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CHTL NEW WEBSITE! NEW PR! HUNDRED OF MILLIONS IN FUNDING!!
ChinaTel Consummates an Amended and Restated Stock Purchase Agreement With Isaac and an Extension of Its Promissory Note
http://www.chinatelgroup.com/
.Companies:China Tel Group Inc..Press Release Source: ChinaTel Group, Inc. On Wednesday May 12, 2010, 8:00 am EDT
SAN DIEGO, May 12 /PRNewswire-FirstCall/ -- China Tel Group, Inc. (ChinaTel) (OTC Bulletin Board:CHTL.ob - News), a provider of high speed wireless broadband and telecommunications infrastructure engineering and construction services, today announced it has entered into an Amended and Restated Stock Purchase Agreement (SPA) with Isaac Organization, Inc. (Isaac) for up to $640 million in stock and warrants. The SPA provides that ChinaTel will sell up to 49% of its Series A common stock in installment payments from Isaac of up to $15 million or more per month through December 2011, aggregating up to $320 million, including the $11 million already paid, and receive up to $320 million more should Isaac exercise its warrants received in consideration for the full payment of the purchase price for the Series A common stock. ChinaTel will control the flow of investment by making regular funding requests to meet its deployment needs. Once Isaac has invested $205 million, ChinaTel has the unilateral right to cease making funding requests if it determines it is in its best interests.
ChinaTel also announced it has secured an extension of the maturity date of its $191 million promissory note to Trussnet Capital Partners (HK), Ltd. (TCP) until December 31, 2011.
ChinaTel's CEO, George Alvarez, explained: "The two contracts now better compliment each other. Isaac is comfortable knowing ChinaTel will have the resources to repay its promissory note to Trussnet Capital Partners (HK) Ltd. in a timely manner."
"We are extremely excited about finally completing a defined roadmap to ensure that we reach our destination. With Isaac as our financial partner and working as a team, we are now focused and will be able to deploy the most extensive wireless broadband network in the world," exclaimed Colin Tay, the President of ChinaTel.
About China Tel Group, Inc.
China Tel Group, Inc. (ChinaTel), through its controlled subsidiaries, provides fixed telephony, conventional long distance, high-speed wireless broadband and telecommunications infrastructure engineering and construction services. ChinaTel is presently building, operating and deploying networks in Asia and South America: a 3.5GHz wireless broadband system in 29 cities across the People's Republic of China (PRC) with and for CECT-Chinacomm Communications Co., Ltd., a PRC company that holds a license to build the high speed wireless broadband system; and a 2.5GHz wireless broadband system in cities across Peru with and for Perusat, S.A., a Peruvian company that holds a license to build high speed wireless broadband systems. ChinaTel's vision remains clear: (i) to acquire and operate wireless broadband networks in key markets throughout the world; (ii) to deliver a new world of communications; and (iii) and invest in building long-lasting relationships with customers and partners to lead the broadband industry in customer service and responsiveness. Our strategy is to build leading-edge IP-leveraged solutions advanced by our worldwide infrastructure and leadership in emerging markets. http://chinatelgroup.com/
About Isaac Organization
Isaac Organization, Inc. (Isaac) is a leading global private investment firm, with approximately $5 billion worth of projects under management across a family of funds. Isaac invests in companies across a broad range of geographies, including the United States, Canada, China, Taiwan and South Korea. Guided by a thorough approach to due diligence execution, research and market analysis, Isaac has found one financial truth to be inviolate: growth and real wealth happens over time and scrupulous due diligence. Isaac's various funds invest in commercial real estate buildings leased by several agencies of the United States federal government, as well as by hospitals, medical clinics and other industries, including technology, telecommunications and entertainment companies. Isaac is also involved in urban development projects in Asia.
Safe Harbor Statement
This press release contains forward-looking statements that involve risks and uncertainties. Actual results, events and performances could vary materially from those contemplated by these forward-looking statements. These statements involve known and unknown risks and uncertainties, which may cause the Company's actual results, expressed or implied, to differ materially from expected results. These risks and uncertainties include, among other things, product demand and market competition. You should independently investigate and fully understand all risks before making an investment decision.
Contacts:
Retail Investors
Tim Matula
ChinaTel Group, Inc.
Investor Relations
(Toll Free) 1-877-260-9170
investors@chinatelgroup.com
CHTL NEW WEBSITE! NEW PR! HUNDRED OF MILLIONS IN FUNDING!!
ChinaTel Consummates an Amended and Restated Stock Purchase Agreement With Isaac and an Extension of Its Promissory Note
http://www.chinatelgroup.com/
.Companies:China Tel Group Inc..Press Release Source: ChinaTel Group, Inc. On Wednesday May 12, 2010, 8:00 am EDT
SAN DIEGO, May 12 /PRNewswire-FirstCall/ -- China Tel Group, Inc. (ChinaTel) (OTC Bulletin Board:CHTL.ob - News), a provider of high speed wireless broadband and telecommunications infrastructure engineering and construction services, today announced it has entered into an Amended and Restated Stock Purchase Agreement (SPA) with Isaac Organization, Inc. (Isaac) for up to $640 million in stock and warrants. The SPA provides that ChinaTel will sell up to 49% of its Series A common stock in installment payments from Isaac of up to $15 million or more per month through December 2011, aggregating up to $320 million, including the $11 million already paid, and receive up to $320 million more should Isaac exercise its warrants received in consideration for the full payment of the purchase price for the Series A common stock. ChinaTel will control the flow of investment by making regular funding requests to meet its deployment needs. Once Isaac has invested $205 million, ChinaTel has the unilateral right to cease making funding requests if it determines it is in its best interests.
ChinaTel also announced it has secured an extension of the maturity date of its $191 million promissory note to Trussnet Capital Partners (HK), Ltd. (TCP) until December 31, 2011.
ChinaTel's CEO, George Alvarez, explained: "The two contracts now better compliment each other. Isaac is comfortable knowing ChinaTel will have the resources to repay its promissory note to Trussnet Capital Partners (HK) Ltd. in a timely manner."
"We are extremely excited about finally completing a defined roadmap to ensure that we reach our destination. With Isaac as our financial partner and working as a team, we are now focused and will be able to deploy the most extensive wireless broadband network in the world," exclaimed Colin Tay, the President of ChinaTel.
About China Tel Group, Inc.
China Tel Group, Inc. (ChinaTel), through its controlled subsidiaries, provides fixed telephony, conventional long distance, high-speed wireless broadband and telecommunications infrastructure engineering and construction services. ChinaTel is presently building, operating and deploying networks in Asia and South America: a 3.5GHz wireless broadband system in 29 cities across the People's Republic of China (PRC) with and for CECT-Chinacomm Communications Co., Ltd., a PRC company that holds a license to build the high speed wireless broadband system; and a 2.5GHz wireless broadband system in cities across Peru with and for Perusat, S.A., a Peruvian company that holds a license to build high speed wireless broadband systems. ChinaTel's vision remains clear: (i) to acquire and operate wireless broadband networks in key markets throughout the world; (ii) to deliver a new world of communications; and (iii) and invest in building long-lasting relationships with customers and partners to lead the broadband industry in customer service and responsiveness. Our strategy is to build leading-edge IP-leveraged solutions advanced by our worldwide infrastructure and leadership in emerging markets. http://chinatelgroup.com/
About Isaac Organization
Isaac Organization, Inc. (Isaac) is a leading global private investment firm, with approximately $5 billion worth of projects under management across a family of funds. Isaac invests in companies across a broad range of geographies, including the United States, Canada, China, Taiwan and South Korea. Guided by a thorough approach to due diligence execution, research and market analysis, Isaac has found one financial truth to be inviolate: growth and real wealth happens over time and scrupulous due diligence. Isaac's various funds invest in commercial real estate buildings leased by several agencies of the United States federal government, as well as by hospitals, medical clinics and other industries, including technology, telecommunications and entertainment companies. Isaac is also involved in urban development projects in Asia.
Safe Harbor Statement
This press release contains forward-looking statements that involve risks and uncertainties. Actual results, events and performances could vary materially from those contemplated by these forward-looking statements. These statements involve known and unknown risks and uncertainties, which may cause the Company's actual results, expressed or implied, to differ materially from expected results. These risks and uncertainties include, among other things, product demand and market competition. You should independently investigate and fully understand all risks before making an investment decision.
Contacts:
Retail Investors
Tim Matula
ChinaTel Group, Inc.
