining such advice concerning the tax consequences
of its investment in the Securities and it
is not relying on the Company or its
respective counsel for advice concerning such tax consequences;
(i) the
purchase of the Note by the Purchaser hereunder is not a transaction in which
any director or officer of the Company, or any beneficial owner of securities
carrying more than ten percent (10%) of the voting rights attaching to all
outstanding voting securities of the Company, has a direct or indirect
beneficial interest; and
(j) if
it decides to offer, sell or otherwise transfer any of the Securities, the
Purchaser will not offer, sell or otherwise transfer any of such Securities
directly or indirectly, unless:
(i) the
sale is to the Company;
(ii) the
sale is made outside the United States in a transaction meeting the requirements
of Regulation S under the U.S. Securities Act and in compliance with applicable
local laws and regulations and the Purchaser has prior to such sale furnished to
the Company an opinion of counsel reasonably satisfactory to the Company to the
effect that such transaction does not require registration pursuant to
Regulation S under the U.S. Securities Act;
(iii) the
sale is made in the United States pursuant to the exemption from the
registration requirements under the U.S. Securities Act provided by
Rule 144 thereunder and in accordance with any applicable state securities
or “blue sky” laws, and the Purchaser has prior to such sale furnished to the
Company an opinion of counsel reasonably satisfactory to the Company to the
effect that such transaction does not require registration pursuant to
Rule 144 under the U.S. Securities Act;
(iv) the
Securities are sold in the United States in a transaction that does not require
registration under the U.S. Securities Act or any applicable state laws and
regulations governing the offer and sale of securities, and the Purchaser has
prior to such sale furnished to the Company an opinion of counsel reasonably
satisfactory to the Company to the effect that such transaction does not require
registration; or
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(v) the
sale is made in the United States pursuant to an effective registration
statement filed under the U.S. Securities Act.
The
Purchaser acknowledges and agrees that the Company will refuse to register any
sale of Securities made in breach of the provisions hereof; and all of the acknowledgements,
representations, warranties and covenants set out in Schedule B or Schedule C,
whichever is delivered by Purchaser pursuant to Section 6.4(a) hereto are true
and correct as of the day hereof and are incorporated by reference herein.
Section 6.5.
Source of
Funds. You represent and warrant to the Company that the
source of funds to be used by you to pay the purchase price of the Note to be
purchased by you hereunder is from your own personal assets and is not: an
“insurance company general account” within the meaning of Department of Labor
Prohibited Transaction Exemption (“PTE”) 95-60 (issued
July 12, 1995); an employee benefit plan or group of plans maintained by
the same employer or employee organization or a separate account or trust fund
comprised of one or more employee benefit plans; an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued February 29, 1990); a
bank collective investment fund, within the meaning of the PTE 91-38 (issued
July 12, 1991); an “investment fund” (within the meaning of Part V of the QPAM
Exemption) managed by a “qualified professional asset manager” or “QPAM” (within the meaning of
Part V of the QPAM Exemption); or a governmental plan.
As used
in this Section 6.5, the terms “employee benefit plan”,
“governmental plan”,
“party in interest” and
“separate account”
shall have the respective meanings assigned to such terms in Section 3 of
Employee Retirement Income Security Act of 1974, as amended from time to time,
and the rules and regulations promulgated thereunder from time to time in
effect.
Section 6.6 Payment of
Commissions. You hereby represent and warrant that you are
aware of and agree that the Company shall pay a commission equal to six percent
(6%) of the principal amount of the Note to Westmoore Securities Inc. and upon
the sale of all other convertible notes sold by the Company under the
Offering.
SECTION 7.
INFORMATION
AS TO THE COMPANY.
Section 7.1. Inspection. Subject
to the provisions of Section 20, the Company shall permit the representatives of
each holder of Notes to meet with an executive officer of the Company, to
discuss the affairs, finances and accounts of the Company with such executive
officer.
SECTION 8.
PRINCIPAL
AND INTEREST; MATURITY.
Section
8.1 Principal and Interest.
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(a) The
Company shall repay in full the Note on the Maturity Date in an amount equal to
the aggregate principal amount of the Note outstanding on the Maturity Date
taking into affect the Increased Outstanding Balance, plus accrued and unpaid
interest thereon, unless and to the extent that the Note is earlier redeemed,
repurchased, repaid or converted in accordance with the terms of the
Note.
(b) Interest
shall accrue on the Increased Outstanding Balance of the Note at the
rate of ten percent (10%) per
annum from the Closing Date, until and to the extent that the principal
amount of the Note is paid or the principal amount of the Note has been
converted as provided in Section 9 hereof. Interest on the Note shall
be computed on the basis of a 360-day year comprised of twelve (12) 30-day
months.
(c) If
a date for payment of principal is a Legal Holiday, payment shall be made on the
next succeeding day that is not a Legal Holiday, and interest shall accrue for
the intervening period.
(d) Except
as provided in the following sentence, the Company will pay principal and
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts in immediately available funds by
wire transfer to a U.S. dollar account maintained by the holder with a bank in
the United States designated in writing by the holder.
Section 8.2. Redemption of
Note. Notwithstanding Section 8.1 of this Agreement, after
March 31, 2009, Purchaser shall have the right to irrevocably call on the
Company to redeem the Note through the payment of all outstanding principal and
interest (calculated on the Increased Outstanding Balance) upon Ninety (90) days
written notice to the Company. In the event that the Purchaser
desires to irrevocably call for the redemption of the Note by the Company, the
Purchaser shall deliver to the Company: (1) a Notice of Election to
Redeem in the form attached hereto as Exhibit B; and (2) the original, signed
copy of the Note.
SECTION
9. CONVERSION
OF NOTES.
Section 9.1. Conversion by
Purchaser.
(a) The
Purchaser shall have the option to convert the Note, and all accrued interest on
the principal amount of the Note at anytime following the date of this Agreement
into shares of Series A common stock of the Company (the
“Shares”). In the event that the Purchaser wishes to convert the
Note, the Purchaser shall deliver to the Company a Notice of Election to Convert
in the form attached hereto as Exhibit C and the other items described in
subsection (b) of this Section 9.1.
(b) The
principal balance and all accrued and unpaid interest thereon (for purposes of
this Section 9, such amount is referred to as the “Amount Owing”), shall be
converted into Shares at the Conversion Price as defined in Section 9.2 below on
the date that the Company receives the following items from the Purchaser (such
shall be deemed to be the “Conversion Date”): (1) the Purchaser’s signed Notice
of Election to Convert; and (2) the original, signed copy of the
Note.
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(c) Purchaser
shall also provide to the Company, if required and instructed to do so by the
Company: (1) appropriate endorsements and transfer documents; and (2) payment of
transfer or similar tax.
(d) Nothing
in this Section 9.1 shall be deemed to require the Purchaser to elect to convert
the Note.
(e) Purchaser
acknowledges and agrees the Shares have not been registered by the
Company.
Section 9.2 Conversion
Price. The Amount Owing shall be converted into Shares (as
such term is defined in Section 22 below) at a conversion price (the “Conversion
Price”) per Share equal to the lesser of: (1) $0.95 (ninety five cents); or (2)
eighty percent (80%) of the volume weighted average of the closing bid price for
the Shares on the Over The Counter Bulletin Board Exchange for the ten (10) day
period prior to Purchaser’s election to convert under Section 9.1.
Section 9.3. Registration
of Shares. The Company agrees to use its best efforts to file
a Form S-1 or similar registration statement with the Securities and Exchange
Commission after completion of the Company’s 2008 fiscal year audit to register
the Shares to be issued to Purchaser under this Section 9.
