GUARANTY
Exhibit
99.7
GUARANTY, dated as of May ___, 2006 made by Qiao Xing Mobile Communications Co. Ltd., a company
organized under the laws of the British Virgin Islands (the “Guarantor”) in favor of DKR Soundshore
Oasis Holding Fund Ltd., a company organized under the laws of Bermuda and the other Buyers listed
on the Schedule of Buyers attached to the Securities Purchase Agreement referred to below (together
with their successors and permitted assigns, each, a “Buyer” and collectively, the “Buyers”).
W I T N E S S E T H:
WHEREAS, Qiao Xing Universal Telephone, Inc., a company incorporated under the laws of the
British Virgin Islands (the “Parent”), the Guarantor and each party listed as a Buyer on the
Schedule of Buyers attached thereto are parties to a Securities Purchase Agreement, dated as of the
date hereof (as amended, restated or otherwise modified from time to time, the “Securities Purchase
Agreement”);
WHEREAS, it is a condition precedent to the Buyers’ obligation under the Securities Purchase
Agreement that the Guarantor execute and deliver to the Buyer a guaranty guaranteeing all of the
obligations of the Parent thereunder; and
WHEREAS, the Guarantor has determined that its execution, delivery and performance of this
Guaranty directly benefits, and are within the corporate purposes and in the best interests of, the
Guarantor;
NOW, THEREFORE, in consideration of the premises and the agreements herein and in order to
induce the Buyers to perform under the Securities Purchase Agreement, the Guarantor hereby agrees
with the Buyers as follows:
SECTION 1. Definitions. Reference is hereby made to the Securities Purchase
Agreement and the Notes (as defined in the Securities Purchase Agreement) issued pursuant thereto
(as such Notes may be amended, restated, replaced or otherwise modified from time to time in
accordance with the terms thereof, collectively, the “Notes”) for a statement of the terms thereof.
All terms used in this Guaranty, which are defined in the Securities Purchase Agreement or the
Notes and not otherwise defined herein, shall have the same meanings herein as set forth therein.
SECTION 2. Guaranty. The Guarantor hereby unconditionally and irrevocably
guarantees the punctual payment, as and when due and payable, by stated maturity or otherwise, of
all obligations of the Parent from time to time owing by it in respect of the Securities Purchase
Agreement, the Notes and the other Transaction Documents, including, without limitation, all
interest that accrues after the commencement of any proceeding commenced by or against such Person
under any provision of the United States Bankruptcy Code (11 U.S.C. § 101, et
seq.), as amended, and any successor statute or under any other bankruptcy or insolvency
law, assignments for the benefit of creditors, formal or informal moratoria, compositions, or
extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief (an “Insolvency Proceeding”) of the Parent or the Guarantor, whether or not the
payment of such interest is unenforceable or is not allowable due to the existence of such
Insolvency Proceeding), and all fees, commissions, expense reimbursements, indemnifications
and all other amounts due or to become due under any of the Transaction Documents (such
obligations, to the extent not paid by the Parent, being the “Guaranteed Obligations”), and agrees
to pay any and all expenses (including reasonable counsel fees and expenses) reasonably incurred by
the Buyers in enforcing any rights under this Guaranty. Without limiting the generality of the
foregoing, the Guarantor’s liability hereunder shall extend to all amounts that constitute part of
the Guaranteed Obligations and would be owed by the Parent to the Buyers under the Securities
Purchase Agreement and the Notes but for the fact that they are unenforceable or not allowable due
to the existence of an Insolvency Proceeding involving the Guarantor or the Parent (each, a
"Transaction Party”).
(a) The Guarantor guarantees that the Guaranteed Obligations will be paid strictly in
accordance with the terms of the Transaction Documents, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of the
Buyers with respect thereto. The obligations of the Guarantor under this Guaranty are independent
of the Guaranteed Obligations, and a separate action or actions may be brought and prosecuted
against the Guarantor to enforce such obligations, irrespective of whether any action is brought
against any Transaction Party or whether any Transaction Party is joined in any such action or
actions. The liability of the Guarantor under this Guaranty shall be irrevocable, absolute and
unconditional irrespective of, and the Guarantor hereby irrevocably waives any defenses it may now
or hereafter have in any way relating to, any or all of the following:
(i) any lack of validity or enforceability of any Transaction Document or any agreement or
instrument relating thereto;
(ii) any change in the time, manner or place of payment of, or in any other term of, all or
any of the Guaranteed Obligations, or any other amendment or waiver of or any consent to departure
from any Transaction Document, including, without limitation, any increase in the Guaranteed
Obligations resulting from the extension of additional credit to any Transaction Party or
otherwise;
(iii) any taking, release or amendment or waiver of or consent to departure from any other
guaranty for all or any of the Guaranteed Obligations;
(iv) any change, restructuring or termination of the corporate, limited liability company or
partnership structure or existence of any Transaction Party; or
(v) any other circumstance (including any statute of limitations) or any existence of or
reliance on any representation by the Buyers that might otherwise constitute a defense available
to, or a discharge of, any Transaction Party or any other guarantor or surety.