Investor Relations
(Toll Free) 1-877-260-9170
investors@chinatelgroup.com
Just out!! CHTL RECEIVES $320 MILLION IN FUNDING!!!!!
http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=7249796
China Tel Group Inc (Form: 8-K, Received: 05/12/2010 09:08:05)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
May 9, 2010
Date of Report (date of Earliest Event Reported)
CHINA TEL GROUP INC.
(Exact Name of Registrant as Specified in its Charter)
NEVADA 98-0489800
(State or Other Jurisdiction of
Incorporation or Organization) (Commission File No.) (I.R.S. Employer
Identification No.)
12526 High Bluff Drive, Suite 155, San Diego, CA 92130
(Address of principal executive offices and zip code)
(858) 259-6614
(Registrant’s telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed from last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions ( see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into Material Definitive Agreement.
Amended and Restated Stock Purchase Agreement
On February 9, 2010, the Company and Isaac Organization, Inc., a Canadian
corporation (“Isaac”), entered into a Stock Purchase Agreement (“Isaac
Agreement”). On March 5, 2010, the Company and Isaac entered into an Amendment
to Stock Purchase Agreement (“First Isaac Amendment”), the effect of which was
to amend the terms of the Isaac Agreement. The Company has received a total of
$11,000,000 paid under the Isaac Agreement and First Isaac Amendment. On March
31, 2010, Isaac withheld payment of an installment payment due under the terms
of the First Isaac Amendment and expressed a desire to renegotiate the terms of
the agreement between the Company and Isaac based on developments involving a
separate Stock Purchase Agreement between the Company and Excel Era Limited
(“Excel”) reported by the Company on the same Form 8-K reports as described in
the Isaac Agreement and the First Isaac Amendment.
On May 9, 2010, the Company and Isaac entered into an Amended and Restated Stock
Purchase Agreement (“A&R Isaac SPA”), the material terms of which are as
follows:
· Isaac shall purchase of up to 49% of the shares of the Company’s Series
A common stock (each a “Share”) for a purchase price of up to
$320,000,000, including the $11,000,000 paid under the Isaac Agreement and
First Isaac Amendment.
· The purchase price is payable in monthly installments of up to
$15,000,000 or more commencing May 1, 2010 through December 1, 2011, with
the unpaid balance of the purchase price payable on December 31, 2011.
The Company must make a funding request for installment payments under the
A&R Isaac SPA, which Isaac must pay within 30 days. The Company may make
one or more funding requests of up to $15,000,000 in the aggregate per
calendar month, or more if the parties agree in writing.
· Upon receipt of each installment, the Company shall issue and deliver to
Isaac the number of Shares that the dollar amount of the installment bears
to $1.50 per Share.
· The Company shall also issue and deliver to Isaac for each dollar paid
one warrant (“Warrant”) granting the right to acquire one Share. Each
Warrant has a term of three years from the date of issuance in which the
holder may exercise the Warrant at an exercise price of $1.00 per Share,
unless the parties agree in writing to a cashless exercise. Therefore,
the total amount to be paid to the Company for the Warrants is up to
$320,000,000 in addition to the purchase price of up to $320,000,000.
· Isaac is entitled to issuance of additional Shares under a fully diluted
calculation to be performed commencing June 1, 2010 and the first calendar
day of every third month thereafter until the purchase price is paid in
full or the A&R Isaac SPA is otherwise terminated, such that between the
total shares, as of each calculation date, the number of Shares issued to
Isaac shall bear the same ratio to 49% of the total Shares the paid
portion of the purchase price bears to the total purchase price. The
number of Warrants and Shares issued upon exercise of Warrants (“Warrant
Shares”) is excluded from both the numerator and the denominator in making
the fully diluted calculation.
· The Parties intend to enter into a separate Registration Rights
Agreement, under which Shares and Warrants issued to Isaac may enjoy
“piggyback” rights, if the Company registers any of its Shares in the
future.
· The Company has the right to terminate Isaac’s rights under the A&R
Isaac SPA under two circumstances. First, if Isaac fails to pay any
installment after a funding request and before expiration of a grace
period, the Company may issue a notice of termination for monetary
default, in which event the Company is entitled to cancel 10% of the
Shares, Warrants and Warrant Shares previously issued to Isaac. Second,
at any time after Isaac has paid $205,000,000 of the purchase price, the
Company may issue a notice of termination at the Company’s option, in
which event Isaac is entitled to receive Shares representing 10% of the
sum of: (i) all Shares and Warrant Shares previously issued; and (ii) all
Shares represented by Warrants previously issued to Isaac that have not
been exercised.
· Isaac is entitled to designate two members of the Company’s Board of
Directors.
· As a condition to the execution of the A&R Isaac SPA, the Company and
Trussnet Capital Partners (HK) Ltd. (“TCP”) executed an agreement
extending the maturity date of the Company’s Promissory Note with TCP
until December 31, 2011.
A fully executed copy of the A&R Isaac SPA is attached hereto and incorporated
by reference herein as Exhibit 99.1 to this Form 8-K.
Amendment of Promissory Note
On March 9, 2009, the Company filed a Form 8-K to report it had entered into an
Asset Purchase Agreement with Trussnet Capital Partners (HK) Ltd., a Hong Kong
limited liability company (“TCP”), which included a Promissory Note from the
Company to TCP in the amount of $191,000,000 (“Note”). The Note has been
previously amended pursuant to a First Amendment of Promissory Note, effective
as of March 5, 2010 (“(First Amendment”), a Second Amendment to Promissory Note,
effective as of March 16, 2010 (“Second Amendment”) and a Third Amendment to
Promissory Note, effective as of April 9, 2010 (“Third Amendment”) reported by
amended Form 8-K filings made March 5, 2010, March 18, 2010, and April 9, 2010,
respectively.
On May 9, 2010, the Company and TCP executed a Fourth Amendment to Promissory
Note (“Fourth Amendment”), the material terms of which are as follows:
· The First Amendment, Second Amendment and Third Amendment are of no
further force and effect, except as restated in the Fourth Amendment.
· The interest rate of the Note is increased from 8% to 10%, effective
March 9, 2010.
· The maturity date of the Note is extended to December 31, 2011, in
exchange for the extension fees set forth in the attached Fourth Amendment
on the original $191,000,000 principal balance of the Note.
· TCP is entitled to accept any or all of the interest accrued and/or
extension fees incurred pursuant to the Note in the form of shares of the
Company’s Shares issued at a price per share of the lesser of: (i)
ninety-five cents ($.095); or (ii) eighty percent (80%) of the volume
weighted average of the closing bid price for the Shares on the Over The
Counter Bulletin Board quotation system for the ten (10) day period prior
to the date TCP delivers a written election to receive such payment in the
form of Shares. TCP has elected to receive Shares for the difference
between the total amount due under the Note and the original $191,000,000
principal balance of the Note.
· TCP agrees to pay towards its contract to acquire 49% of the shares of
Chinacomm Ltd., a Cayman Islands corporation, all amounts the Company pays
to TCP to reduce the principal balance due under the Note.
A copy of the Fourth Amendment is attached hereto and incorporated by reference
herein as Exhibit 99.2.
Lastly, as of May 12, 2010, the Company issued a press release announcing the
signing of the A&R Isaac SPA and the Fourth Amendment. A copy of the press
release is attached hereto and incorporated by reference herein as Exhibit 99.3
to this Form 8-K.
Item 3.02 Unregistered Sales of Equity Securities
See Item 1.01 above for a description of the A&R Isaac SPA.
Item 9.01 Exhibits.
99.1 Amended and Restated Stock Purchase Agreement between China Tel
Group, Inc. and Isaac Organization, Inc.
99.2 Fourth Amendment to Promissory Note from China Tel Group, Inc. to
Trussnet Capital Partners (HK) Ltd.
99.3 Press Release dated May 12, 2010
Signature
Pursuant to the requirements of the Securities and Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CHINA TEL GROUP, INC.
Date: May 11, 2010 By: /s/ George Alvarez
Name: George Alvarez
Title: Chief Executive Officer
EXHIBIT 99.1
CHINA TEL GROUP, INC.
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
WITH ISAAC ORGANIZATION, INC.
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
THIS AMENDED AND RESTATED STOCK PURCHASE AGREEMENT is made as of the 9th day of
May 2010 (“Agreement”) by and between China Tel Group, Inc . , a Nevada
corporation (“Company”), and Isaac Organization, Inc., a Canadian corporation
organized under the laws of Ontario (“Purchaser”). The Company and the
Purchaser are each sometimes referred to individually in this Agreement as a
“Party” and together as “Parties.”