Section
9.4. Taxes on Conversion.
(a) If
the Purchaser converts the Note, the Purchaser shall pay any documentary, stamp
or similar issue or transfer tax due on the issue of Common Shares upon the
conversion. The Company may refuse to deliver the certificates
representing the Common Shares being issued in a name other than the Purchaser’s
name until the Company receives a sum sufficient to pay any tax which shall be
due.
(b) The
Company may refuse to deliver the certificates representing the Common Shares
being issued in a name other than the Purchaser’s name unless the Company
receives documentation pursuant to Section 14.2(b) hereof with respect to the
transfer of such Note in respect of the transfer of Common Shares.
|
SECTION 10.
|
AFFIRMATIVE
COVENANTS.
|
The
Company covenants that so long as any principal amount of the Note issued by the
Company pursuant to this Agreement or any similar Notes are
outstanding:
Section 10.1.
Insurance. The
Company will maintain with insurers which on the date the policy commences are
financially sound and reputable, insurance with respect to its Material
properties and business against such casualties and contingencies, of such
types, on such terms and in such amounts (including deductibles, co-insurance
and self-insurance, if adequate reserves are maintained with respect thereto) as
is customary in the case of entities of established reputations engaged in the
same or a similar business and similarly situated.
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Section 10.2. Maintenance of
Properties. The Company will maintain and keep, or cause to be
maintained and kept, its interests in all of its assets constituting Material
tangible personal property in good repair, working order and condition (other
than ordinary wear and tear), so that the business carried on in connection
therewith may be conducted in the ordinary course at all times, provided that this Section
shall not prevent the Company from discontinuing the operation and the
maintenance of any of its assets if such discontinuance is desirable in the
conduct of its business and the Company has concluded that such discontinuance
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
Section 10.4.
Corporate Existence,
etc. The Company will at all times preserve and keep in full
force and effect its corporate existence.
SECTION 11.
NEGATIVE
COVENANTS.
Except
with the prior written consent of the Purchaser, so long as any principal amount
of any of the Notes issued in this Offering is outstanding, the Company
covenants with the Purchaser as follows in this Section 11:
Section 11.1.
Transactions with
Affiliates. The Company will not enter into directly or
indirectly any transaction or group of related transactions (including, without
limitation, the purchase, lease, sale or exchange of Material properties of any
kind or the rendering of any service) with any Affiliate (other than another
Material Subsidiary or the Asset Acquisition), except in the ordinary course and
pursuant to the reasonable requirements of the Company’s business and upon fair
and reasonable terms no less favorable to the Company than would be obtainable
in a comparable arm’s-length transaction with a Person not an
Affiliate.
Section 11.2.
Restricted
Payments. The Company will not make any Restricted Payments,
except: (a) the Company may declare and pay: (i) dividends with respect to
its Equity Interests payable solely in additional shares of its Equity Interests
or Indebtedness and (ii) interest and principal on Indebtedness owed by the
Company to a Subsidiary, and (b) the Company may make distributions pursuant to
and in accordance with stock incentive plans or other compensation plans for
management or employees of the Company and its Subsidiaries.
Section 11.3.
Sale of Assets,
etc. The Company will not make any Transfer of assets, other
than to a wholly owned subsidiary.
Section 12.
Events of Default.
An “Event of Default” shall
exist if any of the following conditions or events shall occur and be
continuing:
(a) the
Company defaults in the payment of any principal at the applicable Redemption
Price, if any, on the Note when the same becomes due and payable, whether at
maturity or at a date fixed for prepayment or by declaration or otherwise;
or
(b) the
Company defaults in the payment of any interest on the Note for more than five
(5) Business Days after the same becomes due and payable; or
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(c) the
Company defaults in the performance of or compliance with any term contained in
Section 8.6 or Section 11 and remains in default after the expiration of a
thirty (30) day cure period; or
(d) the
Company defaults in the performance or compliance in any Material respect with
any other material term herein (other than those referred to in paragraphs (a),
(b) and (c) of this Section 12) and such default is not remedied within
thirty (30) days after the earlier of (i) a Senior Financial
Officer obtaining actual and not constructive knowledge of such default and
(ii) the Company
receiving written notice of such default from any holder of the Note (any such
written notice to be identified as a “notice of default” and to
refer specifically to this paragraph (d) of Section 12);
or
(e) any
representation or warranty made in writing by or on behalf of the Company or by
any officer of the Company in this Agreement, in any Loan Document or in any
writing furnished in connection with the transactions contemplated hereby proves
to have been false or incorrect in any Material respect on the date as of which
made; or
(f) the
Company (i) is generally not paying, or admits in writing its inability to
pay, its debts as they become due, (ii) files, or consents by answer or
otherwise to the filing against it of, a petition for relief or reorganization
or arrangement or any other petition in bankruptcy, for liquidation or to take
advantage of any bankruptcy, insolvency, reorganization, moratorium or other
similar law of any jurisdiction, (iii) makes an assignment for the benefit
of its creditors, (iv) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, (v) is adjudicated as
insolvent or to be liquidated, or (vi) takes corporate action for the
purpose of any of the foregoing; or
(g) a
court or governmental authority of competent jurisdiction enters an order
appointing a custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its property, or
constituting an order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Company, or any such petition
shall be filed against the Company and such petition shall not be dismissed or
stayed pending appeal within ninety (90) days, or are not discharged within
sixty (60) days after the expiration of such stay; or
(h) a
final judgment or judgments for the payment of money aggregating in excess of
US$7,500,000 (to the extent not covered by insurance) are rendered against the
Company and which judgments are not, within ninety (90) days after entry
thereof, bonded, discharged, finally settled or stayed pending appeal, or are
not discharged within sixty (60) days after the expiration of such stay;
or
(i) (i)
this Agreement, the Note, or any other Loan Document ceases to be in full force
and effect (except in accordance with its terms) or is declared null and void or
the validity or enforceability is contested or challenged by Company, any
Affiliate of Company or any of its respective partners or shareholders; or (ii)
Company denies that it has any further liability or obligation under any of the
Loan Documents prior to the indefeasible satisfaction in full of all Obligations
under the Loan Documents.
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SECTION 13.
REMEDIES
ON DEFAULT, ETC.
Section 13.1.
Acceleration.
(a) If
an Event of Default with respect to the Company described in paragraph (f) or
(g) of Section 12 (other than an Event of Default described in clause (i)
of paragraph (f) or described in clause (vi) of paragraph (f) by virtue of the
fact that such clause encompasses clause (i) of paragraph (f)) has occurred, all
the Notes then outstanding shall automatically become immediately due and
payable.
(b) If
any other Event of Default has occurred and is continuing, the Purchaser may at
any time at its option, by notice to the Company, declare the Note then
outstanding to be immediately due and payable.
Upon the
Note becoming due and payable under this Section 13.1, whether
automatically or by declaration, it will forthwith mature and the entire unpaid
principal amount thereof at the applicable Redemption Price, if any, plus all
accrued and unpaid interest thereon (to the full extent permitted by applicable
law), shall all be immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are hereby
waived.
Section 13.2.
Other
Remedies. If any Default or Event of Default has occurred and
is continuing, and irrespective of whether the Note has become or has been
declared immediately due and payable under Section 13.1, the holder thereof
may proceed to protect and enforce its rights by an action at law, suit in
equity or other appropriate proceeding, whether for the specific performance of
any agreement contained herein or in the Note, or for an injunction against a
violation of any of the terms hereof or thereof, or in aid of the exercise of
any power granted hereby or thereby or by law or otherwise.