This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time
any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by
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the Buyers or any other Person upon the insolvency, bankruptcy or reorganization of any Transaction
Party or otherwise, all as though such payment had not been made.
(b) This Guaranty is a continuing guaranty and shall (i) remain in full force and effect until
the indefeasible payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty and shall not terminate for any reason prior to the Maturity Date and
(ii) be binding upon the Guarantor and its respective successors and assigns. This Guaranty shall
inure to the benefit of and be enforceable by the Buyers and their successors, pledgees,
transferees and assigns. Without limiting the generality of the foregoing sentence, any Buyer may
pledge, assign or otherwise transfer all or any portion of its rights and obligations under any
Transaction Document to any other Person, and such other Person shall thereupon become vested with
all the benefits in respect thereof granted to such Buyer herein or otherwise, in each case as
provided in the Securities Purchase Agreement.
SECTION 4. Waivers. The Guarantor hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed Obligations and this Guaranty
and any requirement that the Buyers exhaust any right or take any action against any Transaction
Party or any other Person. The Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated herein and that the waiver set forth in this
Section 4 is knowingly made in contemplation of such benefits. The Guarantor hereby waives any
right to revoke this Guaranty, and acknowledges that this Guaranty is continuing in nature and
applies to all Guaranteed Obligations, whether existing now or in the future.
SECTION 5. Subrogation. The Guarantor may not exercise any rights that it may now
or hereafter acquire against any Transaction Party or any other guarantor that arise from the
existence, payment, performance or enforcement of the Guarantor’s obligations under this Guaranty,
including, without limitation, any right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or remedy of the Buyers against any
Transaction Party or any other guarantor, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without limitation, the right to take
or receive from any Transaction Party or any other guarantor, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or security solely on account of such
claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts
payable under this Guaranty shall have indefeasibly been paid in full in cash. If any amount shall
be paid to the Guarantor in violation of the immediately preceding sentence at any time prior to
the later of the payment in full in cash of the Guaranteed Obligations and all other amounts
payable under this Guaranty, such amount shall be held in trust for the benefit of the Buyers and
shall forthwith be paid to the Buyers to be credited and applied to the Guaranteed Obligations and
all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the
terms of the Transaction Documents. If (a) the Guarantor shall make payment to the Buyers of all
or any part of the Guaranteed Obligations, and (b) all of the Guaranteed Obligations and all other
amounts payable under this Guaranty shall indefeasibly be paid in full, in cash, the Buyers will,
at the Guarantor’s request and expense, execute and deliver to the Guarantor appropriate documents,
without recourse and without representation or warranty, necessary to evidence the transfer by
subrogation to the
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Guarantor of an interest in the Guaranteed Obligations resulting from such payment by the
Guarantor.
SECTION 6. Representations, Warranties and Covenants. The Guarantor hereby
represents and warrants as follows:
(a) The Guarantor (i) is a corporation, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization as set forth on the first page hereof, (ii)
has all requisite power and authority to conduct its business as now conducted and as presently
contemplated and to execute and deliver this Guaranty and each other Transaction Document to which
the Guarantor is a party, and to consummate the transactions contemplated hereby and thereby and
(iii) is duly qualified to do business and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it or in which the transaction of its business makes
such qualification necessary.
(b) The execution, delivery and performance by the Guarantor of this Guaranty and each other
Transaction Document to which the Guarantor is a party (i) have been duly authorized by all
necessary action, (ii) do not and will not contravene its charter or by-laws, its limited liability
company or operating agreement or its certificate of partnership or partnership agreement, as
applicable, or any applicable law or any contractual restriction binding on or otherwise affecting
the Guarantor or its properties, (iii) do not and will not result in or require the creation of any
lien (other than pursuant to any Transaction Document) upon or with respect to any of its
properties, and (iv) do not and will not result in any default, noncompliance, suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license, authorization or approval
applicable to it or its operations or any of its properties.
(c) No authorization or approval or other action by, and no notice to or filing with, any
governmental authority is required in connection with the due execution, delivery and performance
by the Guarantor of this Guaranty or any of the other Transaction Documents to which the Guarantor
is a party, except for the filing of registrations, filings or recordings as may be necessary to
perfect the lien purported to be created by any Transaction Documents to which the Guarantor is a
party.
