SECURITIES PURCHASE AGREEMENT
Exhibit 99.2
SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of October 31, 2006, by and among
Qiao Xing Universal Telephone, Inc., a company incorporated under the laws of the British Virgin
Islands, with headquarters located at Qiao Xing Science Industrial Park, Xxxx Xxxx, Huizhou City,
Guangdong, People’s Republic of China, 516023, (the “Company”), and the investors listed on the
Schedule of Buyers attached hereto (individually, a “Buyer” and collectively, the “Buyers”).
WHEREAS:
A. The Company and each Buyer desire to enter into this transaction to purchase the Purchased
Shares (as defined below) set forth herein pursuant to a currently effective shelf registration
statement on Form F-3, which has at least $30,000,000 in unallocated securities registered
thereunder (Registration Number 333-120668) (the “Registration Statement”), which Registration
Statement has been declared effective in accordance with the Securities Act of 1933, as amended
(the “1933 Act”), by the United States Securities and Exchange Commission (the “SEC”).
B. Each Buyer wishes to purchase, and the Company wishes to sell, upon the terms and
conditions stated in this Agreement, (i) that aggregate number of shares of common stock, par value
$0.001 per share, of the Company (the “Common Stock”), set forth opposite such Buyer’s name in
column (3) on the Schedule of Buyers (which aggregate amount for all Buyers together shall be
2,000,000 shares of Common Stock and shall collectively be referred to herein as the “Purchased
Shares”) and (ii) a warrant representing the right to acquire initially up to that number of
additional shares of Common Stock set forth opposite such Buyer’s name in column (4) on the
Schedule of Buyers (which aggregate amount for all Buyers together shall be initially 400,000
shares of Common Stock and shall collectively be referred to herein as the “Warrants”), in
substantially the form attached hereto as Exhibit A (as exercised, collectively, the
“Warrant Shares”).
C. The Purchased Shares, the Warrants and the Warrant Shares are collectively referred to
herein as the “Securities”.
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF PURCHASED SHARES AND WARRANTS.
(a) Purchase of Purchased Shares and Warrants.
Subject to the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7 below,
the Company shall issue and sell to each Buyer, and each Buyer severally, but not jointly, agrees
to purchase from the Company on the Closing Date (as defined below) (i) the number of Purchased
Shares as is set forth opposite such Buyer’s name in column (3) on the Schedule of Buyers and (ii)
Warrants to acquire initially up to that number of Warrant Shares as is set forth opposite such
Buyer’s name in column (4) on the Schedule of Buyers (the
“Closing”). The Closing shall occur on the Closing Date at the offices of Xxxxxxx Xxxx &
Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(b) Purchase Price. The purchase price for each Purchased Share and related Warrant
to be purchased by each Buyer at the Closing shall be $12.00 (the “Purchase Price”).
(c) Closing Date. The date and time of the Closing (the “Closing Date”) shall be
10:00 a.m., New York City Time, on the third Business Day after execution and delivery of this
Agreement, after notification of satisfaction (or waiver) of the conditions to the Closing set
forth in Sections 6 and 7 below (or such other date as is mutually agreed to by the Company and
each Buyer). As used herein, “Business Day” means any day other than Saturday, Sunday or other day
on which commercial banks in Xxx Xxxx xx Xxx Xxxx, Xxxx Xxxx or China are authorized or required by
law to remain closed.
(d) Form of Payment. On the Closing Date, (i) each Buyer shall pay its Purchase Price
to the Company for the Purchased Shares and Warrants to be issued and sold to such Buyer at the
Closing, by wire transfer of immediately available funds in accordance with the Company’s written
wire instructions, and (ii) the Company shall (A) cause Computershare Trust Company, Inc., the
Company’s transfer agent (the “Transfer Agent”) through the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer Program, to credit such aggregate number of Purchased Shares that
such Buyer is purchasing as is set forth opposite such Buyer’s name in column (3) of the Schedule
of Buyers to such Buyer’s or its designee’s balance account with DTC through its Deposit Withdrawal
Agent Commission system and (B) deliver to each Buyer a Warrant pursuant to which such Buyer shall
have the right to acquire such number of Warrant Shares as is set forth opposite such Buyer’s name
in column (4) of the Schedule of Buyers, duly executed on behalf of the Company and registered in
the name of such Buyer.
2. REPRESENTATIONS AND WARRANTIES OF EACH BUYER.
Each Buyer represents and warrants with respect to only itself that:
(a) Organization; Authority. Such Buyer is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization with the
requisite power and authority to enter into and to consummate the transactions contemplated by the
applicable Transaction Documents (as defined below) and otherwise to carry out its obligations
thereunder. The execution, delivery and performance by such Buyer of the transactions contemplated
by this Agreement has been duly authorized by all necessary action on the part of such Buyer. This
Agreement has been duly executed by such Buyer, and when delivered by such Buyer in accordance with
the terms hereof, each will constitute the valid and legally binding obligation of such Buyer,
enforceable against it in accordance with its terms, except (a) as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights
generally, (b) as enforceability of any indemnification and contribution provisions may be limited
under the federal and state securities laws and public policy, and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding therefor may be brought.
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(b) No Conflicts. The execution, delivery and performance by such Buyer of this
Agreement and the consummation by such Buyer of the transactions contemplated hereby will not (i)
result in a violation of the organizational documents of such Buyer or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which such Buyer is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment or decree (including federal
and state securities laws) applicable to such Buyer, except in the case of clauses (ii) and (iii)
above, for such conflicts, defaults, rights or violations which would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the ability of such Buyer to
perform its obligations hereunder.
(c) Residency. Such Buyer is a resident of that jurisdiction specified below its
address on the Schedule of Buyers.
(d) Lock-Up. Such Buyer agrees not to sell any of the Purchased Shares or any
Warrant Shares on the Principal Market (as defined below) until 60 days after the Closing Date
without the prior written consent of the Company.
(e) Qualified Institutional Buyer. Such Buyer is a Qualified Institutional Buyer
as such term is defined in Rule 144A under the 1933 Act.
The Company acknowledges and agrees that each Buyer does not make or has not made any
representations or warranties with respect to the transactions contemplated hereby other than those
specifically set forth in this Section 2.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties to each Buyer:
(a) Significant Subsidiaries. Schedule 3(a) sets forth all of the
Significant Subsidiaries (which for purposes of this Agreement has the meaning ascribed to such
term in Regulation S-X under the Securities Exchange Act of 1934, as amended (the “1934
Act”)) of the Company (each a “Subsidiary” and collectively, “Subsidiaries”). Except as
disclosed in Schedule 3(a), the Company owns, directly or indirectly, all of the capital
stock of each Significant Subsidiary free and clear of any and all liens, charges, encumbrances,
security interests, rights of first refusal or other restrictions of any kind (“Liens”), and all
the issued and outstanding shares of capital stock of each Significant Subsidiary are validly
issued and are fully paid, non-assessable and free of preemptive and similar rights.