Section 13.3.
Costs and
Expenses. The Company shall pay all costs and expenses of
amending, administering, implementing, collecting, defending, declaring and
enforcing holder rights under this Agreement, the Note or other instrument or
agreement delivered in connection with any of the Loan Documents, including
searches and filings at all times, and holder’s reasonable attorneys’ fees
(actually incurred, regardless of whether any litigation is commenced or default
is declared and regardless of tribunal or jurisdiction).
Section 13.4.
Rescission. At any
time after the Note has been declared due and payable pursuant to clause (b) or
(c) of Section 13.1, the Purchaser, by written notice to the Company, may
rescind and annul any such declaration and its consequences if (a) the
Company has paid all overdue interest on the Note and all principal at the
applicable Redemption Price, if any, on the Note that is due and payable and is
unpaid other than by reason of such declaration, and all interest on such
overdue principal at the applicable Redemption Price, if any, and (to the extent
permitted by applicable law) any overdue interest in respect of the Note, at the
Default Rate, (b) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 17,
and (c) no judgment or decree has been entered for the payment of any
monies due pursuant hereto or to the Note. No rescission and
annulment under this Section 13.4 will extend to or affect any subsequent
Event of Default or Default or impair any right consequent thereon.
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Section 13.5.
No Waivers or Election
of Remedies, Expenses, etc. No course of dealing and no delay
on the part of the Purchaser in exercising any right, power or remedy shall
operate as a waiver thereof or otherwise prejudice the Purchaser’s rights,
powers or remedies. No right, power or remedy conferred by this
Agreement or by any Note thereof shall be exclusive of any other right, power or
remedy referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise. The Company will pay to the holder of the Note
on demand such further amount as shall be sufficient to cover all costs and
expenses of such holder incurred in any enforcement or collection under this
Section 13, including, without limitation, reasonable attorneys’ fees,
expenses and disbursements actually incurred.
SECTION 14.
REGISTRATION
AND TRANSFER.
The
Company and, by acceptance of the Note, the Purchaser hereby agree that the
following provisions shall govern the registration, sale, assignment, pledge,
transfer, encumbrance or other disposition of the Note.
Section 14.1 Note
Registration. The Company shall keep at its principal office a
register (the “Register”) in which the Company shall enter the name and address
of the registered holder of the Note. References to the “Purchaser”
or “Purchasers” of the Note shall mean the person listed in the Register as the
payee of the Note unless the payee shall have presented the Note to the Company
for transfer and the transferee shall have been entered in the Register as a
subsequent holder, in which case the term shall mean such subsequent
holder. The registered Purchaser of the Note may be treated as the
owner of it for all purposes.
Section 14.2 Disposition.
(a) The
Purchaser may not Transfer the Note, in whole or in part, directly or
indirectly, except in accordance with Section 14.2(b). Any purported
Transfer other than in accordance with the terms hereof and thereof shall be
void and without force or effect.
(b) A
Transfer of the Note shall only be effected by the Purchaser hereof by delivery
of the Note to the Company (with the instrument of assignment provided on the
Note properly completed in accordance with the terms and conditions of the
Note), accompanied by an opinion of counsel, in form and substance, and from
counsel, reasonably satisfactory to the Company to the effect that such Transfer
does not violate the Securities Act or any applicable state or foreign
securities laws, and by such other evidence as the Company may reasonably
require of compliance with the Securities Act and applicable state or foreign
securities laws and with the provisions of the Note, at the Company’s principal
office or at such
other location as the Company shall designate in writing to the Purchaser; provided, however, that such transfer
of the Note shall become effective only upon, and shall not be effective for any
purpose until, the Company has received the Note.
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Section 14.3. Replacement of
Note. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of the Note
(which evidence shall be notice from the Purchaser of such loss, theft,
destruction or mutilation), and upon surrender and cancellation thereof, the
Company, at its own expense, shall execute and deliver in lieu thereof, a new
Note, dated and bearing interest from the date to which interest shall have been
paid on such lost, stolen, destroyed or mutilated Note or dated the date of such
lost, stolen, destroyed or mutilated Note if no interest shall have been paid
thereon, as the case may be.
SECTION
15. PAYMENTS
ON NOTE.
Section 15.1.
Place of
Payment. Subject to Section 15.2, payments of principal
and interest becoming due and payable on the Note shall be made at the principal
office of the Purchaser of the Note. The Purchaser of the Note may at any time,
by notice to the Company, change the place of payment of the Note so long as
such place of payment shall be either the principal office of the Purchaser of
such Note in such jurisdiction or the principal office of a bank or trust
company in such jurisdiction.
Section 15.2.
Home Office
Payment. So long as you or your nominee shall be the Purchaser
of the Note, and notwithstanding anything contained in Section 15.1 or in
the Note to the contrary, the Company will pay all sums becoming due on such
Note for principal and interest by the method and at the address specified for
such purpose below your name in Schedule A, or by such other method or at
such other address as you shall have from time to time specified to the Company
in writing for such purpose, without the presentation or surrender of the Note
or the making of any notation thereon, except that upon written request of the
Company made concurrently with or reasonably promptly after payment or
prepayment in full of the Note, you shall surrender the Note for cancellation,
reasonably promptly after any such request, to the Company at its principal
executive office or at the place of payment most recently designated by the
Company pursuant to Section 15.1.
SECTION 16
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All
representations and warranties contained in the Loan Documents shall survive the
execution and delivery of the Loan Documents and the Note, the purchase by you
of the Note and any partial payment on the Note and shall expire and be of no
further force and effect when all principal, interest and other amounts payable
on the Note shall have been indefeasibly paid in full in accordance with the
provisions thereof. The Loan Documents embody the entire agreement and
understanding between you and the Company and supersede all prior agreements and
understandings relating to the subject matter hereof.
SECTION 17.
AMENDMENT
AND WAIVER.
Section 17.1.
Requirements. This
Agreement and the Note may be amended, and the observance of the Note may be
waived (either retroactively or prospectively), with (and only with) the written
consent of the Company and the Purchaser.
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Section 17.2.
Binding Effect,
etc. Any amendment or waiver consented to as provided in this
Section 17 is binding upon the Purchaser of the Note and upon each future
Purchaser of the Note and upon the Company without regard to whether the Note
has been marked to indicate such amendment or waiver. No such
amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the
Company and the Purchaser of the Note or any delay in exercising any rights
hereunder or under the Note shall operate as a waiver of any rights of the
Purchaser. As used herein, the term “this Agreement” and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
SECTION 18.
NOTICES.
All
notices and communications provided for hereunder shall be in writing and
sent:
(a) by
facsimile transmission if the sender on the same day sends a confirming copy of
such notice by a recognized overnight delivery service (charges prepaid),
or
(b) by
registered or certified mail with return receipt requested (postage prepaid),
or
(c) by
a recognized overnight delivery service (with charges prepaid). Any
such notice must be sent:
(i) if
to you or your nominee, to you or it at the address specified for such
communications in Schedule A, or at such other address as you or it shall
have specified to the Company in writing,
(ii) if
to the Company, to the Company at its address set forth at the beginning hereof
to the attention of the Chief Executive Officer, or at such other address as the
Company shall have specified to the Purchaser of each Note in
writing.
Notices
under this Section 18 will be deemed given only when actually
received.
SECTION 19.
REPRODUCTION
OF DOCUMENTS.