RECITALS
A. On February 9, 2010, the Company and the Purchaser entered into a
Stock Purchase Agreement (“Isaac SPA”). The Isaac SPA provides for the
Purchaser to acquire 55,199,934 newly issued Shares (representing 12% of the
total issued and outstanding Shares) in exchange for the payment of $160,000,000
(“Isaac Issued Stock”) The Purchaser received the Isaac Issued Stock and made
one installment payment of One Million Dollars ($1,000,000.00) pursuant to the
provisions of the Isaac SPA;
B. On March 5, 2010, the Purchaser and Isaac entered into an
Amendment to the Isaac SPA (“First Isaac Amendment”). The First Isaac Amendment
provides that the number of Shares to be purchased by the Purchaser increased to
106,399,869 (representing 24% of the total issued and outstanding Shares). The
total purchase price increased to Three Hundred Twenty Million Dollars
($320,000,000). The installment dates and amounts to be paid were amended in
accordance with the First Isaac Amendment. The Purchaser made installment
payments totaling Ten Million Dollars ($10,000,000) called for in the First
Isaac Amendment. The Company neither issued the Purchaser a certificate for the
increased shares called for under the First Isaac Amendment nor cancelled the
Isaac Issued Stock;
C. On March 31, 2010, the Purchaser withheld making a Twenty Million
Dollar ($20,000,000) installment payment called for under the First Isaac
Amendment, as the Purchaser expressed a desire to renegotiate its terms in light
of recent developments with Excel Era Limited (“Excel”), another investor who
failed to make a Two Hundred Thirty-Nine Million ($239,000,000) installment
payment that was due on March 31, 2010 pursuant to a stock purchase agreement,
as amended, between Excel and the Company; and
D. The Purchaser has indicated it is unwilling to perform under the
Isaac SPA, as amended by the First Isaac Amendment, because of Excel’s failure
to perform under its stock purchase agreement, as amended, with the Company.
The Purchaser has offered to purchase up to 49% of the Company’s issued and
outstanding Shares for the Purchase Price of Three Hundred Twenty Million
Dollars ($320,000,000) and up to 320,000,000 Warrants at a cost of One Dollar
($1.00) for each Warrant. The Company has agreed to accept the offer on the
terms and conditions set forth below.
NOW, THEREFORE, for good and valuable consideration, the Parties to this
Agreement agree as follows:
AGREEMENT
1. Purchase and Sale of Series A Common Stock . The securities that are the
subject of this Agreement are shares of the Company’s Series A common stock
(“Shares”) and warrants granting the Purchaser a right to purchase Shares as
described in Sections 1.3 and 1.4 of this Agreement (“Warrants”). Shares do not
include any interest in the Company’s Series B common stock or the Company’s
preferred stock.
Page 1 of 20
1.1. Sale and Issuance of Series A Common Stock . Subject to the terms and
conditions of this Agreement, the Company shall issue, sell and deliver to the
Purchaser or its nominee(s); and the Purchaser shall purchase from the Company
up to 49% of the Total Shares as of the date of a Fully Diluted Calculation
(“Purchased Shares”). In addition, on each of the following dates or events,
the Company shall perform a Fully Diluted Calculation (as defined below), and
the Company shall issue and deliver to the Purchaser the number of Additional
Shares that result from a Fully Diluted Calculation: June 1, 2010; September 1,
2010; November 1, 2010; March 1, 2011; June 1, 2011; September 1, 2011; November
1, 2011; and January 2, 2012 (each date a “Fully Diluted Calculation Date”) .
If the Company delivers a Notice of Termination at Company’s Option, as soon as
reasonably possible, but in no event later than thirty (30) days thereafter, the
Company shall perform a Fully Diluted Calculation in lieu of any subsequent
Fully Diluted Calculation Date.
1.2. Purchase Price . The purchase price (“Purchase Price”) for 49% of the
Total Shares is Three Hundred Twenty Million Dollars ($320,000,000). The
Purchase Price is payable in the following installments: a credit for the Eleven
Million Dollars ($11,000,000) previously paid by the Purchaser called for in the
Isaac SPA and the First Isaac Amendment; at the Company’s option in such amounts
and at such times as designated by the Company’s Board of Directors (“Board”) up
to Fifteen Million Dollars ($15,000,000), or more if the Parties agree in
writing, payable during each calendar month, commencing May 1, 2010 and every
succeeding calendar month through and including December 1, 2011; (each payment
an “Installment”); and the remaining balance of the Purchase Price on or before
December 31, 2011 (“Final Installment”). Every Installment , including the
Final Installment shall be payable only following a Funding Request from the
Company (as defined in Section 1.8 below) and shall be subject to a Grace Period
(as also defined in Section 1.8 below).
1.3. Warrants . Upon receipt by the Company of any payment the Purchaser
makes towards the Purchase Price, the Company shall also issue and deliver to
the Purchaser one (1) Warrant for each dollar of the Purchase Price paid .
1.4. Closing; Delivery . The “Closing” shall take place when each of the
following events have occurred: (i) the Purchaser has surrendered to the Company
for cancellation the Isaac Issued Stock; (ii) the Company has sent to its Stock
Transfer Agent a letter directing the Stock Transfer Agent to issue to the
Purchaser or its nominee(s) one or more certificates representing: (x) 666,667
Shares for the One Million Dollars ($1,000,000) previously paid to the Company,
(y) 6,666,667 Shares for Ten Million Dollars ($10,000,000) previously paid to
the Company; and (z) 11,000,000 Warrants pursuant to this Agreement; and (iii)
the Company has secured an extension of the maturity date of its One Hundred
Ninety One Million Dollar ($191,000,000) Promissory Note (“TCP Note”) with
Trussnet Capital Partners (HK) Ltd. (“TCP”) until at least December 31, 2011.
Each payment applicable to the Purchase Price shall be made by wire transfer to
a bank account designated by the Company, or as otherwise agreed between the
Parties in writing. Within five (5) days of the Company’s receipt of any
Installment payment, the Company shall issue and deliver Shares to the Purchaser
at the rate of one Share for each One and One-Half Dollars ($1.50) of the
Purchase Price paid to the Company. The Company shall issue and deliver
Additional Shares to the Purchaser on each Fully Diluted Calculation Date (as
defined in Section 1.8 below) .
1.5. Termination of Purchase Rights .
(a) Termination for Monetary Default . Upon the Purchaser’s failure to pay
any Installment following receipt of a Funding Request and after expiration of
the Grace Period, the Company shall have the right, in addition to all other
legal and equitable rights, to deliver to the Purchaser a notice of Termination
Notice for Monetary Default (“Notice of Monetary Default”). Upon delivery of a
Notice of Monetary Default, the Company shall cancel on its books and records;
and the Purchaser shall surrender for cancellation, certificates in the name of
the Purchaser representing ten percent (10%) of: (i) the aggregate number of
Shares previously issued upon exercise of any Warrants and delivered to the
Purchaser upon payment towards the Purchase Price; (ii) the aggregate number of
Warrant Shares previously issued to the Purchaser; and (iii) the aggregate
number of Warrants issued and delivered to the Purchaser that have not been
exercised. The Purchaser shall deliver these Shares and Warrants within five
(5) days of the delivery of Notice to do so. The books and records of the
Company and its transfer agent shall reflect the foregoing cancellations,
whether or not the Purchaser duly surrenders such certificates for cancellation
in accordance with this Section 1.5(a). Any certificates held by the Purchaser
which should have been surrendered for cancellation, but were not, shall be null
and void. The Purchaser shall also forfeit ten percent (10%) of Purchaser’s
rights to receive Additional Shares pursuant to any Fully Diluted Calculation.
Page 2 of 20
(b) Restrictions on Transfer . In addition to any restrictions that may apply
generally to the Shares as described in Section 3.3, in order to protect the
Company’s right to cancel certificates previously issued to the Purchaser upon
the Company’s delivery of a Notice of Monetary Default, the Purchaser shall not,
prior to either: (i) payment in full of the Purchaser Price; or (ii) Termination
of Purchase Rights at the Company’s Option, sell, transfer, distribute or
otherwise convey more than ninety percent (90%) of the sum of: (x) the aggregate
number of Shares previously issued and delivered to the Purchaser upon payment
towards the Purchase Price; (y) the aggregate number of Warrant Shares
previously issued and delivered to the Purchaser; and (z) the aggregate number
of Warrants previously issued and delivered to the Purchaser that have not been
exercised. The Company shall have the right to issue certificates for up to ten
percent (10%) of the aggregate number of Shares, Warrant Shares and Warrants
delivered to the Purchaser which bears a special restrictive legend alerting
potential transferees of this restriction. The Purchaser shall be entitled to
have the special restrictive legend removed from any certificates by issuance of
replacement certificates, provided other certificates issued to the Purchaser
totaling ten percent (10%) of the aggregate number of Shares, Warrant Shares and
Warrants at all times bear the special restrictive legend. The special
restrictive legend shall be removed from all certificates upon: (i) payment in
full of the Purchase Price; (ii) Termination at Company’s Option; or (iii) a
written agreement between the Parties to do so.