(b) Organization and Qualification. Each of the Company and each Subsidiary is an
entity duly organized, validly existing and in good standing under the laws of the jurisdiction of
its incorporation or organization (as applicable), with the requisite power and authority to own
and use or lease and operate its properties and assets and to carry on its business as currently
conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other organizational
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or charter documents. Each of the Company and each Subsidiary is duly qualified to conduct
business and is in good standing as a foreign corporation or other entity in each jurisdiction in
which the nature of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as the case may be,
would not, individually or in the aggregate, have or reasonably be expected to result in (i) an
adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a
material and adverse effect on the results of operations, assets, prospects, business or financial
condition of the Company and the Subsidiaries, taken as a whole, or (iii) an adverse impairment to
the Company’s ability to perform on a timely basis its obligations under any Transaction Document
(any of (i), (ii) or (iii), a “Material Adverse Effect”).
(c) Authorization; Enforcement. The Company has the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by each of this Agreement,
the Warrants, the Irrevocable Transfer Agent Instructions (as defined below) and any other
documents or agreements executed in connection with the transactions contemplated hereunder
(collectively, the “Transaction Documents”) and otherwise to carry out its obligations hereunder
and thereunder and to issue the Securities in accordance with the terms hereof and thereof. The
execution and delivery of each of the Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby, including, without limitation, the issuance
of the Purchased Shares and the Warrants and the reservation for issuance of the Warrant Shares
issuable upon exercise of the Warrants, have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company, its Board of Directors or its
stockholders in connection herewith and therewith. Each Transaction Document has been (or upon
delivery will have been) duly executed by the Company and, when delivered in accordance with the
terms hereof, will constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except (a) as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (b)
as enforceability of any indemnification and contribution provisions may be limited under the
federal and state securities laws and public policy, and (c) that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to equitable defenses
and to the discretion of the court before which any proceeding therefor may be brought.
(d) No Conflicts. The execution, delivery and performance of the Transaction
Documents by the Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Purchased Shares and the
Warrants and reservation for issuance of the Warrant Shares) do not and will not (i) conflict with
or violate any provision of the Company’s or any Subsidiary’s certificate or articles of
incorporation, any certificate of designations, preferences and rights of any outstanding series of
preferred stock, bylaws or other organizational or charter documents, board resolutions or joint
venture contract or (ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or
otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected,
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or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction,
decree, business license or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities laws, regulations of
whichever of the New York Stock Exchange, Inc., the American Stock Exchange or The NASDAQ Global
Market (the “Principal Market”) and applicable laws of the People’s Republic of China (“China”))
that the Common Stock is listed or quoted for trading on the date in question (any of the
foregoing, a “Trading Market”)), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not,
individually or in the aggregate, have or reasonably be expected to result in a Material Adverse
Effect.
(e) Filings, Consents and Approvals. Neither the Company nor any Subsidiary is
required to obtain any consent, waiver, authorization or order of, give any notice to, or make any
filing or registration (collectively, “Consents”) with, any Person in connection with the
execution, delivery and performance by the Company of the Transaction Documents, other than (i) the
filing with the SEC of the prospectus supplement required by the Registration Statement pursuant to
Rule 424(b) under the 1933 Act (the “Prospectus Supplement”) supplementing the base prospectus
forming part of the Registration Statement (the “Prospectus”), (ii) the application(s) to the
Principal Market for the listing of the Purchased Shares and the Warrant Shares for trading thereon
in the time and manner required thereby, (iii) all filings required pursuant to Section 4(g)
hereof, and (iv) those Consents that have been obtained prior to the date hereof. As used in this
Agreement, “Person” means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, any other entity and a government
or any department or agency thereof, including in China.
(f) Issuance of the Securities. The Purchased Shares and Warrants are duly
authorized and, upon issuance in accordance with the terms hereof, will be duly and validly issued,
fully paid and nonassessable, free from all taxes, Liens and charges with respect to the issue
thereof. The Warrant Shares have been duly authorized and, when issued and paid for in accordance
with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all taxes, Liens and charges with respect to the issue thereof. The Company has
reserved from its duly authorized capital stock the maximum number of shares of Common Stock
issuable pursuant to the Warrants in order to issue the full number of Warrant Shares as are or may
become issuable in accordance with the terms of the Warrants. The issuance by the Company of the
Securities has been registered under the 1933 Act, the Securities are being issued pursuant to the
Registration Statement and all of the Securities are freely transferable and tradable by the Buyers
without restriction. The Registration Statement is effective and available for the issuance of the
Purchased Shares thereunder and the Company has not received any notice that the SEC has issued or
intends to issue a stop-order with respect to the Registration Statement or that the SEC otherwise
has suspended or withdrawn the effectiveness of the Registration Statement, either temporarily or
permanently, or intends or has threatened in writing to do so. The “Plan of Distribution” section
under the Registration Statement permits the issuance and sale of the Securities hereunder. Upon
receipt of the Purchased Shares and Warrant Shares, the Buyers will have good and marketable title
to such Purchased Shares and Warrant Shares.
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(g) Capitalization. The number of shares and type of all authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 3(g). All outstanding
shares of capital stock of the Company are duly authorized, validly issued, fully paid and
nonassessable and have been issued in compliance with all applicable securities laws. Except as
set forth in Schedule 3(g), no securities of the Company are entitled to preemptive or
similar rights, and no Person (other than the Buyers) has any right of first refusal, preemptive
right, right of participation, or any similar right to participate in the transactions contemplated
by the Transaction Documents. Except as a result of the purchase and sale of the Securities and
except as disclosed in Schedule 3(g), there are no outstanding options, warrants, scrip
rights to subscribe to, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or giving any Person any
right to subscribe for or acquire, any shares of the Common Stock, or contracts, commitments,
understandings or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or exchangeable into
shares of Common Stock. Except as set forth in Schedule 3(g), the issue and sale of the
Securities will not, immediately or with the passage of time, obligate the Company to issue shares
of Common Stock, or other securities to any Person (other than the Buyers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion, exchange or reset
price under such securities.
(h) SEC Reports; Financial Statements. The Company has filed all reports required
to be filed by it under the 1933 Act and the 1934 Act, including pursuant to Section 13(a) or 15(d)
thereof, for the two (2) years preceding the date hereof (or such shorter period as the Company was
required by law to file such reports) (the foregoing materials being collectively referred to
herein as the “SEC Reports” and, together with the Schedules to this Agreement, the “Disclosure
Materials”) on a timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. The Company has
delivered to the Buyers a copy of all SEC Reports not available on the XXXXX system. As of their
respective dates, the SEC Reports complied in all material respects with the requirements of the
1933 Act and the 1934 Act and the rules and regulations of the SEC promulgated thereunder, and none
of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading. The
Registration Statement and any prospectus included therein, including the Prospectus and the
Prospectus Supplement, complied in all material respects with the requirements of the 1933 Act and
the 1934 Act and the rules and regulations of the SEC promulgated thereunder, and none of such
Registration Statement or any such prospectus, including the Prospectus and the Prospectus
Supplement, contain or contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the statements therein,
in the case of any prospectus in the light of the circumstances under which they were made, not
misleading. The Company is in compliance with any and all applicable requirements of the
Xxxxxxxx-Xxxxx Act of 2002 that are effective as of the date hereof, and any and all applicable
rules and regulations promulgated by the SEC thereunder that are effective as of the date hereof.