This
Agreement and all documents relating thereto, including, without limitation,
(a) consents, waivers and modifications that may hereafter be executed,
(b) documents received by you at the Closing (except the Notes themselves),
and (c) subject to the provisions of Section 20, financial statements,
certificates and other information previously or hereafter furnished to you, may
be reproduced by you by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to
the extent permitted by applicable law, any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not such
reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not
prohibit the Company or the Purchaser of Note from contesting any such
reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such
reproduction.
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SECTION 20.
CONFIDENTIAL
INFORMATION.
For the
purposes of this Section 20, “Confidential Information”
means information delivered to you or any holder by or on behalf of the Company
or any Subsidiary in connection with the transactions contemplated by or
otherwise pursuant to the Loan Documents that is proprietary in nature and that
was clearly marked or labeled or otherwise adequately identified when received
by you or such Purchaser as being confidential information of the Company or
such Subsidiary, provided that such term does
not include information that (a) was publicly known or otherwise known to
you or such Purchaser prior to the time of such disclosure through no act or
omission by you or any Person authorized to act on your behalf in breach of any
duty of confidentiality, (b) subsequently becomes publicly known through no
act or omission by you or any Person acting on your behalf, (c) otherwise
becomes known to you other than through disclosure by the Company or any
Subsidiary from any Person who has not breached any duty of confidentiality owed
to the Company or any Subsidiary, or (d) concerns or relates to the U.S.
federal income tax treatment or U.S. federal income tax structure of the
transactions contemplated hereby (and you may disclose to any and all persons,
without limitation of any kind, any such information with respect to such U.S.
federal income tax treatment and U.S. federal income tax structure). You will
maintain the confidentiality of such Confidential Information in accordance with
procedures adopted by you in good faith to protect confidential information of
third parties delivered to you and you may only use the Confidential Information
in connection with the transactions contemplated by the Loan Documents,
including, without limitation, the administration, preservation, or enforcement
of your rights relating to your investment represented by your Notes, provided that you may deliver
or disclose Confidential Information to (i) your directors, officers,
employees, agents, attorneys and Affiliates (to the extent such disclosure
reasonably relates to the administration of the investment represented by your
Notes) who are subject to a duty of confidentiality or otherwise agree to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 20, (ii) your financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 20,
(iii) any other Purchaser of any Note who agrees to hold confidential the
Confidential Information substantially in accordance with the terms of this
Section 20, (iv) any Institutional Investor to which you sell or offer to
sell such Note or any part thereof or any participation therein (if such Person
has agreed in writing prior to its receipt of such Confidential Information to
be bound by the provisions of this Section 20), (v) any Person from
which you offer to purchase any security of the Company (if such Person has
agreed in writing prior to its receipt of such Confidential Information to be
bound by the provisions of this Section 20), (vi) any federal or state
regulatory authority having jurisdiction over you, (vii) the National
Association of Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to information about
your investment portfolio, or (viii) any other Person to which such
delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to you,
(x) in response to any subpoena or other legal process, (y) in
connection with any litigation to which you are a party or (z) if an Event
of Default has occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement; provided,
however, prior to disclosing any Confidential Information pursuant to
clauses (vi), (vii) or (viii) (other than in connection with clause (z) of
clause (viii)) you shall (if reasonably practicable under the circumstances and
provided that you are not legally prohibited from doing so) notify the Company
of the proposed disclosure and afford it a reasonable opportunity to seek an
injunction or other protective order against the public release of all or any
portion of such Confidential Information. Each Purchaser of a Note,
by its acceptance of a Note, will be deemed to have agreed to be bound by and to
be entitled to the benefits of this Section 20 as though it were a party to this
Agreement. On reasonable request by the Company in connection with
the delivery to any Purchaser of a Note of information required to be delivered
to such Purchaser under this Agreement or requested by such Purchaser (other
than a Purchaser that is a party to this Agreement or its nominee), such
Purchaser will enter into an agreement with the Company embodying the provisions
of this Section 20.
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SECTION 21.
MISCELLANEOUS.
Section 21.1.
Successors and
Assigns. All covenants and other agreements contained in this
Agreement by or on behalf of any of the parties hereto bind and inure to the
benefit of their respective successors and assigns (including, without
limitation, any subsequent Purchaser of a Note) whether so expressed or
not.
Section 21.2.
Payments Due on
Non-Business Days. Anything in this Agreement or the Notes to
the contrary notwithstanding, any payment of principal or interest on any Note
that is due on a date other than a Business Day shall be made on the next
succeeding Business Day without including the additional days elapsed in the
computation of the interest payable on such next succeeding Business
Day.
Section 21.3. Severability. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 21.4. Construction and
Interpretation. Each covenant contained herein shall be
construed (absent express provision to the contrary) as being independent of
each other covenant contained herein, so that compliance with any one covenant
shall not (absent such an express contrary provision) be deemed to excuse
compliance with any other covenant. Where any provision herein refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be applicable whether such action is taken directly
or indirectly by such Person. All references to immediately available
funds or dollar amounts contained in this Agreement shall mean United States
dollars. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The parties acknowledge and agree that: (i) each
party and its counsel have reviewed the terms and provisions of this Agreement
and have contributed to its revision, (ii) the normal rule of construction, to
the effect that any ambiguities are resolved against the drafting party, shall
not be employed in the interpretation of it, and (iii) the terms and provisions
of this Agreement shall be constructed fairly as to all parties hereto and not
in favor or against any party, regardless of which party was generally
responsible for the preparation of this Agreement. The terms
“herein”, "hereof"" or “hereunder” shall refer to the entire Agreement; all
references to Sections shall refer to sections of this Agreement; “including”
means “and including without limitation.” Words importing the
singular also include the plural and vice versa.
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Section 21.5.
Counterparts. This
Agreement may be executed in any number of counterparts, each of which shall be
an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies
hereof, each signed by less than all, but together signed by all, of the parties
hereto.
Section 21.6.
Governing
Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California, excluding choice of law principles of the law of such
locale that would require the application of the laws of a jurisdiction other
than such locale.
Section 21.7
Submission to
Jurisdiction. For the purposes of any action or proceeding
involving this Agreement, the Notes or any other agreement or document referred
to herein or therein, the Company hereby expressly submits to the nonexclusive
jurisdiction of all courts sitting in the State of California and consents that
any order, process, notice of motion or other application to or by any of said
courts or a judge thereof may be served within or without such court’s
jurisdiction by registered mail or by personal service, provided that a
reasonable time for appearance is allowed. The Company hereby waives,
and shall cause its Subsidiaries to irrevocably waive any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement, the Notes or any other agreement
or document referred to herein or therein brought in any court sitting in the
State of New York and hereby further irrevocably waives any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION
22. DEFINED
TERMS
As used
herein, the following terms have the respective meanings set forth below or set
forth in the Section hereof following such term:
“Affiliate” means, at any
time, and with respect to any Person, (a) any other Person that at such
time directly or indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, such first Person, and
(b) any Person beneficially owning or holding, directly or indirectly, 10%
or more of any class of voting or equity interests of the Company or any
Subsidiary or any corporation of which the Company and its Subsidiaries
beneficially own or hold, in the aggregate, directly or indirectly, 10% or more
of any class of voting or equity interests. As used in this
definition, “Control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Unless the
context otherwise clearly requires, any reference to an “Affiliate” is a reference to
an Affiliate of the Company.
Page 21
of 29
“This Agreement” means this
Amended and Restated Convertible Note Purchase Agreement.
“Business Day” means any day
other than a Saturday, a Sunday or a day on which commercial banks in New York
City are required or authorized to be closed.