(c) Termination at Company’s Option . At any time after the Purchaser has
purchased at least Two Hundred Five Million Dollars ($205,000,000) in Shares,
the Company shall have the right, in its sole discretion, to deliver to the
Purchaser a notice of Termination at Company’s Option (“Notice at Company’s
Option”). The Notice at Company’s Option shall have no effect on any then
pending Funding Request, but shall extinguish the Company’s rights to make
additional Funding Requests and to receive that portion of the Purchaser Price
represented by such additional Funding Requests. Within ten (10) days of the
Purchaser’s receipt of a Notice at Company’s Option, the Company shall issue and
deliver to the Purchaser certificates representing ten percent (10%) of the sum
of: the (i) aggregate number of Shares previously issued and delivered to the
Purchaser upon payment towards the Purchase Price; (ii) aggregate number of
Warrant Shares previously issued and delivered to the Purchaser; and (iii)
aggregate number of Shares represented by Warrants previously issued and
delivered to the Purchaser that have not been exercised.
1.6. Restrictions on the Company’s Use of Proceeds of the Purchaser Price .
Unless otherwise expressly agreed between the Parties in writing, all payments
by the Purchaser pursuant to this Agreement must be used by the Company
exclusively for: (i) the deployment of wireless broadband telecommunications
networks in any country in which the Company currently has or in the future
acquires rights to do so (which includes payments to CECT-Chinacomm
Communications Co. Ltd. (“Chinacomm”) and/or Chinacomm Ltd. for deployment of
the Chinacomm telecommunications network in the Peoples Republic of China); (ii)
the Company’s sales, administrative or other general expenses.
1.7. Registration Rights Agreement . The Parties shall enter into a
registration rights agreement (“Registration Rights Agreement”), pursuant to
which the Company shall provide the Purchaser with piggyback registration
rights.
Page 3 of 20
1.8. Defined Terms Used in this Agreement . In addition to the terms defined
elsewhere in this Agreement, the following terms used in this Agreement shall be
construed to have the meanings set forth or referenced below.
“Additional Shares” means Shares issued and delivered to the Purchaser or its
nominee(s), that are in addition to Purchased Shares, in an amount to be
determined based on the Fully Diluted Calculation.
“Affiliate” means, with respect to any specified Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with such Person, including, without limitation, any general partner, managing
member, officer or director of such Person or any venture capital fund now or
hereafter existing that is controlled by one or more general partners or
managing members of, or shares the same management company with, such Person.
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Intellectual Property” means all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
trade secrets, licenses, domain names, mask works, information and proprietary
rights and processes as are necessary to the conduct of the Company’s business
as now conducted and as presently proposed to be conducted.
“Dollar” or “Dollars” means the currency of the United States.
“Exchange Act” means the Securities Exchange of 1934, as amended, and the rules
and regulations promulgated thereunder.
“Fully Diluted Calculation” means the calculation described in Section 1.1 to
determine the Additional Shares to be issued to the Purchaser. A Fully Diluted
Calculation shall mean that the Purchased Shares, excluding Warrants, Warrant
Shares and Additional Shares, shall bear the same ratio to forty nine percent
(49%) of the Total Shares that the paid portion of the Purchase Price bears to
the total Purchase Price. Total Shares means the sum of: (i) the number of
Shares issued and outstanding on the date of the Fully Diluted Calculation; and
(ii) the number of Shares that are subject to issuance for: (x) convertible
securities of the Company, and (y) options, warrants and other rights entitling
any holder to purchase Shares, whether or not such rights have been exercised;
provided, however, that the Warrants, Warrant Shares and the Additional Shares
issued to the Purchaser pursuant to this Agreement shall be excluded from the
calculation of Total Shares. The Fully Diluted Calculation does not include any
interest in the Company’s Series B common stock or the Company’s preferred stock
.
“Funding Request” means a Notice made by the Company and delivered to the
Purchaser in accordance with Section 6.5 directing the Purchaser to pay all or a
portion of the next Installment described in Section 1.2. Each Funding Request
shall include: (i) the amount of the funding request; and (ii) the account
information, including wire transfer instructions, for the particular account of
the Company or any subsidiary of the Company to which payment should be made.
The Purchaser’s failure to pay timely any amount set forth in a Funding Request
and before expiration of the Grace Period, shall provide the Company the right
to send the Purchaser a Notice Monetary Default.
“Grace Period” means thirty (30) calendar days after a Funding Request has been
delivered to the Purchaser.
“Key Employee” means any executive-level employee (including all vice
president-level positions) as well as any employee or consultant who either
alone or in concert with others develops, invents, programs or designs any
Company Intellectual Property.
Page 4 of 20
“Knowledge,” including the phrase “to the Company’s knowledge,” shall mean the
actual knowledge, after reasonable investigation, of the following officers of
the Company: (i) George Alvarez; (ii) Tay Yong Lee (“Colin Tay”); and (iii)
Mario Alvarez.
“Material Adverse Effect” means a material adverse effect on the business,
assets (including intangible assets), liabilities, financial condition,
property, or results of operations of the Company.
“Person” means any individual, corporation, partnership, trust, limited
liability company, association or other entity.
“Purchaser” means Isaac Organization, Inc., a Canadian corporation.
“Securities” means the Purchased Shares, the Additional Shares, the Warrants and
the Warrant Shares.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
“Share” means one share of the Series A common stock of the Company, and any and
all securities of any kind whatsoever of the Company or any successor thereof
which may be issued on or after the date of this Agreement in respect of, in
exchange for, or upon conversion of such Series A common stock of the Company
pursuant to a merger, consolidation, stock split, reverse split, stock dividend,
or recapitalization of the Company. Share does not include the Company’s Series
B common stock or the Company’s preferred stock.
“Total Shares” means all Shares that are issued and outstanding from time to
time, subject to a Fully Diluted Calculation defined above.
“Transaction Documents” means this Agreement, the Registration Rights Agreement,
the Warrants and any agreements or certificates entered into pursuant to this
Agreement.
“Warrant” means a warrant in a form agreed to by the Board and the Purchaser and
delivered to the Purchaser in accordance with Section 1.3, granting the holder
thereof the right to purchase one (1) Share. Each Warrant shall provide: (i) a
term of exercise equal to three (3) years from the date of issuance of each
Warrant; (ii) an exercise price equal to One Dollar ($1.00) per Share, unless
the Parties mutually agree in writing to a cashless exercise; and (iii)
“piggyback” registration rights .
“Warrant Share” means a Share issuable upon the exercise of a Warrant.
2. Representations and Warranties of the Company . The Company hereby
represents and warrants to the Purchaser that, except as set forth on the
“Disclosure Schedule” attached to this Agreement as Exhibit A which identifies
exceptions that shall be deemed to be part of the representations and warranties
made hereunder, the following representations are true and complete as of the
date of the Agreement. The Disclosure Schedule shall qualify other subsections
in this Section 2 only to the extent it is readily apparent from a reading of
the Disclosure Schedule that such disclosure is applicable to such other
subsections.
2.1 Organization, Good Standing, Corporate Power and Qualification .
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada and has all requisite corporate
power and authority to carry on its business as presently conducted and as
proposed to be conducted. The Company is duly qualified to transact business
and is in good standing in each jurisdiction in which the failure to so qualify
would have a Material Adverse Effect.
Page 5 of 20
2.2 Subsidiaries . Each of the Company’s subsidiaries
(“Subsidiaries”) is duly organized and existing under the laws of its
jurisdiction of organization and is in good standing under such laws. None of
the Company’s Subsidiaries owns or leases property or engages in any activity in
any United States jurisdiction that might require its qualification to do
business as a foreign corporation and in which the failure so to qualify would
have a Materially Adverse Effect .