The financial statements of the Company included in the SEC Reports comply in all material respects
with applicable accounting requirements and the rules and regulations of the SEC with respect
thereto as in effect at the time
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of filing. Such financial statements have been prepared in accordance with United States
generally accepted accounting principles applied on a consistent basis during the periods involved
(“GAAP”), except as may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the Company and its
consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash
flows for the periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material Changes. Except as disclosed in Schedule 3(i), since the date
of the latest audited financial statements included within the SEC Reports, (i) there has been no
event, occurrence or development that has had or that would reasonably be expected to result in a
Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or
otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be reflected in the
Company’s financial statements pursuant to GAAP or required to be disclosed in filings made with
the SEC, (iii) the Company has not altered its method of accounting or the identity of its
auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem
any shares of its capital stock, (v) the Company has not issued any equity securities to any
officer, director or any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such terms are used in
and construed under Rule 144 promulgated under the 1933 Act, as amended (or a successor rule
thereto) (“Rule 144”) (an “Affiliate”), except pursuant to existing Company stock option plans,
(vi) the Company has not sold any assets, individually or in the aggregate, in excess of $250,000
outside of the ordinary course of business or (vii) the Company has not had capital expenditures,
individually or in the aggregate, in excess of $250,000 outside of the ordinary course of business.
The Company does not have pending before the SEC any request for confidential treatment of
information.
(j) Litigation. There is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary or any of their respective properties before or by any court, arbitrator,
governmental or administrative agency or regulatory authority (federal, state, county, local or
foreign) which (i) adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable
decision, individually or in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof, is or
has been the subject of any claim, action or proceeding involving a claim of violation of or
liability under federal, state or foreign securities laws or a claim of breach of fiduciary duty
nor has any director or officer engaged in any criminal activity. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any investigation by the SEC
involving the Company or any current or former director or officer of the Company. The SEC has not
issued any stop order or other order suspending the effectiveness of any registration statement
filed by the Company or any Subsidiary under the 1934 Act or the 1933 Act, including the
Registration Statement.
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(k) Labor Relations. No strike, work stoppage, slow down or other material labor
problem exists or, to the knowledge of the Company, is threatened or imminent with respect to any
of the employees of the Company or any Subsidiary.
(l) Compliance. Neither the Company nor any Subsidiary (i) is in default under or
in violation of (and no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under), nor has the
Company or any Subsidiary received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or instrument to which
it is a party or by which it or any of its properties is bound (whether or not such default or
violation has been waived), (ii) is in violation of any order of any court, arbitrator,
governmental body, or regulatory or self-regulatory authority or (iii) is or has been in violation
of any statute, rule or regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental protection, occupational
health and safety, product quality and safety and employment and labor matters, except in each case
as would not, individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect.
(m) Regulatory Permits. The Company and the Subsidiaries possess all certificates,
authorizations, governmental approvals, business licenses and permits issued by the appropriate
United States federal, state and local or Chinese and other relevant foreign regulatory authorities
necessary to conduct their respective businesses as described in the SEC Reports, except where the
failure to possess such approvals, business licenses, certificates, authorizations or permits would
not, individually or in the aggregate, have or reasonably be expected to result in a Material
Adverse Effect (“Material Permits”), and neither the Company nor any Subsidiary has received any
notice of proceedings relating to the revocation or modification of any Material Permit.
(n) Title to Assets. Except as disclosed in Schedule 3(n), the Company and
the Subsidiaries have good and, where permitted by applicable China law, marketable title to all
real property owned by them that is material to their respective businesses and good and marketable
title in all personal property owned by them that is material to their respective businesses, in
each case free and clear of all Liens, except for Liens as do not materially affect the value of
such property and do not materially interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries. Any real property and facilities held under lease by
the Company and the Subsidiaries or used in its business are held by them under valid, subsisting
and enforceable leases and land use certificates, as the case may be, of which the Company and the
Subsidiaries are in compliance.
(o) Patents and Trademarks. Except as disclosed in Schedule 3(o), the
Company and the Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights, licenses and other
similar rights that are necessary or material for use in connection with their respective
businesses as described in the SEC Reports and which the failure to so have would, individually or
in the aggregate, have or reasonably be expected to result in a Material Adverse Effect
(collectively, the “Intellectual Property Rights”). Schedule 3(o) sets forth a complete
list of all patents,
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trademarks, servicemarks and trade names that are used by the Company or its Subsidiaries or
in their respective businesses and owned or co-owned by and registered in the name of the Company
or any Subsidiary, all applications therefore, and all licenses and other intellectual property
agreements relating thereto. All of the Company’s Intellectual Property Rights and relevant
applications therefor have been duly registered by the China Patent and Trademark Office, or the
equivalent offices of non-US jurisdictions, and have been properly maintained in accordance with
applicable law in China and such other jurisdictions. None of the Intellectual Property Rights has
expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned within
two (2) years from the date of this Agreement. Neither the Company nor any Subsidiary has received
since the date of the latest audited financial statements included within the SEC Reports, a
written notice of a claim or otherwise has any knowledge that the Intellectual Property Rights
violate or infringe upon the rights of any Person, except as would not have a Material Adverse
Effect. To the knowledge of the Company, all such Intellectual Property Rights are enforceable.
There is no claim, action or proceeding being made or brought, or to the knowledge of the Company,
being threatened, against the Company or its Subsidiaries regarding its Intellectual Property
Rights.
(p) Insurance. The Company and the Subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such amounts as are
prudent and customary in the businesses in which the Company and the Subsidiaries are engaged.
Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew
its existing insurance coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business without a significant increase
in cost, except for cost increases being experienced by companies in similar businesses and risk
categories.
(q) Foreign Corrupt Practices. Neither the Company nor any director, officer or
employee acting on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii)
made any direct or indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic government
official or employee.
(r) Transactions With Affiliates and Employees. Except as set forth in the SEC
Reports filed at least ten (10) days prior to the date hereof, none of the officers or directors of
the Company and, to the knowledge of the Company, none of the employees of the Company is presently
a party to any transaction with the Company or any Subsidiary (other than for services as
employees, officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee or partner.
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(s) Tax Status. The Company and each of its Subsidiaries (i) has made or filed all
United States federal and state income and all other China and other required foreign tax returns,
reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all
taxes and other governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those being contested in
good faith and (iii) has set aside on its books provision reasonably adequate for the payment of
all material taxes for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company or any Subsidiary know of no
basis for any such claim.