“Closing” is defined in
Section 3.
“Closing Date” is defined in
Section 3.
“Code” means the US Internal
Revenue Code of 1986, as amended from time to time, and the rules and
regulations promulgated thereunder from time to time.
“Common Stock” or “Common Shares” means the common
stock, par value $0.001 per share, of the Company.
“Company” means China Tel
Group Inc., a Nevada corporation.
“Confidential Information” is
defined in Section 20.
“Consolidated Assets” means
the total assets of the Company and its Subsidiaries which would be shown as
assets on a consolidated balance sheet of the Company and its Subsidiaries
prepared in accordance with applicable GAAP, after eliminating all amounts
properly attributable to minority interests, if any, in the stock and surplus of
Subsidiaries.
"Conversion Price" has the
meaning set forth in Section 9.2.
“Default” means an event or
condition the occurrence or existence of which would, with the lapse of time or
the giving of notice or both, become an Event of Default.
“Distribution” means, in
respect of any corporation, association or other business entity:
(a) dividends
or other distributions or payments on capital stock or other Equity Interests of
such corporation, association or other business entity (except distributions in
such stock or other Equity Interests or Indebtedness as permitted by the
Agreement); and
(b) the
redemption or acquisition of such stock or other Equity Interests or of
warrants, rights or other options to purchase such stock or other Equity
Interests (except when solely in exchange for such stock or other Equity
Interests or Indebtedness as permitted by the Agreement) unless made,
contemporaneously, from the net proceeds of a sale of such stock or other Equity
Interests.
“Dollar” or “$” means lawful money of the
United States of America.
“Environmental Laws” means
any and all federal, state, provincial, local, and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
Page 22
of 29
“Equity Interests” means
shares of capital stock, partnership interests, membership interests in a
limited liability company, beneficial interests in a trust or other equity
ownership interests in a Person, and any warrants, options or other rights
entitling the holder thereof to purchase or acquire any such Equity
Interest.
“ERISA Affiliate” means any
trade or business (whether or not incorporated) that is treated as a single
employer together with the Company under section 414 of the
Code.
“Event of Default” is defined
in Section 13.
“Exchange Act” means the US
Securities Exchange Act of 1934.
Page 23
of 29
“Fair Market Value” means, at
any time and with respect to any property, the sale value of such property that
would be realized in an arm’s-length sale at such time between an informed and
willing buyer and an informed and willing seller (neither being under a
compulsion to buy or sell).
“Foreign Pension Plan” means
any plan, fund (including, without limitation, any superannuation fund but
excluding any governmental plan or program requiring the mandatory payment of
social insurance taxes or similar contributions to a governmental fund with
respect to the wages of an employee) or other similar program established or
maintained outside the United States of America by the Company or any ERISA
Affiliate for the benefit of employees of the Company or any ERISA Affiliate
residing outside the United States of America, which plan, fund or other similar
program provides, or results in, retirement income, a deferral of income in
contemplation of retirement or payments to be made upon termination of
employment excluding contractual notice payments, and which plan is not subject
to ERISA or the Code.
“Fundamental Change” means,
with respect to the Company, the occurrence of any transaction to which the
Company is a party (including without limitation any recapitalization or
reclassification of the Common Shares (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination of the Ordinary), any consolidation of the Company
with, or merger of the Company into, any other person, any merger of another
person into the Company (other than a merger which does not result in a
reclassification, conversion, exchange or cancellation of outstanding Common
Shares of the Company) or any sale or transfer of all or substantially all of
the assets of the Company or any compulsory share exchange) pursuant to which
all Common Shares are converted into or exchangeable for the right to receive
other securities, cash or other property.
“GAAP” means generally
accepted accounting principles as in effect from time to time in the stated
jurisdiction.
“Governmental
Authority” means
Page 24
of 29
(a) the
governments of
(i) the
United States of America, or the United Kingdom or any State, province or other
political subdivision thereof, or
(ii) any
jurisdiction in which the Company conducts all or any part of its business, or
which asserts jurisdiction over any properties of the Company, or
(b) any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government, including any stock
exchange.
“Purchaser” is defined in
Section 14.1.
“Indebtedness” with respect
to any Person means, at any time, without duplication,
(a) its
liabilities for the deferred purchase price of property acquired by such Person
(excluding: (i) accounts payable arising in the ordinary course of business
but including all liabilities created or arising under any conditional sale or
other title retention agreement with respect to any such property, and
(ii) where such deferred purchase price is in the form of
equity);
(b) all
liabilities appearing on its balance sheet in accordance with GAAP in respect of
capital leases;
(c) all
liabilities for borrowed money secured by any Lien with respect to any property
owned by such Person (whether or not it has assumed or otherwise become liable
for such liabilities);
(d) all
its liabilities in respect of letters of credit or instruments serving a similar
function issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed money) other
than with respect to letters of credit which are 100% cash
collateralized;
(e) interest
rate, currency or commodity (including crude oil and natural gas) swaps, caps,
collars, forwards, futures or derivatives transactions or similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency of such Person; and
(f) any
Guaranty of such Person with respect to liabilities of a type described in any
of clauses (a) through (f) hereof.
Indebtedness
of any Person shall include all obligations of such Person of the character
described in clauses: (a) through (f) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed to
be extinguished under GAAP.
Page 25
of 29
“Institutional Investor”
means (a) any Purchaser (including beneficial owners of the Notes), or
(b) any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any insurance
company, any broker or dealer, or any other similar financial institution or
entity, regardless of legal form.
“Knowledge” means,
either:
(i) in
respect of the Company, the actual and not constructive knowledge of any
officers of the Company or any Subsidiary or any employees of the Company that
report directly to any officers of the Company or any Material Subsidiary;
or
(ii) in
respect of the Purchaser, the actual and not constructive knowledge of the
officer of the Purchaser with responsibility for making or administering of the
investment in the Notes.
“Legal Holiday” means any day
on which commercial banks in New York City, NY are required or authorized to be
closed.
“Loan Documents” means this
Agreement, the Note, and all other agreements, certificates, documents,
instruments and writings at any time delivered in connection herewith or
therewith, all as amended, modified, restated or reassigned from time to
time.
“Material” means material in
relation to the business, operations, financial condition, assets or properties
of the Company taken as a whole.
“Material Adverse Effect”
means a material adverse effect on (a) the business, operations, financial
condition, assets or properties of the Company taken as a whole, (b) the
ability of the Company to perform its obligations under the Loan Documents to
which it is a party or (c) the validity or enforceability of any of the
Loan Documents.
“Note” is defined in
Section 1.
“Obligations” means and
include all Indebtedness, liabilities, obligations, covenants, duties and
amounts owing or to be owing by Company to Purchasers of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, arising directly or indirectly, under any Loan Documents, and all
renewals, extensions and/or rearrangements of any of the
foregoing. The term includes, but is not limited to, all interest,
reasonable charges, expenses, consultants’ and attorneys’ fees and any other sum
chargeable to Company under any of the Loan Documents.
“Officer’s Certificate” means
a certificate of a Senior Financial Officer or of any other officer of the
Company whose responsibilities extend to the subject matter of such
certificate.
Page 26
of 29
“Payment Default” means an
event of default which occurs and is continuing pursuant to Sections 12(a) or
12(b).
“Person” means an individual,
partnership, corporation, limited liability company, association, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
“Register” is defined in
Section 14.1.
“Restricted Payments” means
any Distribution in respect of the Company, including, without limitation, any
Distribution resulting in the acquisition by the Company of securities which
would constitute treasury stock.