(d) Each of this Guaranty and the other Transaction Documents to which the Guarantor is or
will be a party, when delivered, will be a legal, valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, suretyship or other similar laws.
(e) There is no pending or, to the best knowledge of the Guarantor, threatened action, suit or
proceeding affecting the Guarantor or to which any of the properties of the Guarantor is subject,
before any court or other governmental authority or any arbitrator that (i) if adversely
determined, could have a material adverse effect or (ii) relates to this Guaranty or any of the
other Transaction Documents to which the Guarantor is a party or any transaction contemplated
hereby or thereby.
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(f) The Guarantor (i) has read and understands the terms and conditions of the Securities
Purchase Agreement and the other Transaction Documents, and (ii) now has and will continue to have
independent means of obtaining information concerning the affairs, financial condition and business
of the Parent and the other Transaction Parties, and has no need of, or right to obtain from any
Buyer, any credit or other information concerning the affairs, financial condition or business of
the Parent or the other Transaction Parties that may come under the control of any Buyer.
(g) The Guarantor covenants and agrees that until indefeasible full and final payment of the
Guaranteed Obligations, it will comply with each of the covenants (except to the extent applicable
only to a public company) which are set forth in Section 4 of the Securities Purchase Agreement as
if the Guarantor were a party thereto.
SECTION 7. Right of Set-off. Upon the occurrence and during the continuance of
any Event of Default, any Buyer may, and is hereby authorized to, at any time and from time to
time, without notice to the Guarantor (any such notice being expressly waived by the Guarantor) and
to the fullest extent permitted by law, set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at any time owing by
any Buyer to or for the credit or the account of the Guarantor against any and all obligations of
the Guarantor now or hereafter existing under this Guaranty or any other Transaction Document,
irrespective of whether or not any Buyer shall have made any demand under this Guaranty or any
other Transaction Document and although such obligations may be contingent or unmatured. Each
Buyer agrees to notify the relevant Guarantor promptly after any such set-off and application made
by such Buyer, provided that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of the Buyers under this Section 7 are in addition to other
rights and remedies (including, without limitation, other rights of set-off) which the Buyers may
have under this Guaranty or any other Transaction Document in law or otherwise.
SECTION 8. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if to the Guarantor, to
it at its address set forth in the Securitites Purchase Agreement, or if to any Buyer, to it at its
address set forth in the Securities Purchase Agreement; or as to either such Person at such other
address as shall be designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 8. All such notices and other communications shall be
effective (i) if mailed (by certified mail, postage prepaid and return receipt requested), when
received or three Business Days after deposited in the mails, whichever occurs first; (ii) if
telecopied, when transmitted and confirmation is received, provided same is on a Business Day and,
if not, on the next Business Day; or (iii) if delivered, upon delivery, provided same is on a
Business Day and, if not, on the next Business Day.
SECTION 9. CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY OTHER TRANSACTION DOCUMENT MAY BE BROUGHT
IN XXX XXXXXX XX XXX XXXXX XX XXX XXXX IN THE COUNTY OF NEW YORK OR OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
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GUARANTOR HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE GUARANTOR HEREBY IRREVOCABLY
APPOINTS XXXXXX X. XXXXXXXXX, ESQ., WITH OFFICES AT 0000 XXX XXXXXXX, XXXXX 000, XXXXXXXXX XXXXXXX,
XXXXXXXX 00000 IN RESPECT OF ANY SUCH ACTION OR PROCEEDING AND FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, AT ITS ADDRESS FOR
NOTICES AS SET FORTH ON THE SIGNATURE PAGE HERETO AND TO XXXXXX X. XXXXXXXXX, ESQ., SUCH SERVICE TO
BECOME EFFECTIVE TEN (10) DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
BUYERS TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS
OR OTHERWISE PROCEED AGAINST THE GUARANTOR IN ANY OTHER JURISDICTION. THE GUARANTOR HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN
ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE GUARANTOR HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR NOTICE,
ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, THE GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS GUARANTY AND THE OTHER TRANSACTION DOCUMENTS.
SECTION 10. WAIVER OF JURY TRIAL, ETC. THE GUARANTOR HEREBY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS GUARANTY
OR THE OTHER TRANSACTION DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT
OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR ARISING FROM ANY FINANCING RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY OR
THE OTHER TRANSACTION DOCUMENTS, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL
BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THE GUARANTOR CERTIFIES THAT NO OFFICER,
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BUYER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT ANY
BUYER WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE
FOREGOING WAIVERS. THE GUARANTOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE BUYERS ENTERING INTO THIS AGREEMENT.
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SECTION 11. Taxes.