(t) Internal Accounting Controls. The Company and the Subsidiaries maintain a
system of internal accounting controls which the audit committee of the board of directors
reasonably believes is sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management’s general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in accordance with
management’s general or specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(u) Solvency. Based on the financial condition of the Company as of the date
hereof and as of the Closing Date, (i) the Company’s fair saleable value of its assets exceeds the
amount that will be required to be paid on or in respect of the Company’s existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do
not constitute unreasonably small capital to carry on its business for the current fiscal year as
now conducted and as proposed to be conducted including its capital needs taking into account the
particular capital requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive, were it to liquidate all of its assets, after
taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or
in respect of its debt when such amounts are required to be paid. The Company does not intend to
incur debts beyond its ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
(v) Placement Agent’s Fees. The Company shall be responsible for the payment of
any placement agent’s fees, financial advisory or consultancy fees, brokers’ commissions or
finder’s fee (other than for persons engaged by any Buyer or its investment advisor) relating to or
arising out of the transactions contemplated hereby, which fees are set forth on Schedule
3(v). The Company shall pay, and hold each Buyer harmless against, any liability, loss or
expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in
connection with any such claim. The Company acknowledges that it has engaged Worldwide Gateway
Co., Ltd. as placement agent (the “Agent”) in connection with the sale of the Securities. Other
than the Agent, the Company has not engaged any placement agent or other agent in connection with
the sale of the Securities.
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(w) Integration. Neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf has, directly or indirectly, made or is making any offers or sales of
any security or solicited or is soliciting any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with other offerings by the Company in
a manner that would violate the 1933 Act or the rules and regulations of any exchange or automated
quotation system on which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps that would cause the offering of
the Securities to be integrated with other offerings.
(x) Listing and Maintenance Requirements. The Company has not, in the two (2)
years preceding the date hereof, received notice (written or oral) from any Trading Market on which
the Common Stock is or has been listed or quoted to the effect that the Company is not in
compliance with the listing or maintenance requirements of such Trading Market. The Company is
currently in compliance with all such listing and maintenance requirements and has no reason to
believe that it will not in the foreseeable future continue to be (except as a result of a failure
in the future to comply with minimum trading price requirements), in compliance with all such
listing and maintenance requirements. The issuance and sale of the Securities hereunder does not
contravene the rules and regulations of the Principal Market and no approval of the stockholders of
the Company is required for the Company to issue and deliver to the Buyers the maximum number of
shares of Common Stock contemplated by this Agreement, including by reason of the issuance of
shares of Common Stock upon the issuance of the Warrant Shares upon exercise in full of the
Warrants. The Common Stock is currently listed on the Principal Market.
(y) Registration Rights. No holder of securities of the Company has rights to the
registration of any securities of the Company because of the filing of the Registration Statement
or the issuance of the Securities hereunder that could expose the Company to material liability or
any Holder to any liability or that could impair the Company’s ability to consummate the issuance
and sale of the Securities in the manner, and at the times, contemplated hereby, which rights have
not been waived by the holder thereof as of the date hereof.
(z) Investment Company. The Company is not, and is not an Affiliate of, an
“investment company” within the meaning of the Investment Company Act of 1940, as amended.
(aa) Application of Takeover Protections. The Company has taken all necessary
action, if any, in order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company’s Certificate of Incorporation (or similar charter
documents) or the laws of its state of incorporation that is or could become applicable to the
Buyers solely as a result of the Buyers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation the Company’s issuance
of the Securities and the Buyers’ ownership of the Securities.
(bb) Disclosure. The Company confirms that neither it nor any Person acting on its
behalf has provided any of the Buyers or their agents or counsel with any information that the
Company believes constitutes material, non-public information. The Company understands
11
and confirms that the Buyers will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company. All disclosure provided to the Buyers
regarding the Company, its business and the transactions contemplated hereby, furnished by or on
behalf of the Company (including the Company’s representations and warranties set forth in this
Agreement) are true and correct and do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.
(cc) Dilutive Effect. The Company understands and acknowledges that the number of
the Warrant Shares issuable upon exercise of the Warrants will increase in certain circumstances.
The Company further acknowledges that its obligation to issue the Warrant Shares upon exercise of
the Warrants in accordance with this Agreement and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company.
(dd) China Subsidiaries
(i) Schedule 3(dd) sets forth, for each Subsidiary that is incorporated in China, (i)
the legal classification of such entity under the applicable company laws and foreign investment
laws of China, including true and correct copies of the relevant currently effective business
license, registration documents and capital verification report issued by the relevant China
governmental approval authority for the location in which the Subsidiary maintains an office or
premises for business operations; (ii) the total investment capital (i.e., debt and equity) and
equity (i.e., registered capital); (iii) the holders of record of the equity (i.e., the registered
capital); (iv) the authorized legal representative, directors, officers, legal address and each
business address, as well as the original China approval authority and China governmental authority
with current jurisdiction over the entity; and (v) any agreements with respect to the registered
capital, including outstanding securities, contracts, commitments or arrangements granting any
party the right to obtain any equity ownership of the Subsidiary.
(ii) For each Subsidiary, the holders of record of its registered capital have contributed in
full its subscribed share of the entity’s registered capital pursuant to the relevant joint venture
contract and articles of association, and all such contributions have been verified and certified
by a Chinese registered public accountant according to applicable China law, approved by all
relevant China governmental authorities and fully paid, and verification certificates have been
issued to each such holder of record or previous investor accordingly. All previous transfers or
assignments of registered capital have been approved by the relevant China governmental authorities
and all necessary corporate action.
(iii) Each Subsidiary incorporated in China is a limited liability company duly organized,
validly existing and in good standing under the applicable company laws and foreign investment laws
of China, has the status of a foreign investment enterprise (where applicable), and is a legal
person with all requisite corporate power to own, lease and operate its properties and to carry on
its business as now being conducted in each place where its business is conducted. The Subsidiary
and its business operations are in compliance with the terms and conditions of its business
license, joint venture contract (where applicable) and articles
12
of association. The construction of the Subsidiary’s operating facilities and operation of
its business is and has been in full compliance with its relevant feasibility study and business
license. Each Subsidiary has received all authorizations, approvals, license, permits and other
rights (including but not limited to those pertaining to the manufacture, distribution and sale of
telephone equipment and all other products of the Company’s business) from China governmental
authorities necessary and appropriate for the continued operation of the Company’s business.
(iv) All necessary approvals from China governmental authorities have been received to ensure
that each Subsidiary will continue to enjoy, to the extent permitted by applicable China law, all
of the tax clearances, concessions and other benefits available to such Subsidiary prior to the
Closing Date, or otherwise available under applicable China law to foreign investment enterprises
similarly situated.
(v) Each Subsidiary is and has been in compliance with applicable China laws relating to its
relationship to its employees or suppliers or to any governmental taxing or customs authority, and
relating to any other aspect of its business. Each Subsidiary is in compliance with applicable
China law relating to anti-competitive practices, price fixing, and environmental matters,
respectively, and, to its knowledge, there are no proceedings pending or threatened regarding any
violation by it of applicable China law, including work safety, environmental and employment laws.
(vi) Each Subsidiary has obtained all required China product registrations for the products
related to its business.
(ee) Acknowledgment Regarding Buyer’s Purchase of Securities. The Company
acknowledges and agrees that each Buyer is acting solely in the capacity of arm’s length purchaser
with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and
that no Buyer is an officer or director of the Company. The Company further acknowledges that no
Buyer is acting as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is merely incidental to
such Buyer’s purchase of the Securities. The Company further represents to each Buyer that the
Company’s decision to enter into the Transaction Documents has been based solely on the independent
evaluation by the Company and its representatives.