“SEC” means the United States
Securities and Exchange Commission or any other successor Governmental
Authority.
“Securities” means the Note
and the Shares.
“Securities Act” means the
Securities Act of 1933.
“Securities Laws” means the
Securities Act and all other federal, provincial or state securities or “blue
sky” laws or foreign securities laws and all rules or regulations promulgated
thereunder by any Governmental Authority, each as amended from time to
time.
“Shares” means shares of the
Company’s Series A Common Stock.
“Senior Financial Officer”
means the chief financial officer, principal accounting officer, treasurer or
comptroller of the Company.
“Subsidiary” means, as to any
Person, any corporation, association or other business entity in which such
Person or one or more of its Subsidiaries or such Person and one or more of its
Subsidiaries owns sufficient equity or voting interests to enable it or them (as
a group) ordinarily, in the absence of contingencies, to elect a majority of the
directors (or Persons performing similar functions) of such entity, and any
partnership of which the Company or a Subsidiary is the general
partner.
“Transfer” or “Transferred” means, with
respect to any Person, any transaction in which such Person sells, conveys,
transfers or leases (as lessor) any of its property having a Fair Market Value
of greater than US $5 million.
The
Company will be entitled to rely on delivery by facsimile of an executed copy of
this Agreement, including the completed attachments hereto, and acceptance by
the Company of such facsimile copy will be legally effective to create a valid
and binding agreement between the Company and the Purchaser in accordance with
the terms hereof.
Page 27
of 29
Signature
of Purchaser (on its own behalf and, if applicable, on behalf of each principal
for whom it is contracting hereunder).
_______________________________________________________
(Signature
of Purchaser)
_______________________________________________________
(Full
Name of Purchaser - please print)
_______________________________________________________
(Authorized
Signature)
_______________________________________________________
(Name and
Official Capacity - please print)
CONFIRMATION
AND ACCEPTANCE
This
Amended and Restated Convertible Note Purchase Agreement is confirmed and
accepted by the CHINA
TEL GROUP, INC.
DATED as of the _____________
day of ,
2008.
Page 28
of 29
SCHEDULE
A
INFORMATION
RELATING TO PURCHASER
|
NAME
AND ADDRESS OF PURCHASER
|
PRINCIPAL
AMOUNT OF
NOTES
TO BE PURCHASED
|
|
_____________________________________________
_____________________________________________
_____________________________________________
Attn:
Telephone
No.:
Facsimile
No.:
|
US$ U
|
|
(1) All
payments by wire transfer of immediately available funds to:
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
|
|
|
(2) All
communications and notices of payments and written confirmations of such
wire transfers to:
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
|
|
|
(3) Details
of Nominee (if applicable):
_____________________________________________
_____________________________________________
_____________________________________________
_____________________________________________
|
SCHEDULE A
Page 1
of 1
SCHEDULE
B
U.S.-Accredited
Investor Certificate
Defined
terms used but not defined herein hall have the meaning ascribed to such terms
in the Amended and Restated Convertible Note Purchase Agreement (for U.S.
Purchasers) (the "Note Purchase
Agreement"), dated November 17, 2008, between China Tel Group Inc. (the
"Company") and each
Purchaser of Notes of the Company outside of Canada and the United States (the
"Offering").
In
connection with the execution of the Note Purchase Agreement to which this
Schedule B is attached, the Purchaser represents and warrants to the Company
that:
|
(a)
|
It
has such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of an investment in the
Securities and it is able to bear the economic risk of loss of its entire
investment;
|
|
(b)
|
The
Company has provided to it the opportunity to ask questions and receive
answers concerning the terms and conditions of the Offering and it has had
access to such information concerning the Company as it has considered
necessary or appropriate in connection with its investment decision to
acquire the Shares;
|
|
(c)
|
It
is acquiring the Securities for its own account, for investment purposes
only and not with a view to any resale, distribution or other disposition
of the Securities in violation of the United States securities
laws;
|
|
(d)
|
It
understands the Securities have not been and will not be registered under
the U.S. Securities Act of 1933 (the “U.S. Securities Act”) or the
securities laws of any state of the United States and that the sale
contemplated hereby is being made in reliance on an exemption from such
registration requirement provided by Rule 506 of Regulation
D. It also understands that it will be required to furnish
certain information about it and its holdings of the Company’s securities
as part of the information that will be included in any registration
statement with respect to the
Securities;
|
|
(e)
|
The
Purchaser acknowledges and agrees with the Company that the Company shall
refuse to register any transfer of the Securities not made in accordance
with the provisions of Regulation D, pursuant to registration under the
U.S. Securities Act, or pursuant to an available exemption from
registration under the U.S. Securities
Act;
|
|
(f)
|
It
has not purchased the Securities as a result of any form of general
solicitation or general advertising, including advertisements, articles,
notices or other communications published in any newspaper, magazine or
similar media or broadcast over radio, or television, or other form of
telecommunications, including electronic display, or any seminar or
meeting whose attendees have been invited by general solicitation or
general advertising;
|
SCHEDULE
B
Page 1 of
5
|
(g)
|
If
it decides to offer, sell or otherwise transfer any of the Securities, it
will not offer, sell or otherwise transfer any of such Securities directly
or indirectly, unless:
|
|
|
(i)
|
the
sale is to the Company;
|
|
|
(ii)
|
the
sale is made pursuant to the exemption from the registration requirements
under the U.S. Securities Act provided by Rule 144 thereunder and in
accordance with any applicable state securities or “blue sky”
laws;
|
|
|
(iii)
|
the
Securities are sold in a transaction that does not require registration
under the U.S. Securities Act or any applicable state laws and regulations
governing the offer and sale of securities, and it has prior to such sale
furnished to the Company an opinion of counsel reasonably satisfactory to
the Company to the effect that such transaction does not require
registration; or
|
|
|
(iv)
|
the
sale is made pursuant to an effective registration statement filed under
the U.S. Securities Act.
|
|
(h)
|
The
Securities are “restricted securities” as that term is defined in Rule 144
under the U.S. Securities Act, and the certificates representing the
Shares, as well as all certificates issued in exchange for or in
substitution of the foregoing, until such time as is no longer required
under the applicable requirements of the U.S. Securities Act or applicable
state securities laws, will be subject to the terms of and bear, on the
face of such certificate, a legend in substantially the following
form:
|
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE “U.S. SECURITIES ACT”) AND ARE
BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT FOUND IN REGULATION D PROMULGATED BY THE U.S. SECURITIES
AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF FOR VALUE EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED THEREUNDER, OR
PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS INVOLVING
THESE AND ANY UNDERLYING SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE
WITH THE U.S. SECURITIES ACT.
|
(i)
|
It
understands and agrees that there may be material tax consequences to the
Purchaser of an acquisition or disposition of the Securities, or any
portion thereof. The Company gives no opinion and makes no
representation with respect to the tax consequences to the Purchaser under
United States, state, local or foreign tax law of the undersigned’s
acquisition or disposition of such
Securities;
|
|
(j)
|
It
understands and agrees that the unaudited financial statements of the
Company have been prepared in accordance with United States generally
accepted accounting principles;
|
SCHEDULE
B
Page 2 of
5
|
(k)
|
It
consents to the Company making a notation on its records or giving
instructions to any transfer agent of the Company in order to implement
the restrictions on transfer set forth and described in this Certification
and the Note Purchase Agreement of which this Certification is a
part;
|
|
(l)
|
if
an individual, it is a resident of the state or other jurisdiction listed
in its address on the Note Purchase Agreement, or if the Purchaser is not
an individual, the office of the Purchaser at which the Purchaser received
and accepted the offer to purchase the Securities is the address listed on
Schedule A to the Note Purchase
Agreement;
|
|
(m)
|
the
Purchaser has properly complied with and duly executed this Certification
for U.S. Securities Law Compliance and confirms the truth and accuracy of
all statements made by the Purchaser in such certificate;
and
|
|
(n)
|
The
Purchaser, by initialing one of the categories below, represents and
warrants to the Company that it is an “accredited investor” as defined in
Regulation D (please place your initials on the appropriate line(s); if no
categories are applicable, please do not place your initials beside any
category):
|
|
______
|
Category
1.