2.3 Authorization . All corporate actions required to be taken by
the Board and shareholders in order to authorize the Company to enter into the
Transaction Documents and to issue the Securities have been taken or will be
taken prior to the Closing described in Section 1.3 above. All actions on the
part of the officers of the Company necessary for the execution and delivery of
the Transaction Documents, the performance of all obligations of the Company
under the Transaction Documents to be performed as of the Closing, and the
issuance and delivery of the Securities has been taken in accordance with this
Agreement. The Transaction Documents, when executed and delivered by the
Company, shall constitute valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms
except: (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, or other laws of general application relating
to or affecting the enforcement of creditors’ rights generally; or (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
2.4 Valid Issuance of Securities . The Securities, when issued,
sold and delivered in accordance with the terms and for the consideration set
forth in this Agreement, will be validly issued, fully paid and non assessable
and free of restrictions on transfer other than restrictions on transfer under
this Agreement, applicable state and federal securities laws and liens or
encumbrances created by or imposed by the Purchaser. Assuming the accuracy of
the representations of the Purchaser in Section 3 and subject to the
restrictions described in Section 3.4 below, the Securities will be issued in
compliance with all applicable federal and state securities laws.
2.5 Litigation . Except as set forth on the Disclosure Schedule,
there is no claim, action, lawsuit, proceeding, arbitration, complaint, or
charge pending or, to the Company’s knowledge, currently threatened in writing:
(i) against the Company or any officer, director or Key Employee of the Company
arising out of their employment or Board relationship with the Company; or (ii)
to the Company’s knowledge, that questions the validity of the Agreement or the
right of the Company to enter into or to consummate the transactions
contemplated by the Agreement. Neither the Company nor, to the Company’s
knowledge, any of its officers, directors or Key Employees is a party or is
named as subject to the provisions of any order, writ, injunction, judgment or
decree of any court or government agency or instrumentality (in the case of
officers, directors or Key Employees, such as would affect the Company). Except
as identified in the Disclosure Schedule, there is no action, lawsuit,
proceeding or investigation by the Company pending or which the Company intends
to initiate. The foregoing includes, without limitation, actions, lawsuits,
proceedings or investigations pending or threatened in writing (or any basis
therefore known to the Company) involving the prior employment of any of the
Company’s employees, their services provided in connection with the Company’s
business, or any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers.
2.6 Intellectual Property . To the Company’s knowledge, the Company
owns or possesses sufficient legal rights to all Company Intellectual Property
without any known conflict with, or infringement of, the rights of others. To
the Company’s knowledge, no product or service marketed or sold (or proposed to
be marketed or sold) by the Company violates or will violate any license or
infringes or will infringe any intellectual property rights of any other party.
Page 6 of 20
(a) Other than with respect to commercially available software products under
standard end-user object code license agreements, there are no outstanding
options, licenses, agreements, claims, encumbrances or shared ownership
interests of any kind relating to the Company Intellectual Property, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other Person.
(b) The Company has not received any communications alleging that the Company
has violated or, by conducting its business, would violate any of the patents,
trademarks, service marks, trade names, copyrights, trade secrets, mask works or
other proprietary rights or processes of any other Person.
(c) The Company has obtained and possesses valid licenses to use all of the
software programs present on the computers and other software-enabled electronic
devices that it owns or leases, if any, or that it has otherwise provided to its
employees for their use in connection with the Company’s business.
(d) To the Company’s knowledge, it will not be necessary to use any inventions
of any of its employees or consultants (or Persons it currently intends to hire)
made prior to their employment by the Company.
2.7 Compliance with Other Instruments . Except as identified in the
Disclosure Schedule, the Company is not in violation or default (which has not
been waived): (i) of any provisions of its Articles of Incorporation or Bylaws;
(ii) of any instrument, judgment, order, writ or decree; (iii) under any
mortgage; or (iv) under any lease, agreement, contract or purchase order to
which it is a party or by which it is bound that is required to be listed on the
Disclosure Schedule, or, to the Company’s knowledge, of any provision of federal
or state statute, rule or regulation applicable to the Company, the violation of
which would have a Material Adverse Effect. The execution, delivery and
performance of the Transaction Documents and the consummation of the
transactions contemplated by the Transaction Documents will not result in any
such violation or be in conflict with or constitute, with or without the passage
of time and giving of notice, either: (x) a default under any such provision,
instrument, judgment, order, writ, decree, contract or agreement or (y) an event
which results in the creation of any lien, charge or encumbrance upon any assets
of the Company or the suspension, revocation, forfeiture, or non-renewal of any
material permit or license applicable to the Company.
2.8 Agreements; Actions . Except for the Agreement and as set forth
in the Disclosure Schedule, there are no agreements, understandings,
instruments, contracts or proposed transactions to which the Company is a party
or by which it is bound that involve: (i) obligations (contingent or otherwise)
of, or payments to, the Company in excess of One Million Dollars
($1,000,000.00); (ii) the license of any patent, copyright, trademark, trade
secret or other proprietary right to or from the Company; (iii) the grant of
rights to manufacture, produce, assemble, license, market, or sell its products
to any other Person that limit the Company’s exclusive right to develop,
manufacture, assemble, distribute, market or sell its products; or (iv)
indemnification by the Company with respect to infringements of proprietary
rights.
(a) Except as set forth in the Disclosure Schedule, the Company has not: (i)
declared or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock; (ii) incurred any
indebtedness for money borrowed or incurred any other liabilities individually
in excess of Two Hundred Thousand Dollars ($200,000.00) or in excess of Five
Hundred Thousand Dollars in the aggregate ($500,000.00); (iii) made any loans or
advances to any Person, other than ordinary advances for travel expenses; or
(iv) sold, exchanged or otherwise disposed of any of its assets or rights, other
than the sale of its inventory in the ordinary course of business. For the
purposes of subsections (ii) and (iii) of this Section 2.8(b), all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same Person (including Persons the Company has reason
to believe are affiliated with each other) shall be aggregated for the purpose
of meeting the individual minimum dollar amounts of such subsection.
Page 7 of 20
(b) The Company is not a guarantor or indemnitor of any indebtedness of any
other Person.
2.9 Related Party Transactions . Other than: (i) standard employee
benefits generally made available to all employees; (ii) standard director and
officer indemnification agreements approved by the Board; and (iii) the purchase
of shares of the Company’s capital stock and the issuance of options to purchase
shares of the Company’s Series A common stock, in each instance, approved in
writing by the Board (previously provided to the Purchasers or its counsel),
there are no agreements, understandings or proposed transactions between the
Company and any of its officers, directors, consultants or Key Employees or any
Affiliate thereof.
(a) Except as set forth in the Disclosure Schedule, the Company is not
indebted, directly or indirectly, to any of its directors, officers or employees
or to their respective spouses or children or to any Affiliate of any of the
foregoing, other than in connection with expenses or advances of expenses
incurred in the ordinary course of business or employee relocation expenses and
for other customary employee benefits made generally available to all employees.
None of the Company’s directors, officers or employees, or any members of their
immediate families, or any Affiliate of the foregoing are, directly or
indirectly, indebted to the Company.
2.10 Absence of Liens . Except as reflected in the Financial
Statements (as defined below), the property and assets that the Company owns are
free and clear of all mortgages, deeds of trust, liens, loans and encumbrances,
except for statutory liens for the payment of current taxes that are not yet
delinquent and encumbrances and liens that arise in the ordinary course of
business and do not materially impair the Company’s ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to the Company’s knowledge, holds
a valid leasehold interest free of any liens, claims or encumbrances other than
those of the lessors of such property or assets.
2.11 Real and Personal Property .
(a) Real Property . The Company does not own any real property. All of the
real property leased by the Company (“Leased Real Property”) is identified on
Section 2.11(a) of the Disclosure Schedule. This schedule of Leased Real
Property is a complete, accurate, and correct list of the Company’s Leased Real
Property. Each of the leases for the Leased Real Property identified on Section
2.11(a) of the Disclosure Schedule is in full force and effect and has not been
modified, amended, or altered, in writing or otherwise. Except as set forth in
the Disclosure Schedule, neither the Company nor any other party thereto is in
default under any of said leases, nor has any event occurred which, with the
giving of notice or the passage of time or both, would give rise to a default.
(b) Personal Property . Except as specifically disclosed on Section 2.11(b)
of the Disclosure Schedule, the Company has good and marketable title to all of
its personal property and assets and all such personal property and assets are
in good working condition. None of such personal property or assets is subject
to any mortgage, pledge, lien, conditional sale agreement, security agreement,
encumbrance or other charge. The Financial Statements reflect all personal
property and assets of the Company (other than assets disposed of in the
ordinary course of business subsequent to December 31, 2009), and such
properties and assets are sufficient for the Company to conduct the business of
the Company as currently conducted and as proposed to be conducted.