(a) All payments made by the Guarantor hereunder or under any other Transaction Document shall
be made in accordance with the terms of the Securities Purchase Agreement and shall be made without
set-off, counterclaim, deduction or other defense. All such payments shall be made free and clear
of and without deduction for any present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed on the net
income of the Buyers by the jurisdiction in which such Buyer is organized or where it has its
principal office (all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities, collectively or individually, “Taxes"). If the Guarantor shall be required to
deduct or to withhold any Taxes from or in respect of any amount payable hereunder or under any
other Transaction Document;
(i) the amount so payable shall be increased to the extent necessary so that after
making all required deductions and withholdings (including Taxes on amounts payable to the
Buyers pursuant to this sentence) the Buyers receive an amount equal to the sum they would
have received had no such deduction or withholding been made,
(ii) the Guarantor shall make such deduction or withholding,
(iii) the Guarantor shall pay the full amount deducted or withheld to the relevant
taxation authority in accordance with applicable law, and
(iv) as promptly as possible thereafter, the Guarantor shall send the Buyers an
official receipt (or, if an official receipt is not available, such other documentation as
shall be satisfactory to the Buyers) showing payment. In addition, the Guarantor agrees to
pay any present or future taxes, charges or similar levies which arise from any payment made
hereunder or from the execution, delivery, performance, recordation or filing of, or
otherwise with respect to, this Agreement or any other Transaction Document other than any
present or future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or from the execution, delivery
or registration of, or otherwise with respect to, this Agreement or any other Transaction
Document (collectively, “Other Taxes”).
(b) The Guarantor hereby indemnifies and agrees to hold the Buyers harmless from and against
Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 11) paid by any Buyer and any liability
(including penalties, interest and expenses for nonpayment, late payment or otherwise) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted. This indemnification shall be paid within 30 days from the date on which any
Buyer makes written demand therefor, which demand shall identify the nature and amount of Taxes or
Other Taxes.
(c) If the Guarantor fails to perform any of its obligations under this Section 11, the
Guarantor shall indemnify the Buyers for any taxes, interest or penalties that may become payable
as a result of any such failure. The obligations of the Guarantor under this
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Section 11 shall survive the termination of this Guaranty and the payment of the obligations and all
other amounts payable hereunder.
SECTION 12. Miscellaneous.
(a) The Guarantor will make each payment hereunder in lawful money of the United States of
America and in immediately available funds to the Buyers, at such address specified by the Buyers
from time to time by notice to the Guarantor.
(b) No amendment or waiver of any provision of this Guaranty and no consent to any departure
by the Guarantor therefrom shall in any event be effective unless the same shall be in writing and
signed by the Guarantor and the Buyers, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
(c) No failure on the part of any Buyer to exercise, and no delay in exercising, any right
hereunder or under any other Transaction Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder or under any Transaction Document preclude any
other or further exercise thereof or the exercise of any other right. The rights and remedies of
the Buyers provided herein and in the other Transaction Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies provided by law. The rights of the
Buyers under any Transaction Document against any party thereto are not conditional or contingent
on any attempt by the Buyers to exercise any of their rights under any other Transaction Document
against such party or against any other Person.
(d) Any provision of this Guaranty 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 portions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its successors and assigns, and
(ii) inure, together with all rights and remedies of the Buyers hereunder, to the benefit of the
Buyers and their respective successors, transferees and assigns. Without limiting the generality
of clause (ii) of the immediately preceding sentence, any Buyer may assign or otherwise transfer
its rights and obligations under the Securities Purchase Agreement or any other Transaction
Document to any other Person, and such other Person shall thereupon become vested with all of the
benefits in respect thereof granted to the Buyers herein or otherwise. The Guarantor agrees that
each participant shall be entitled to the benefits of Section 11 with respect to its participation
in any portion of the Notes as if it was a Buyer. None of the rights or obligations of the
Guarantor hereunder may be assigned or otherwise transferred without the prior written consent of
the Buyers.
(f) This Guaranty and the other Transaction Documents represent the entire agreement of the
Guarantor and the Buyers with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Guarantor or any Buyer relative to the subject
matter thereof not expressly set forth or referred to herein or in the other Transaction Documents.
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(g) Section headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
(h) THIS GUARANTY AND THE OTHER TRANSACTION DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE
CONTRARY IN ANOTHER TRANSACTION DOCUMENT) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN WITHOUT
REGARD TO CONFLICT OF LAW PRINCIPLES.
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed by an officer
thereunto duly authorized, as of the date first above written.
| QIAO XING MOBILE COMMUNICATIONS CO. LTD. | ||||||||
| By: | ||||||||
| Name: | ||||||||
| Title: | ||||||||
| Address: | [ | ] | ||||||
| [ | ] | |||||||
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