|
A
bank, as defined in Section 3(a)(2) of the U.S. Securities Act, whether
acting in its individual or fiduciary capacity; or
|
|
______
|
Category
2.
|
A
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or
fiduciary capacity; or
|
|
______
|
Category
3.
|
A
broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of
1934; or
|
|
Category
4.
|
An
insurance company as defined in Section 2(13) of the U.S. Securities Act;
or
|
|
|
______
|
Category
5.
|
An
investment company registered under the Investment Issuer Act of
1940; or
|
|
______
|
Category
6.
|
A
business development company as defined in Section 2(a)(48) of the Investment Issuer Act of
1940;
or
|
SCHEDULE
B
Page 3 of
5
|
______
|
Category
7.
|
A
small business investment company licensed by the U.S. Small Business
Administration under Section 301(c) or (d) of the Small Business Investment Act
of 1958; or
|
|
______
|
Category
8.
|
A
plan established and maintained by a state, its political subdivision or
any agency or instrumentality of a state or its political subdivisions,
for the benefit of its employees, with assets in excess of US$5,000,000;
or
|
|
______
|
Category
9.
|
An
employee benefit plan within the meaning of the Employee Retirement Income
Security Act of 1974 in which the investment decision is made by a
plan fiduciary, as defined in Section 3(21) of such Act, which is either a
bank, savings and loan association, insurance company or registered
investment advisor, or an employee benefit plan with total assets in
excess of US$5,000,000 or, if a self-directed plan, the investment
decisions are made solely by persons who are accredited investors;
or
|
|
______
|
Category
10.
|
A
private business development company as defined in Section 202(a)(22) of
the Investment Advisors
Act of 1940; or
|
|
Category
11.
|
An
organization described in Section 501(c)(3) of the Internal Revenue Code,
a corporation, a Massachusetts or similar business trust, or a
partnership, not formed for the specific purpose of acquiring the
Securities, with total assets in excess of US$5,000,000;
or
|
|
|
______
|
Category
12.
|
A
director, executive officer or general partner of the company;
or
|
|
______
|
Category
13.
|
A
natural person whose individual net worth, or joint net worth with that
person’s spouse, at the time of this purchase exceeds US$1,000,000;
or
|
SCHEDULE
B
Page 4
of 5
|
______
|
Category
14.
|
A
natural person who had an individual income in excess of US$200,000 in
each year of the two most recent years or joint income with that person’s
spouse in excess of US$300,000 in each of those years and has a reasonable
expectation of reaching the same income level in the current year;
or
|
|
______
|
Category
15.
|
A
trust, with total assets in excess of US$5,000,000, not formed for the
specific purpose of acquiring the Shares offered, whose purchase is
directed by a sophisticated person as described in SEC Rule 506(b)(2)(ii);
or
|
|
______
|
Category
16.
|
An
entity in which each of the equity owners meets the requirements of one of
the above ca
|
_________________________________
Date
_________________________________
Duly
authorized signatory for Purchaser
_________________________________
(Print
name of Purchaser)
SCHEDULE
B
Page 5
of 5
SCHEDULE
C
Non-U.S.
Person Certificate
|
|
Dated
__________________, 2008
|
China
Tel Group, Inc.
c/▇
▇▇▇▇▇▇▇, Cron & Jasper, PLC
Four
Venture Plaza Suite 390
Irvine,
Ca. 92618
Defined
terms used but not defined herein hall have the meaning ascribed to such terms
in the Convertible Note Purchase Agreement (for Purchasers outside of the United
States) (the "Amended and Restated Convertible Note Purchase
Agreement"), dated November 17, 2008, between China Tel Group, Inc., a
Nevada corporation (the "Company") and each Purchaser
of Notes of the Company outside of the United States (the "Shares").
1. The
undersigned hereby represents, warrants and certifies that:
|
(a)
|
it
is not a "U.S. person" (as such term is defined by Rule 902 of Regulation
S under the U.S. Securities Act) and is not acquiring the Shares, directly
or indirectly, for the account or benefit of any U.S.
person.
|
Rule 902
under the U.S. Securities Act, defines a "U.S. person" as:
|
|
(A)
|
Any
natural person resident in the United
States;
|
|
|
(B)
|
Any
partnership or corporation organized or incorporated under the laws of the
United States;
|
|
|
(C)
|
Any
estate of which any executor or administrator is a U.S.
person;
|
|
|
(D)
|
Any
trust of which any trustee is a U.S.
person;
|
|
|
(E)
|
Any
agency or branch of a foreign entity located in the United
States;
|
|
|
(F)
|
Any
non-discretionary account or similar account (other than an estate or
trust) held by a dealer or other fiduciary for the benefit or account of a
U.S. person;
|
|
|
(G)
|
Any
discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary organized, incorporated, or (if an
individual) resident in the United States;
and
|
SCHEDULE
C
Page 1 of
5
|
|
(H)
|
Any
partnership or corporation if:
|
|
|
(1)
|
organized
or incorporated under the laws of any foreign jurisdiction;
and
|
|
|
(2)
|
formed
by a U.S. person principally for the purpose of investing in securities
not registered under the Securities Act, unless it is organized or
incorporated, and owned, by accredited investors (as defined in Rule
501(a) under the Securities Act) who are not natural persons, estates or
trusts.
|
The
following are not "U.S. persons":
|
|
(A)
|
Any
discretionary account or similar account (other than an estate or trust)
held for the benefit or account of a non-U.S. person by a dealer or other
professional fiduciary organized, incorporated, or (if an individual)
resident in the United States;
|
|
|
(B)
|
Any
estate of which any professional fiduciary acting as executor or
administrator is a U.S. person if:
|
|
|
(1)
|
An
executor or administrator of the estate who is not a U.S. person has sole
or shared investment discretion with respect to the assets of the estate;
and
|
|
|
(2)
|
The
estate is governed by foreign law;
|
|
|
(C)
|
Any
trust of which any professional fiduciary acting as trustee is a U.S.
person, if a trustee who is not a U.S. person has sole or shared
investment discretion with respect to the trust assets, and no beneficiary
of the trust (and no settlor if the trust is revocable) is a U.S.
person;
|
|
|
(D)
|
An
employee benefit plan established and administered in accordance with the
law of a country other than the United States and customary practices and
documentation of such country;
|
|
|
(E)
|
Any
agency or branch of a U.S. person located outside the United States
if:
|
|
|
(1)
|
The
agency or branch operates for valid business reasons;
and
|
|
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(2)
|
The
agency or branch is engaged in the business of insurance or banking and is
subject to substantive insurance or banking regulation, respectively, in
the jurisdiction where located; and
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SCHEDULE
C
Page 2 of
5
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(F)
|
The
International Monetary Fund, the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development
Bank, the African Development Bank, the United Nations, and their
agencies, affiliates and pension plans, and any other similar
international organizations, their agencies, affiliates and pension
plans.
|
|
(b)
|
the
offer and sale of the Shares was made in an "offshore transaction" (as
defined under Regulation S under the U.S. Securities Act), in
that:
|
|
|
(i)
|
the
undersigned was outside the United States at the time the buy order for
such Shares was originated; and
|
|
|
(ii)
|
the
offer to sell the Shares was not made to the undersigned in the United
States.
|
|
(c)
|
the
transaction (i) has not been pre-arranged with a purchaser located inside
of the United States or who is a U.S. person, and (ii) is not part of a
plan or scheme to evade the registration requirements of the U.S.