Page 8 of 20
2.12 Financial Statements; Liabilities . The Company has delivered
to the Purchaser its audited financial statements for the fiscal year ended
December 31, 2009 and will deliver when available, the unaudited financial
statements for the three (3) month period ended March 31, 2010 (collectively,
“Financial Statements”). The Financial Statements have been prepared in
accordance with United States generally accepted accounting principles (“GAAP”)
applied on a consistent basis throughout the periods indicated (except for
footnote disclosures in the case of the unaudited financial statements). The
Financial Statements fairly present in all material respects the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein, subject in the case of the unaudited Financial
Statements to normal year-end audit adjustments. Except as set forth in the
Financial Statements and the Disclosure Schedule, the Company has no material
liabilities or obligations, contingent or otherwise, other than: (i) liabilities
incurred in the ordinary course of business subsequent to March 31, 2010; (ii)
obligations under contracts and commitments incurred in the ordinary course of
business; and (iii) liabilities and obligations of a type or nature not required
under GAAP to be reflected in the Financial Statements, which, in all such
cases, individually and in the aggregate would not have a Material Adverse
Effect. The Company maintains and will continue to maintain a standard system
of accounting established and administered in accordance with GAAP.
2.13 Changes . Except as set forth in the Disclosure Schedule, since
the date of the Company’s most recent Financial Statements, to the Company’s
knowledge there has not been:
(a) any change in the assets, liabilities, financial condition or operating
results of the Company from that reflected in the Financial Statements, except
changes in the ordinary course of business that have not caused, in the
aggregate, a Material Adverse Effect;
(b) any damage, destruction or loss of property that would have a Material
Adverse Effect;
(c) any waiver or compromise by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and the satisfaction or discharge of which would not have a Material
Adverse Effect;
(e) any material change to a material contract or agreement by which the
Company or any of its assets is bound or subject;
(f) any resignation or termination of employment of any officer or Key
Employee of the Company;
(g) any mortgage, pledge, transfer of a security interest in, or lien, created
by the Company, with respect to any of its material properties or assets, except
liens for taxes not yet due or payable and liens that arise in the ordinary
course of business and do not materially impair the Company’s ownership or use
of such property or assets;
(h) any loans or guarantees made by the Company to or for the benefit of its
employees, officers or directors, or any members of their immediate families,
other than travel advances and other advances made in the ordinary course of its
business;
(i) any declaration, setting aside or payment or other distribution in respect
of any of the Company’s capital stock, or any direct or indirect redemption,
purchase, or other acquisition of any of such stock by the Company;
Page 9 of 20
(j) any sale, assignment or transfer of any Company Intellectual Property that
could reasonably be expected to result in a Material Adverse Effect;
(k) receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of the Company;
(l) any other event or condition of any character, other than events affecting
the economy or the Company’s industry generally, that could reasonably be
expected to result in a Material Adverse Effect; or
(m) any arrangement or commitment by the Company to do any of the things
described in this Section 2.13.
2.14 Employee Matters . Section 2.14 of the Disclosure Schedule sets
forth a detailed description of all compensation, including salary, bonus,
severance obligations and deferred compensation paid or payable for each
officer, employee, consultant and independent contractor of the Company who
received compensation in excess of Five Hundred Thousand Dollars ($500,000.00)
for the fiscal year ended December 31, 2009 or is anticipated to receive
compensation in excess of Five Hundred Thousand Dollars ($500,000.00) for the
fiscal year ending December 31, 2010.
(a) To the Company’s knowledge, none of its officers is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would materially interfere with such officer’s
ability to promote the interest of the Company or that would conflict with the
Company’s business. Neither the execution or delivery of the Agreement, nor the
carrying on of the Company’s business by the employees of the Company, nor the
conduct of the Company’s business as now conducted and as presently proposed to
be conducted, will, to the Company’s knowledge, conflict with or result in a
breach of the terms, conditions, or provisions of, or constitute a default
under, any contract, covenant or instrument under which any such officer is now
obligated.
(b) To the Company’s knowledge and except as set forth in the Disclosure
Schedule, the Company is not delinquent in payments to any of its employees,
consultants, or independent contractors for any compensation for any service
performed for it to the date hereof or amounts required to be reimbursed to such
employees, consultants, or independent contractors.
(c) To the Company’s knowledge, no Key Employee intends to terminate his or
her relationship with the Company or is otherwise likely to become unavailable
to continue as a Key Employee, nor does the Company have a present intention to
terminate the services of any of the foregoing.
(d) The Company has no employee benefit plans within the meaning of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
(e) The Company is not bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express or implied,
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the knowledge of the Company, has sought to represent any of
the employees, representatives or agents of the Company. There is no strike or
other labor dispute involving the Company pending, or to the Company’s
knowledge, threatened, which could have a Material Adverse Effect its
operations.
2.15 Tax Returns and Payments . Except as set forth in the
Disclosure Schedule, there are no federal, state, county, local or foreign taxes
dues and payable by the Company which have not been paid timely. Except as set
forth in the Disclosure Schedule, there are no accrued and unpaid federal,
state, country, local or foreign taxes of the Company which are due, whether or
not assessed or disputed. There have been no examinations or audits of any tax
returns or reports by any applicable federal, state, local or foreign
governmental agency. Except as set forth in the Disclosure Schedule, the
Company has duly and timely filed all federal, state, county, local and foreign
tax returns required to have been filed by it, and there are in effect no
waivers of applicable statutes of limitations with respect to taxes for any
year.
Page 10 of 20
2.16 Permits . To the Company’s knowledge, the Company has all the
permits, licenses and any similar authority necessary to conduct its business,
the lack of which could reasonably be expected to have a Material Adverse
Effect. To the Company’s knowledge , the Company is not in default in any
material respect under any of such permits, licenses or other similar authority.
2.17 Corporate Documents . The Articles of Incorporation and Bylaws
of the Company are in the form provided to the Purchasers. The copy of the
minute books of the Company provided to the Purchaser contains all actions taken
by written consent without a meeting by the Board and shareholders since the
date of incorporation and accurately reflects in all material respects all
actions by the Board and shareholders with respect to all transactions referred
to in the minute book.
2.18 Environmental and Safety Laws . Except as could not reasonably
be expected to have a Material Adverse Effect, to the best of the Company’s
knowledge: (i) the Company is and has been in compliance with all Environmental
Laws; (ii) there has been no release or threatened release of any pollutant,
contaminant or toxic or hazardous material, substance or waste, or petroleum or
any fraction thereof, (each a “Hazardous Substance”) on, upon, into or from any
site currently or heretofore owned, leased or otherwise used by the Company;
(iii) there have been no Hazardous Substances generated by the Company that have
been disposed of or come to rest at any site that has been included in any
published United States federal, state or local “superfund” site list or any
other similar list of hazardous or toxic waste sites published by any
governmental authority in the United States; and (iv) there are no underground
storage tanks located on, no polychlorinated biphenyls (“PCBs”) or
PCB-containing equipment used or stored on, and no hazardous waste as defined by
the Resource Conservation and Recovery Act, as amended, stored on, any site
owned or operated by the Company, except for the storage of hazardous waste in
compliance with Environmental Laws. For purposes of this Section 2.18,
“Environmental Laws” means any law, regulation, or other applicable requirement
relating to: (x) releases or threatened release of Hazardous Substance; (y)
pollution or protection of employee health or safety, public health or the
environment; or (z) the manufacture, handling, transport, use, treatment,
storage, or disposal of Hazardous Substances.
2.19 Disclosure . The Company has made available to the Purchaser all
the information reasonably available to the Company that the Purchaser has
requested for deciding whether to acquire the Shares, including the Company’s
filings with the Securities and Exchange Commission. No representation or
warranty of the Company contained in this Agreement, as qualified by the
Disclosure Schedule, contains any untrue statement of a material fact or, to the
Company’s knowledge, omits to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made. The Company has not delivered to the
Purchaser, and has not been requested to deliver to the Purchaser, a private
placement or similar memorandum or any written disclosure of the types of
information customarily furnished to purchasers of securities. The Purchaser
acknowledges that it is relying on the Company’s filings with the Securities and
Exchange Commission, its own investigation, the documents it has asked for from
the Company and been provided and any and all information it has been made aware
of by the Company or otherwise in making its investment decision pursuant to
this Agreement.
2.20 Net Operating Loss Carry-Forward . The information contained in
the Disclosure Schedule or otherwise provided to the Purchaser regarding the
application of Section 382 of the Code to the Company’s federal net operating
loss carry-forward is true and correct to the Company’s knowledge.