4. COVENANTS.
(a) Best Efforts. Each party shall use its best efforts timely to satisfy each of
the covenants and the conditions to be satisfied by it as provided in Sections 6 and 7 of this
Agreement.
(b) Maintenance of Registration Statement. For so long as any of the Warrants
remain outstanding, the Company shall use its reasonable best efforts to maintain the effectiveness
of the Registration Statement for the issuance thereunder of the Warrant Shares;
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provided that, if at any time while the Warrants are outstanding the Company shall be
ineligible to utilize Form F-3 (or any successor form) for the purpose of issuance of the Warrant
Shares the Company shall promptly amend the Registration Statement on such other form as may be
necessary to maintain the effectiveness of the Registration Statement for this purpose.
(c) Prospectus Supplement, Form D and Blue Sky. On or before the execution of this
Agreement, the Company shall have delivered, and as soon as practicable after the Closing the
Company shall file, the Prospectus Supplement with respect to the Purchased Shares as required
under and in conformity with the 1933 Act, including Rule 424(b) thereunder. If required, the
Company, on or before the Closing Date, shall take such action as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the Securities for sale to
the Buyers at the Closing pursuant to this Agreement under applicable securities or “Blue Sky” laws
of the states of the United States (or to obtain an exemption from such qualification), and shall
provide evidence of any such action so taken to the Buyers on or prior to the Closing Date. The
Company shall make all filings and reports relating to the offer and sale of the Securities
required under applicable securities or “Blue Sky” laws of the states of the United States
following the Closing Date.
(d) Reporting Status. Until the date on which the Buyers shall have sold all the
Purchased Shares and Warrant Shares and none of the Warrants is outstanding (the “Reporting
Period”), the Company shall timely file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would otherwise
permit such termination.
(e) Listing. The Company shall promptly secure the listing of all of the Purchased
Shares and Warrant Shares upon each national securities exchange and automated quotation system, if
any, upon which the Common Stock is then listed (subject to official notice of issuance) and shall
maintain such listing of all shares of Common Stock from time to time issuable under the terms of
the Transaction Documents. So long as any Warrants are outstanding, the Company shall maintain the
Common Stock’s authorization for listing on the Principal Market. Neither the Company nor any of
its Subsidiaries shall take any action which would be reasonably expected to result in the
delisting or suspension of the Common Stock on the Principal Market. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this Section 4(e).
(f) Fees. The Company shall be responsible for the payment of any placement
agent’s fees, financial advisory fees, or broker’s commissions (other than for Persons engaged by
any Buyer) relating to or arising out of the transactions contemplated hereby. The Company shall
pay, and hold each Buyer harmless against, any liability, loss or expense (including, without
limitation, reasonable attorney’s fees and out-of-pocket expenses) arising in connection with any
claim relating to any such payment including, without limitation, any fees or commissions payable
to the Agent. Except as otherwise set forth in this Agreement or in the Transaction Documents,
each party to this Agreement shall bear its own expenses in connection with the sale of the
Securities to the Buyers.
14
(g) Disclosure of Transactions and Other Material Information. The Company shall,
on or before 8:30 a.m., New York City Time, on the first Business Day following the execution and
delivery of this Agreement, issue a press release reasonably acceptable to the Buyers disclosing
all material terms of the transactions contemplated hereby (the “Press Release”). On or before
8:30 a.m., New York Time, on the second Business Day following the execution and delivery of this
Agreement, the Company shall file a Current Report on Form 6-K describing the terms of the
transactions contemplated by the Transaction Documents in the form required by the 1934 Act, and
attaching the material Transaction Documents (including, without limitation, this Agreement and the
form of the Warrants) as exhibits to such filing (including all attachments, the “6-K Filing”).
From and after the filing of the Press Release, no Buyer shall be in possession of any material,
nonpublic information received from the Company, any of its Subsidiaries or any of its respective
officers, directors, employees or agents, that is not disclosed in such Press Release. The Company
shall not, and shall cause each of its Subsidiaries and its and each of their respective officers,
directors, employees and agents, not to, provide any Buyer with any material nonpublic information
regarding the Company or any of its Subsidiaries from and after the filing of the press release
referred to in the first sentence of this Section without the express written consent of such
Buyer. Subject to the foregoing, neither the Company nor any Buyer shall issue any press releases
or any other public statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior approval
of any Buyer, to make any press release or other public disclosure with respect to such
transactions (i) in substantial conformity with the 6-K Filing and contemporaneously therewith and
(ii) as is required by applicable law and regulations, including the applicable rules and
regulations of the Principal Market (provided that in the case of clause (i) each Buyer shall be
consulted by the Company in connection with any such press release or other public disclosure prior
to its release). Other than in connection with the future SEC Reports, the Company shall not
disclose the name of any Buyer without the prior written consent of such Buyer in any filing,
announcement, release or otherwise.
(h) Reservation of Shares. The Company shall take all action necessary to at all
times have authorized, and reserved for the purpose of issuance, from and after the Closing Date,
the number of shares of Common Stock issuable upon exercise of the Warrants being issued at the
Closing.
(i) Use of Proceeds. The Company will use the proceeds from the sale of the
Securities for general corporate purposes.
(j) Additional Issuances of Securities.
(i) For purposes of this Section 4(j), the following definitions shall apply.
(1) “Convertible Securities” means any stock or securities (other than Options)
convertible into or exercisable or exchangeable for shares of Common Stock.
15
(2) “Options” means any rights, warrants or options to subscribe for or purchase shares
of Common Stock or Convertible Securities.
(3) “Common Stock Equivalents” means, collectively, Options and Convertible Securities.
(ii) From the Closing Date until the date that is 30 days thereafter (the “Trigger Date”), the
Company will not, directly or indirectly, offer, sell, grant any option to purchase, or otherwise
dispose of (or announce any offer, sale, grant or any option to purchase or other disposition of)
any of its or its Subsidiaries’ equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at any time during
its life and under any circumstances, convertible into or exchangeable or exercisable for shares of
Common Stock or Common Stock Equivalents (any such offer, sale, grant, disposition or announcement
being referred to as a “Subsequent Placement”).
(iii) From the Trigger Date until the date that is 150 days thereafter, the Company will not,
directly or indirectly, effect any Subsequent Placement, unless the Company shall have first
complied with this Section 4(j)(iii).
(1) The Company shall deliver to each Buyer a written notice (the “Offer Notice”) of
any bona fide proposed or intended issuance or sale or exchange (the “Offer”) of the
securities being offered (the “Offered Securities”) in a Subsequent Placement, which Offer
Notice shall (w) identify and describe the Offered Securities, (x) describe the price and
other terms upon which they are to be issued, sold or exchanged, and the number or amount of
the Offered Securities to be issued, sold or exchanged, (y) identify the persons or entities
(if known) to which or with which the Offered Securities are to be offered, issued, sold or
exchanged and (z) offer to issue and sell to or exchange with such Buyers all of the Offered
Securities.
(2) To accept an Offer, in whole or in part, such Buyer must deliver a written notice
to the Company prior to the end of the fifth (5th) Business Day after such
Buyer’s receipt of the Offer Notice (the “Offer Period”), setting forth the such amount that
such Buyer elects to purchase (the “Notice of Acceptance”).