Securities Act.
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2.The
undersigned hereby covenants that:
|
|
(a)
|
during
the period prior to one year after the Closing (the "Restricted Period") it
will not engage in hedging transactions with regard to the Shares unless
such transactions are made in compliance with the U.S. Securities
Act;
|
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(b)
|
if
it decides to offer, sell or otherwise transfer any of the Shares, it will
not offer, sell or otherwise transfer any of such Shares directly or
indirectly, unless:
|
|
|
(i)
|
the
sale is to the Company;
|
|
|
(ii)
|
the
sale is made outside the United States in a transaction meeting the
requirements of Regulation S under the U.S. Securities Act and in
compliance with applicable local laws and regulations; provided, however, that
during the period prior to the expiration of the Restrictive Period no
sale may be made to any U.S. person or for the account or benefit of a
U.S. person (other than a distributor) and all purchasers of such Shares
will be required to execute and deliver to the Company a certificate
substantially in the form hereof;
|
|
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(iii)
|
the
sale is made in the United States pursuant to the exemption from the
registration requirements under the U.S. Securities Act provided by Rule
144 thereunder and in accordance with any applicable state securities or
"blue sky" laws and the purchaser has prior to such sale furnished to the
Company an opinion of counsel reasonably satisfactory to the Company to
the effect that such transaction does not require registration pursuant to
Rule 144 under the U.S. Securities
Act;
|
|
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(iv)
|
the
Shares are sold in the United States in a transaction that does not
require registration under the U.S. Securities Act or any applicable state
laws and
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SCHEDULE
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Page 3 of
5
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(v)
|
regulations
governing the offer and sale of securities, and it has prior to such sale
furnished to the Company an opinion of counsel reasonably satisfactory to
the Company to the effect that such transaction does not require
registration; or
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(vi)
|
the
sale is made in the United States pursuant to an effective registration
statement filed under the U.S. Securities
Act.
|
|
|
3.The
undersigned acknowledges and agrees
that:
|
|
(a)
|
the
Shares are and will be "restricted securities" as that term is defined in
Rule 144 under the U.S. Securities Act, and the certificates representing
the Shares, as well as all certificates issued in exchange for or in
substitution of the foregoing, until such time as is no longer required
under the applicable requirements of the U.S. Securities Act or applicable
state securities laws, will be subject to the terms of and bear, on the
face of such certificate, a legend in substantially the following
form:
|
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE "U.S. SECURITIES ACT") OR ANY
STATE SECURITIES LAWS, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT. THESE SECURITIES
ARE RESTRICTED SECURITIES (AS DEFINED UNDER RULE 144 UNDER THE U.S. SECURITIES
ACT) AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF FOR VALUE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S PROMULGATED UNDER THE U.S. SECURITIES ACT, PURSUANT TO
REGISTRATION UNDER THE U.S. SECURITIES ACT, OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION THEREUNDER.
DURING
THE ONE YEAR PERIOD OF TIME FOLLOWING THE COSING (THE "RESTRICTED PERIOD"), THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD, DIRECTLY
OR INDIRECTLY WITHIN THE UNITED STATES, TO A U.S. PERSON (AS DEFINIED IN
REGULATION S UNDER THE U.S. SECURITIES ACT), OR FOR THE ACOUNT OR BENEFIT OF A
U.S. PERSON, EXCEPT PURSUANT TO REGISTRATION UNDER THE U.S. SECURITIES ACT, OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION THEREUNDER. DURING THE
RESTRICTED PERIOD HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE
CONDUCTED UNLESS SUCH TRANSACTIONS ARE MADE IN COMPLIANCE WITH THE U.S.
SECURITES ACT. THIS PARAGRAPH SHALL HAVE NO FURTHER EFFECT SUBSEQUENT
TO THE EXPIRATION OF THE RESTRICTED PERIOD AND THEREAFTER MAY BE
REMOVED.
|
(b)
|
the
Company will refuse to register any sale of Shares made in breach of the
provisions hereof.
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SCHEDULE
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Page 4 of
5
|
(c)
|
the
Company may make a notation on its records or give instructions to its
registrar(s) and transfer agent(s) in order to implement the restrictions
on transfer set forth and described
herein.
|
|
(d)
|
the
addressees of this certificate and others will rely upon the truth and
accuracy of the foregoing acknowledgements, representations, warranties
and agreements, and irrevocably authorizes the addressees of this
certificate to produce the same or a copy thereof to any interested party
in any administrative or legal proceeding or official enquiry with respect
to the matters set forth herein. The undersigned further agrees that if
any of the acknowledgements, representations, warranties or agreements
made herein is no longer accurate, it shall promptly notify the
Company.
|
|
_____________________________________
Print
name of Purchaser
By:
Signature
_____________________________
Title
_____________________________________
(please
print name of individual whose signature
appears
above, if different from name of
purchaser
printed above)
|
SCHEDULE
C
Page 5 of
5
EXHIBIT
A
FORM
OF CONVERTIBLE NOTE
EXHIBIT
A
EXHIBIT
B
NOTICE
OF ELECTION TO REDEEM
PURSUANT
TO SECTION 8.2 OF
AMENDED
AND RESTATED CONVERTIBLE NOTE PURCAHSE AGREEMENT
TO CHINA
TEL GROUP, INC.:
The
undersigned Purchaser of this Note hereby irrevocably exercises the option to
call for the redemption of this Note in accordance with the terms of the Amended
and Restated Convertible Note Purchase Agreement, and directs that China Tel
Group, Inc. to pay to the Purchaser all outstanding principal and interest
(calculated on the Increased Outstanding Balance) due as of the date of payment
within Ninety (90) days of the delivery of this Notice to the
Company.
|
_______________________________________
Signature
(Use
exact name of Purchaser as shown on this
Note)
|
Dated: ,
2___
Signature
Guaranteed
EXHIBIT
B
EXHIBIT
C
NOTICE
OF ELECTION TO CONVERT
PURSUANT
TO SECTION 9.1 OF
AMENDED
AND RESTATED CONVERTIBLE NOTE PURCAHSE AGREEMENT
TO CHINA
TEL GROUP, INC.:
The
undersigned Purchaser of this Note hereby irrevocably exercises the option to
convert this Note into Common Shares of CHINA TEL GROUP, INC. in accordance with
the terms of this Note, and directs that the shares and the Common Shares
issuable and deliverable upon the conversion be issued and delivered to the
Purchaser hereof unless a different name has been indicated below. If
shares are to be issued in the name of a person other than the Purchaser, the
Purchaser will pay all transfer taxes payable with respect thereto.
|
_______________________________________
Signature
(Use
exact name of Purchaser as shown on this
Note)
|
Dated: ,
2___
Signature
Guaranteed
Fill in
for name in which Shares are to be issued:
(Please
print name and address, including zip code)
Social
Security or other Taxpayer Identification Number
EXHIBIT
C