Page 11 of 20
2.21 Foreign Corrupt Practices Act . To the Company’s knowledge,
neither the Company nor any of the Company’s directors, officers or employees
have made, directly or indirectly, any payment or promise to pay, or gift or
promise to give or authorized such a promise or gift, of any money or anything
of value, directly or indirectly, to: (i) any foreign official (as such term is
defined in the United States Foreign Corrupt Practices Act) for the purpose of
influencing any official act or decision of such official or inducing him or her
to use his or her influence to affect any act or decision of a governmental
authority; or (ii) any foreign political party or official thereof or candidate
for foreign political office for the purpose of influencing any official act or
decision of such party, official or candidate or inducing such party, official
or candidate to use his, her or its influence to affect any act or decision of a
foreign governmental authority, in the case of both (i) and (ii) above, in order
to assist the Company or any of its Affiliates to obtain or retain business for,
or direct business to, the Company or any of its Affiliates, as applicable.
Neither the Company, nor any of its directors, officers or employees, has made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
of funds, or received or retained any funds, in violation of any law, rule or
regulation.
2.22 Compliance with Office of Foreign Assets Control . To the
Company’s knowledge, neither the Company nor any of the Company’s directors,
officers or employees is an OFAC Sanctioned Person (as defined below). The
Company and the Company’s directors, officers or employees are in compliance
with, and have not previously violated, the United States of America Patriot Act
of 2001, as amended through the date of this Agreement, to the extent applicable
to the Company and all other applicable anti-money laundering laws and
regulations. To the Company’s knowledge, none of: (i) the purchase and sale of
the Securities; (ii) the use of the Purchase Price; (iii) the execution,
delivery and performance of this Agreement; or (iv) the consummation of any
transaction contemplated hereby or thereby, or the fulfillment of the terms
hereof or thereof, will result in a violation of any of the OFAC Sanctions (as
defined below) or of any anti-money laundering laws of the United States or any
other applicable jurisdiction.
(a) For the purposes of Section 2.22(a) of this Agreement:
(b) “OFAC Sanctions” means any sanctions program administered by the Office of
Foreign Assets Control of the United States Department of the Treasury (“OFAC”)
under authority delegated to the Secretary of the Treasury (“Secretary”) by the
President of the United States or provided to the Secretary by statute, and any
order or license issued by, or under authority delegated by, the President or
provided to the Secretary by statute in connection with a sanctions program thus
administered by OFAC. For ease of reference, and not by way of limitation, OFAC
Sanctions programs are described on OFAC’s website at www.treas.gov/ofac;
(i) “OFAC Sanctioned Person” means any government, country, corporation or
other entity, group or individual with whom or which the OFAC Sanctions prohibit
a U.S. Person from engaging in transactions and includes, without limitation,
any individual or corporation or other entity that appears on the current OFAC
list of Specially Designated Nationals and Blocked Persons (“SDN List”). For
ease of reference, and not by way of limitation, OFAC Sanctioned Persons other
than governments and countries can be found on the SDN List on OFAC’s website at
www.treas.gov/offices/enforcement/ofac/sdn; and
(ii) “U.S. Person” means any U.S. citizen, permanent resident alien, entity
organized under the laws of the United States (including foreign branches), or
any person (individual or entity) in the United States and, with respect to the
Cuban Assets Control Regulations, also includes any corporation or other entity
that is owned or controlled by one of the foregoing, without regard to where it
is organized or doing business.
2.23 SEC Reports; Financial Statements . Except for the Company’s
Annual Report on SEC Form 10-K for the period ended December 31, 2008, the
Company has filed all reports, schedules, forms, statements and other documents
required to be filed by the Company under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law or regulation to file such material) (the foregoing materials, including the
exhibits thereto and documents incorporated by reference therein being
collectively referred to herein as the “SEC Reports”) 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. As of their respective
dates, the SEC Reports complied in all material respects with the requirements
of the Securities Act and the Exchange Act, as applicable, 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
Page 12 of 20
2.24 Sarbanes-Oxley; Internal Accounting Controls . To the Company’s
knowledge and if required to do so by the Sarbanes-Oxley Act of 2002 (“SOX”),
the Company is exercising good faith efforts to be in material compliance with
all provisions of SOX which are applicable to it as of the Closing. The Company
and the Subsidiaries maintain a system of internal accounting controls
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. Except for the accounting restatement
of the non-recourse TCP Note with TCP as an “option to purchase”, as restated in
the Company’s SEC Form 10-Qs for the periods ended March 31, June 30 and
September 30, 2009, the Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms. The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
Company’s most recently filed periodic report under the Exchange Act (such date,
the “Evaluation Date”). The Company presented in its most recently filed
periodic report under the Exchange Act the conclusions of the certifying
officers about the effectiveness of the disclosure controls and procedures based
on their evaluations as of the Evaluation Date. Since the Evaluation Date,
there have been no changes in the Company’s internal control over financial
reporting (as such term is defined in the Exchange Act) that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
2.25 Investment Company . The Company is not, and is not an
Affiliate of, and immediately after receipt of payment for the Securities, will
not be or be an Affiliate of, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. The Company shall conduct its
business in a manner so that it will not become an “investment company” subject
to registration under the Investment Company Act of 1940, as amended.
2.26 Registration Rights . Except as may be provided in the
Registration Rights Agreement, no Person has any right to cause the Company to
effect the registration under the Securities Act of any Securities of the
Company.
2.27 Application of Takeover Protections . The Company and the Board
have 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 Purchaser as a result of the Purchaser and the Company fulfilling their
obligations or exercising their rights under the Transaction Documents,
including without limitation as a result of the Company’s issuance of the
Securities and the Purchaser’s ownership of the Securities.
Page 13 of 20
2.28 No Integrated Offering . Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would cause this offering of
securities to be integrated with prior offerings by the Company.
2.29 Solvency . Based on the consolidated financial condition of the
Company as of the Closing, after giving effect to the receipt by the Company of
the entirety of the payments from the sale of the Securities to the Purchaser
pursuant to this Agreement: (i) the fair saleable value of the Company’s 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 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 liabilities 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). The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one (1) year from the Closing. Schedule 2.29 sets forth as of the date
hereof all outstanding secured and unsecured Indebtedness of the Company or any
Subsidiary, or for which the Company or any Subsidiary has commitments. For the
purposes of this Agreement, “Indebtedness” means (x) any liabilities for
borrowed money or amounts owed in excess of $200,000 (other than trade accounts
payable incurred in the ordinary course of business), (y) all guaranties,
endorsements and other contingent obligations in respect of indebtedness of
others, whether or not the same are or should be reflected in the Company’s
balance sheet (or the notes thereto), except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business; and (z) the present value of any lease payments in
excess of $200,000 due under leases required to be capitalized in accordance
with GAAP. Except as set forth in the Disclosure Schedule, neither the Company
nor any Subsidiary is in default with respect to any Indebtedness.
2.30 Acknowledgment Regarding the Purchaser’s Purchase of Securities .
The Company acknowledges and agrees that the Purchaser is acting solely in the
capacity of an arm’s length purchaser with respect to the Transaction Documents
and the transactions contemplated thereby. The Company further acknowledges
that Purchaser is not 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 thereby , and any advice given by the Purchaser or any
of their respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Purchaser’s purchase of the Securities. The Company further represents to the
Purchaser that the Company’s decision to enter into this Agreement and the other
Transaction Documents has been based solely on the independent evaluation of the
transactions contemplated hereby by the Company and its representatives , and in
consultation with its attorneys.
3. Representations and Warranties of the Purchaser . The Purchaser hereby
represents and warrants to the Company that:
3.1 Authorization . The Purchaser has full power and authority to
enter into the Agreement. The Agreement, when executed and delivered by the
Purchaser, will constitute valid and legally binding obligations of the
Purchaser, enforceable in accordance with their terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance, and any other laws of general application affecting enforcement of
creditors’ rights generally, and as limited by laws relating to the availability
of specific performance, injunctive relief, or other equitable remedies.
Page 14 of 20
3.2 Disclosure of Information; Investment Experience . The
Purchaser has had an opportunity to discuss the Company’s business, management,
financial affairs and the terms and conditions of the offering of the Purchased
Shares with the Company’s management and has had an opportunity to review the
Company’s facilities. The Purchaser has reviewed the Company’s filings with the
Securities and Exchange Commission, including the Risk Factors set forth
therein, and has not relied upon any other written material, except for the
representations and warranties made by the Company in this Agreement. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Purchaser to
rely thereon. The Purchaser represents that the Purchaser is experienced in
evaluating and investing in transactions involving securities of companies in a
similar stage of development and acknowledges that such Purchaser is able to
fend for itself, can bear the economic risk of the Purchaser’s investment and
has such knowledge and experience in financial and business matters and is
capable of evaluating the merits and risks of the investment in the Purchased
Shares.