(3) The Company shall have ten (10) Business Days from the expiration of the Offer
Period above to offer, issue, sell or exchange all or any part of such Offered Securities as
to which a Notice of Acceptance has not been given by the Buyers (the “Refused Securities”),
but only to the offerees described in the Offer Notice (if so described therein) and only
upon terms and conditions (including, without limitation, unit prices and interest rates)
that are not more favorable to the acquiring person or persons or less favorable to the
Company than those set forth in the Offer Notice.
(4) In the event the Company shall propose to sell less than all the Refused Securities
(any such sale to be in the manner and on the terms specified in Section 4(j)(iii)(3)
above), then each Buyer may, at its sole option and in its sole discretion, reduce the
number or amount of the Offered Securities specified in its Notice
16
of Acceptance to an amount that shall be not less than the number or amount of the
Offered Securities that such Buyer elected to purchase pursuant to Section 4(j)(iii)(2)
above multiplied by a fraction, (i) the numerator of which shall be the number or amount of
Offered Securities the Company actually proposes to issue, sell or exchange (including
Offered Securities to be issued or sold to Buyers pursuant to Section 4(j)(iii)(3) above
prior to such reduction) and (ii) the denominator of which shall be the original amount of
the Offered Securities. In the event that any Buyer so elects to reduce the number or
amount of Offered Securities specified in its Notice of Acceptance, the Company may not
issue, sell or exchange more than the reduced number or amount of the Offered Securities
unless and until such securities have again been offered to the Buyers in accordance with
Section 4(j)(iii)(1) above.
(5) Upon the closing of the issuance, sale or exchange of all or less than all of the
Refused Securities, the Buyers shall acquire from the Company, and the Company shall issue
to the Buyers, the number or amount of Offered Securities specified in the Notices of
Acceptance, as reduced pursuant to Section 4(j)(iii)(3) above if the Buyers have so elected,
upon the terms and conditions specified in the Offer. The purchase by the Buyers of any
Offered Securities is subject in all cases to the preparation, execution and delivery by the
Company and the Buyers of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Buyers and their respective counsel.
(6) Any Offered Securities not acquired by the Buyers or other persons in accordance
with Section 4(j)(iii)(3) above may not be issued, sold or exchanged until they are again
offered to the Buyers under the procedures specified in this Agreement..
(iv) The restrictions contained in subsection (ii) and (iii) of this Section 4(j) shall not
apply with respect to any Excluded Securities (as defined in the Warrant).
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to the Transfer Agent, and any subsequent
transfer agent, to issue certificates or credit shares to the applicable balance accounts at DTC,
registered in the name of each Buyer or its respective nominee(s), for the Warrant Shares in such
amounts as specified from time to time by each Buyer to the Company upon exercise of the Warrants
in the form of Exhibit B attached hereto (the “Irrevocable Transfer Agent Instructions”).
The Company represents and warrants that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5 will be given by the Company to the Transfer Agent, and
any subsequent transfer agent with respect to the Securities, and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and to the extent
provided in this Agreement and the other Transaction Documents. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to a Buyer. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations under this Section 5
will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the
provisions of this Section 5, that a Buyer
17
shall be entitled, in addition to all other available remedies, to an order and/or injunction
restraining any breach and requiring immediate issuance and transfer, without the necessity of
showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Purchased Shares and the related
Warrants to each Buyer at the Closing is subject to the satisfaction, at or before the Closing
Date, of each of the following conditions, provided that these conditions are for the Company’s
sole benefit and may be waived by the Company at any time in its sole discretion by providing each
Buyer with prior written notice thereof:
(a) Such Buyer shall have executed this Agreement and delivered the same to the Company.
(b) Such Buyer shall have delivered to the Company the Purchase Price for the Purchased Shares
and the related Warrants being purchased by such Buyer at the Closing by wire transfer of
immediately available funds pursuant to the wire instructions provided by the Company.
(c) The representations and warranties of such Buyer shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date), and such Buyer shall have
performed, satisfied and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied with by such Buyer at
or prior to the Closing Date.
7. CONDITIONS TO EACH BUYER’S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Purchased Shares and the related
Warrants at the Closing is subject to the satisfaction, at or before the Closing Date, of each of
the following conditions, provided that these conditions are for each Buyer’s sole benefit and may
be waived by such Buyer at any time in its sole discretion by providing the Company with prior
written notice thereof:
(a) The Company shall have (i) executed and delivered to such Buyer each of the Transaction
Documents, (ii) electronically delivered the Purchased Shares being purchased by such Buyer at the
Closing pursuant to this Agreement and (iii) executed and delivered the related Warrants (in such
amounts as such Buyer shall request) being purchased by such Buyer at the Closing pursuant to this
Agreement.
(b) Such Buyer shall have received the opinions of the Company’s US counsel and British Virgin
Islands counsel, dated as of the Closing Date, each in a form reasonably acceptable to the Buyers.
(c) The Company shall have delivered to such Buyer a copy of the Irrevocable Transfer Agent
Instructions, in the form of Exhibit B attached hereto, which
18
instructions shall have been delivered to and acknowledged in writing by the Company’s
transfer agent.
(d) The Company shall have delivered to such Buyer a certificate evidencing the incorporation
and good standing (if applicable) of the Company and each of its Subsidiaries in such corporation’s
jurisdiction of incorporation issued by the Secretary of State or other comparable authority of
such jurisdiction of incorporation as of a date within 10 days of the Closing Date.
(e) The Common Stock (i) shall be listed on the Principal Market and (ii) shall not have been
suspended, as of the Closing Date, by the SEC or the Principal Market from trading on the Principal
Market nor shall suspension by the SEC or the Principal Market have been threatened, as of the
Closing Date, either (A) in writing by the SEC or the Principal Market or (B) by falling below the
minimum listing maintenance requirements of the Principal Market.
(f) The Company shall have delivered to such Buyer a certified copy of the Memorandum and
Articles of Association and Certificate of Incorporation, as amended to date (the “Certificate of
Incorporation”) as certified by appropriate authority under the laws of the British Virgin Islands
within 10 days of the Closing Date.
(g) The Company shall have delivered to such Buyer a certificate, executed by the Secretary of
the Company and dated as of the Closing Date, as to (i) the resolutions consistent with this
transaction as adopted by the Company’s Board of Directors in a form reasonably acceptable to such
Buyer, (ii) the Certificate of Incorporation and (iii) the Memorandum and Articles of Association
of the Company, each as in effect at the Closing, in the form attached hereto as Exhibit C.
(h) The representations and warranties of the Company shall be true and correct as of the date
when made and as of the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company shall have performed, satisfied and
complied in all respects with the covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior to the Closing
Date. Such Buyer shall have received a certificate, executed by the Chief Executive Officer of the
Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may
be reasonably requested by such Buyer in the form attached hereto as Exhibit D.
(i) The Company shall have delivered to such Buyer a letter from the Company’s transfer agent
certifying the number of shares of Common Stock outstanding as of a date within five days of the
Closing Date.
(j) The Company shall have obtained all governmental, regulatory or third party consents and
approvals, if any, necessary for the sale of the Purchased Shares, the Warrants and the Warrant
Shares.
19
(k) The Registration Statement shall be effective and available for the issuance and sale of
the Purchased Shares hereunder and the Company shall have delivered to such Buyer the Prospectus
and the Prospectus Supplement as required thereunder.
(l) The Company shall have delivered to such Buyer such other documents relating to the
transactions contemplated by this Agreement as such Buyer or its counsel may reasonably request.
8. TERMINATION. In the event that the Closing shall not have occurred with respect to
a Buyer on the Closing Date due to the Company’s or such Buyer’s failure to satisfy the conditions
set forth in Sections 6 and 7 above (and the nonbreaching party’s failure to waive such unsatisfied
condition(s)), the nonbreaching party shall have the option to terminate this Agreement with
respect to such breaching party at the close of business on such date without liability of any
party to any other party.
9. MISCELLANEOUS.
(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall be governed by the
internal laws of the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of New York. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts
sitting in The City of New York, Borough of Manhattan for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or discussed herein, and
hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding
is improper. Each party hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by mailing a copy thereof to such party
at the address for such notices to it under this Agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. The Company hereby appoints
Xxxxxx X. Xxxxxxxxx, Esq., with offices at 0000 XXX Xxxxxxx, Xxxxx 000, Xxxxxxxxx Xxxxxxx, Xxxxxxxx
00000, as its agent for service of process. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY
DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
(b) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the other party;
provided that a facsimile signature shall be considered due execution and shall be binding upon the
signatory thereto with the same force and effect as if the signature were an original, not a
facsimile signature.
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(c) Headings. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity
or enforceability of any provision of this Agreement in any other jurisdiction.
(e) Entire Agreement; Amendments. This Agreement supersedes all other prior oral or
written agreements between the Buyers, the Company, their Affiliates and Persons acting on their
behalf with respect to the matters discussed herein, and this Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect to the matters
covered herein and therein and, except as specifically set forth herein or therein, neither the
Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be amended other than by an instrument in writing
signed by the Company and the Buyers who purchased at least a majority of the amount of the
Purchased Shares, or, if prior to the Closing Date, the Buyers listed on the Schedule of Buyers as
being obligated to purchase at least a majority of the amount of the Purchased Shares. No
provision hereof may be waived other than by an instrument in writing signed by the party against
whom enforcement is sought. No such amendment shall be effective to the extent that it applies to
less than all of the holders of the Purchased Shares then outstanding. No consideration shall be
offered or paid to any Person to amend or consent to a waiver or modification of any provision of
any of the Transaction Documents unless the same consideration also is offered to all of the
parties to the Transaction Documents, holders of Purchased Shares, holders of the Warrants or
holders of Warrant Shares, as the case may be. The Company has not, directly or indirectly, made
any agreements with any Buyers relating to the terms or conditions of the transactions contemplated
by the Transaction Documents except as set forth in the Transaction Documents.
(f) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and will be deemed to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by
facsimile (provided confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the same. The addresses
and facsimile numbers for such communications shall be:
21
If to the Company:
Qiao Xing Universal Telephone, Inc.
Qiao Xing Science Industrial Park
Xxxx Xxxx
Huizhou City, Guangdong,
People’s Republic of China 516023
Facsimile No.: 000-00-000-0000-000
Telephone No.: 000-00-000-0000-000
Attn.: Chairman
Qiao Xing Science Industrial Park
Xxxx Xxxx
Huizhou City, Guangdong,
People’s Republic of China 516023
Facsimile No.: 000-00-000-0000-000
Telephone No.: 000-00-000-0000-000
Attn.: Chairman
With a copy to:
Xxxxxx X. Xxxxxxxxx, P.C.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn.: Xxxxxx X. Xxxxxxxxx, Esq.
0000 XXX Xxxxxxx, Xxxxx 000
Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn.: Xxxxxx X. Xxxxxxxxx, Esq.
If to the Transfer Agent:
Computershare Trust Company, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn.: Xx. Xxxxxx X. Xxxxx
Vice President & Trust Officer
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn.: Xx. Xxxxxx X. Xxxxx
Vice President & Trust Officer
If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers, with copies
to such Buyer’s representatives as set forth on the Schedule of Buyers,
With a copy to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn.: Xxxxxxx Xxxxx, Esq.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attn.: Xxxxxxx Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such other Person as
the recipient party has specified by written notice given to each other party five (5) days prior
to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or electronically generated
by the sender’s facsimile machine containing the time, date, recipient facsimile number
22
and an image of the first page of such transmission or (C) provided by an overnight courier service
shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (i), (ii) or (iii) above, respectively.
Any document shall be deemed to have been duly served if marked for the attention of the agent
at its address (as set out above) or such other address in the United States as may be notified to
the party wishing to serve the document and delivered in accordance with the notice provisions set
forth in this Section 9(f).
If the Company’s agent at any time ceases for any reason to act as such, the Company shall
appoint a replacement agent having an address for service in the United States and shall notify
each Buyer in writing of the name and address of the replacement agent. Failing such appointment
and notification, each Buyer shall be entitled by notice to the Company to appoint a replacement
agent to act on the Company’s behalf. The provisions of this Section 9(f) applying to service on
an agent apply equally to service on a replacement agent.
(g) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns, including any purchasers of the
Purchased Shares or the Warrants. The Company shall not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the holders of Purchased Shares
representing at least a majority of the number of the Purchased Shares, including by merger or
consolidation. A Buyer may assign some or all of its rights hereunder without the consent of the
Company, in which event such assignee shall be deemed to be a Buyer hereunder with respect to such
assigned rights.
(h) No Third Party Beneficiaries. This Agreement is intended for the benefit of the
parties hereto and their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other Person.
(i) Survival. Unless this Agreement is terminated under Section 8, the
representations and warranties of the Company and the Buyers contained in Sections 2 and 3, the
agreements and covenants set forth in Sections 4, 5 and 9 shall survive the Closing and the
delivery and exercise of Securities, as applicable. Each Buyer shall be responsible only for its
own representations, warranties, agreements and covenants hereunder.
(j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all such other
agreements, certificates, instruments and documents, as any other party may reasonably request in
order to carry out the intent and accomplish the purposes of this Agreement and the consummation of
the transactions contemplated hereby.
(k) Indemnification. (i) In consideration of each Buyer’s execution and delivery of
the Transaction Documents and acquiring the Securities thereunder and in addition to all of the
Company’s other obligations under the Transaction Documents, the Company shall defend, protect,
indemnify and hold harmless each Buyer and each other holder of the Securities and all of their
shareholders, partners, members, officers, directors, employees and direct or indirect investors
and any of the foregoing Persons’ agents or other representatives (including,
23
without limitation, those retained in connection with the transactions contemplated by this
Agreement) (collectively, the “Indemnitees”) from and against any and all actions, causes of
action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable attorneys’ fees and
disbursements (the “Indemnified Liabilities”), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any representation or
warranty made by the Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant, agreement or obligation of
the Company contained in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby or (c) any cause of action, suit or claim brought or made against
such Indemnitee by a third party that is not an Affiliate of such Indemnitee (including for these
purposes a derivative action brought on behalf of the Company) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Transaction Documents or any other
certificate, instrument or document contemplated hereby or thereby, (ii) any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds of the issuance of
the Securities, or (iii) the status of such Buyer or holder of the Securities as an investor in the
Company. To the extent that the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law.
(ii) Promptly after receipt by an Indemnitee under this Section 9(k) of notice of the
commencement of any action or proceeding (including any governmental action or proceeding)
involving an Indemnified Liability, such Indemnitee shall, if a claim for indemnification in
respect thereof is to be made against any indemnifying party under this Section 9(k), deliver to
the indemnifying party a written notice of the commencement thereof, and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume control of the defense
thereof with counsel mutually satisfactory to the indemnifying party and the Indemnitee; provided,
however, that an Indemnitee shall have the right to retain its own counsel with the fees and
expenses of not more than one counsel for such Indemnitee to be paid by the indemnifying party, if,
in the reasonable opinion of the Indemnitee, the representation by such counsel of the Indemnitee
and the indemnifying party would be inappropriate due to actual or potential differing interests
between such Indemnitee and any other party represented by such counsel in such proceeding. Legal
counsel referred to in the immediately preceding sentence shall be selected by the Investors
holding at least a majority of the Purchased Shares. The Indemnitee shall cooperate fully with the
indemnifying party in connection with any negotiation or defense of any such action or Indemnified
Liabilities by the indemnifying party and shall furnish to the indemnifying party all information
reasonably available to the Indemnitee that relates to such action or Indemnified Liabilities. The
indemnifying party shall keep the Indemnitee fully apprised at all times as to the status of the
defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable
for any settlement of any action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably withhold, delay
24
or condition its consent. No indemnifying party shall, without the prior written consent of
the Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise
which does not include as an unconditional term thereof the giving by the claimant or plaintiff to
such Indemnitee of a release from all liability in respect to such Indemnified Liabilities or
litigation. Following indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnitee with respect to all third parties, firms or corporations
relating to the matter for which indemnification has been made. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of any such action
shall not relieve such indemnifying party of any liability to the Indemnitee under this Section
9(k), except to the extent that the indemnifying party is prejudiced in its ability to defend such
action.
(iii) The indemnification required by this Section 9(k) shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and when bills are
received or Indemnified Liabilities are incurred.
(iv) The indemnity agreements contained herein shall be in addition to (x) any cause of
action or similar right of the Indemnitee against the indemnifying party or others, and (y) any
liabilities the indemnifying party may be subject to pursuant to the law.
(l) No Strict Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
(m) Remedies. Each Buyer and each holder of the Securities shall have all rights and
remedies set forth in the Transaction Documents and all rights and remedies which such holders have
been granted at any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of this Agreement
shall be entitled to enforce such rights specifically (without posting a bond or other security),
to recover damages by reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law. Furthermore, the Company recognizes that in the event that it fails
to perform, observe, or discharge any or all of its obligations under the Transaction Documents,
any remedy at law may prove to be inadequate relief to the Buyers. The Company therefore agrees
that the Buyers shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond or other security.
(n) Rescission and Withdrawal Right. Notwithstanding anything to the contrary
contained in (and without limiting any similar provisions of) the Transaction Documents, whenever
any Buyer exercises a right, election, demand or option under a Transaction Document and the
Company does not timely perform its related obligations within the periods therein provided, then
such Buyer may rescind or withdraw, in its sole discretion from time to time upon written notice to
the Company, any relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights.
25
(o) Payment Set Aside. To the extent that the Company makes a payment or payments to
the Buyers hereunder or pursuant to any of the other Transaction Documents or the Buyers enforce or
exercise their rights hereunder or thereunder, and such payment or payments or the proceeds of such
enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or
otherwise restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common law or equitable
cause of action), then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or setoff had not occurred.
(p) Independent Nature of Buyers’ Obligations and Rights. The obligations of each
Buyer under any Transaction Document are several and not joint with the obligations of any other
Buyer, and no Buyer shall be responsible in any way for the performance of the obligations of any
other Buyer under any Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Buyer pursuant hereto or thereto, shall be deemed to
constitute the Buyers as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Buyers are in any way acting in concert or as a group with
respect to such obligations or the transactions contemplated by the Transaction Documents. Each
Buyer confirms that it has independently participated in the negotiation of the transaction
contemplated hereby with the advice of its own counsel and advisors. Each Buyer shall be entitled
to independently protect and enforce its rights, including, without limitation, the rights arising
out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for
any other Buyer to be joined as an additional party in any proceeding for such purpose.
[Signature Page Follows]
26
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
the Securities Purchase Agreement to be duly executed as of the date first written above.
COMPANY:
QIAO XING UNIVERSAL TELEPHONE, INC.
By: |
||||
Title: |
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
the Securities Purchase Agreement to be duly executed as of the date first written above.
BUYERS:
DKR SOUNDSHORE OASIS HOLDING FUND LTD.
By: |
||||
Title: |
IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to
the Securities Purchase Agreement to be duly executed as of the date first written above.
BUYERS:
CEDAR DKR HOLDING FUND LTD.
By: |
||||
Title: |
29
SCHEDULE OF BUYERS
(1) | (2) | (3) | (4) | (5) | ||||||||
Number of | Number of | Legal Representative’s | ||||||||||
Buyer | Address and Facsimile Number | Purchased Shares | Warrant Shares | Address and Facsimile Number | ||||||||
DKR SoundShore
Oasis Holding Fund Ltd. |
0000 Xxxx Xxxx Xxxxxx, 0xx Xxxxx Xxxxxxxx, XX 00000-0000 Attention: Xxxxxxx Xxxxxx Facsimile: (000) 000-0000 Telephone: (000) 000-0000 Residence: Bermuda |
1,800,000 | 360,000 | Xxxxxxx Xxxx & Xxxxx LLP 000 Xxxxx Xxxxxx Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxxxxx Xxxxx, Esq. Facsimile: (000) 000-0000 Telephone: (000) 000-0000 |
||||||||
CEDAR DKR Holding
Fund Ltd.
|
0000 Xxxx Xxxx Xxxxxx, 0xx Xxxxx Xxxxxxxx, XX 00000-0000 Attention: Xxxxxxx Xxxxxx Facsimile: (000) 000-0000 Telephone: (000) 000-0000 Residence: Cayman Islands |
200,000 | 40,000 | Xxxxxxx Xxxx & Xxxxx LLP 000 Xxxxx Xxxxxx Xxx Xxxx, Xxx Xxxx 00000 Attention: Xxxxxxx Xxxxx, Esq. Facsimile: (000) 000-0000 Telephone: (000) 000-0000 |
EXHIBITS
Exhibit A Form of Warrants
Exhibit B Form of Irrevocable Transfer Agent Instructions
Exhibit C Form of Secretary’s Certificate
Exhibit D Form of Officer’s Certificate
Exhibit B Form of Irrevocable Transfer Agent Instructions
Exhibit C Form of Secretary’s Certificate
Exhibit D Form of Officer’s Certificate
EXHIBIT A
32
EXHIBIT B
33
EXHIBIT C
34
EXHIBIT D
35