3.3 Restricted Securities . The Purchaser understands that the
Purchased Shares are “restricted securities” under applicable United States
federal and state securities laws and that, pursuant to these laws, the
Purchaser must hold the Purchased Shares indefinitely, unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. Except as may be set forth in the Registration
Agreement, the Purchaser acknowledges that the Company has no obligation to
register or qualify the Purchased Shares. The Purchaser further acknowledges
that if an exemption from registration or qualification is available, it may be
conditioned on various requirements including, but not limited to, the time and
manner of sale, the holding period for the Purchased Shares, and on requirements
relating to the Company which are outside of the Purchaser’s control, and which
the Company is under no obligation and may not be able to satisfy. The
Purchaser acknowledges that it has no present intention to engage in a
distribution of the Purchased Shares and that it is purchasing such Shares for
its own account.
3.4 Accredited Investor . The Purchaser is an accredited investor
as defined in Rule 501(a) of Regulation D promulgated under the Securities Act,
as amended.
3.5 Foreign Investors . If the Purchaser is not a United States
person (as defined by Section 7701(a)(30) of the Code), the Purchaser hereby
represents that it has satisfied itself as to the full observance of the laws of
its jurisdiction in connection with any invitation to subscribe for the
Purchased Shares or any use of this Agreement, including: (i) the legal
requirements within its jurisdiction for the purchase of the Purchased Shares;
(ii) any foreign exchange restrictions applicable to such purchase, (iii) any
governmental or other consents that may need to be obtained; and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale, or transfer of the Purchased Shares. The Purchaser’s
subscription and payment for, and continued beneficial ownership of, the
Purchased Shares will not violate any applicable securities or other laws of the
Purchaser’s jurisdiction.
3.6 Acknowledgment Regarding the Company’s Sale of Securities. The
Purchaser acknowledges and agrees that the Company is acting solely in the
capacity of an arm’s length company with respect to the Transaction Documents
and the transactions contemplated thereby. The Purchaser further acknowledges
that the Company is not acting as a financial advisor or fiduciary of the
Purchaser (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated thereby and any advice given by the Company or
any of its respective representatives or agents in connection with the
Transaction Documents and the transactions contemplated thereby is merely
incidental to the Company’s sale of the Securities. The Purchaser further
represents to the Company that the Purchaser’s decision to enter into this
Agreement and the other Transaction Documents has been based solely on the
independent evaluation of the transactions contemplated hereby by the Purchaser
and its representatives , and in consultation with its attorneys .
Page 15 of 20
4. Conditions to the Purchaser’s Obligations at Closing . The obligations of
the Purchaser to purchase the Purchased Shares at the Closing are subject to the
fulfillment, on or before the Closing, of each of the following conditions,
unless otherwise waived in a writing between the Parties:
4.1 Representations and Warranties . The representations and
warranties of the Company contained in Section 2 shall be true and correct in
all respects as of the Closing.
4.2 Performance . The Company shall have performed and complied with
all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by the Company on
or before the Closing.
4.3 Compliance Certificate . As soon as practicable, the Chief
Executive Officer of the Company shall deliver to the Purchaser at the Closing a
certificate certifying that the conditions specified in Sections 4.1 and 4.2
have been fulfilled.
4.4 Qualifications . All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Shares pursuant to this Agreement shall be obtained and effective as of the
Closing.
4.5 Approvals . The Secretary of the Company shall deliver to the
Purchaser at the Closing: (i) the Bylaws of the Company; and (ii) resolutions of
the Board, approving the Agreement and the transactions contemplated under the
Agreement.
4.6 Board of Directors . As of the Closing, Purchaser shall be
entitled to nominate two (2) Board members (together with any successors that
may be designated by the Purchaser from time to time, collectively, the
“Purchaser Designees”). As soon as practicable, the Company shall take such
actions as may be necessary to amend the Company’s Bylaws to set the number of
directors on the Board at nine (9).
With respect to each shareholder election of directors for a period of four
years from the date of Closing, including at each annual or special meeting of
shareholders of the Company at which directors are elected, the Company shall
cause the Board and management to: (i) include the Purchaser Designee in the
slate of nominees recommended by the Board to the Company’s shareholders for
election as directors; (ii) recommend to its shareholders that they vote for the
Purchaser Designee as directors of the Company; (iii) vote all proxies it may
hold in favor of the election of the Purchaser Designee, except as otherwise
directed by any shareholder who submits such proxy; and (iv) use its best
efforts to cause the Purchaser Designee to be elected as directors.
4.7 Extension of Note to Trussnet Capital Partners . The Company and
TCP shall execute an agreement extending the maturity date of the TCP Note until
December 31, 2011.
4.8 Proceedings and Documents . All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Purchaser, and the Purchaser (or its counsel) shall have
received all such counterpart original and certified or other copies of such
documents as reasonably requested.
Page 16 of 20
5. Conditions of the Company’s Obligations at Closing . The obligations of
the Company to sell Purchased Shares to the Purchaser at the Closing are subject
to the fulfillment, on or before the Closing, of each of the following
conditions, unless otherwise waived in a writing between the Parties:
5.1 Representations and Warranties . The representations and
warranties of the Purchaser contained in Section 3 shall be true and correct in
all respects as of the Closing.
5.2 Performance . The Purchaser shall have performed and complied
with all covenants, agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by the Purchaser on
or before the Closing.
5.3 Qualifications . All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body of the United States or of
any state that are required in connection with the lawful issuance and sale of
the Share pursuant to this Agreement shall be obtained and effective as of the
Closing.
6. Miscellaneous .
6.1 Survival of Warranties . The representations and warranties of
the Company and the Purchaser contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing.
6.2 Assignment . This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the Parties to this Agreement and any of
their respective successors, personal representatives and permitted assigns who
agree in writing to be bound by the terms of this Agreement. Neither the
Company nor the Purchaser may assign its rights under this Agreement, in whole
or in part, without the prior written consent of the other Party which consent
shall not be unreasonably withheld. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the Parties to this
Agreement, or their respective successors and assigns, any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
6.3 Governing Law . This Agreement and any controversy arising out
of or relating to this Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to conflict
of law principles that would result in the application of any law other than the
laws of the State of California.
6.4 Titles and Subtitles . The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.5 Notices . All notices and other communications given or made
pursuant to this Agreement (“Notice”) shall be in writing and shall be deemed
effectively given upon the earlier of actual receipt or: (i) personal delivery
to the Party to be notified; (ii) when sent, if sent by electronic mail or
facsimile during normal business hours of the recipient, and if not sent during
normal business hours, then on the recipient’s next business day; (iii) five (5)
days after having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) business day after deposit with a
nationally recognized overnight courier, freight prepaid, specifying next
business day delivery, with written verification of receipt. All communications
shall be sent to the respective Parties at their address as set forth on the
signature page, or to such e-mail address, facsimile number or address as
subsequently modified by Notice given in accordance with this Section 6.5. If
Notice is given to the Company, Notice shall also be given to the counsel for
the Company delivered in the same manner as to the Company at the address,
facsimile number or e-mail address immediately below:
Page 17 of 20
Kenneth L. Waggoner
Vice President and General Counsel
China Tel Group, Inc.
12526 High Bluff Drive
Suite 155
San Diego, California 92130
Facsimile: 1 (858) 259-0661
E-Mail: kwaggoner@chinatelgroup.com
6.6 Expenses . The Company shall pay and reimburse all reasonable
expenses of the Purchaser in connection with the transactions contemplated by
this Agreement, including, but not limited to, expenses related to any necessary
securities filings in connection with the Purchaser’s ownership of the
Securities, from time to time, and all reasonable legal and accounting fees and
costs associated therewith.
6.7 Non-Monetary Default by the Purchaser or the Company . Except
as to a Monetary Default by the Purchaser described in Section 1.5(a), if either
Party claims the other Party has failed to perform any obligation or condition
set forth in this Agreement, the Party making such claim (“Claiming Party”)
shall deliver to the other Party written notice setting forth in detail the
nature of the act or omission complained of. The Party receiving such notice
(“Receiving Party”) shall be considered in non-monetary default, unless within
ten (10) days the Receiving Party delivers notice to the Claiming Party either:
(i) disputing that any failure to perform has occurred, in which case the
Parties shall proceed to Dispute Resolution in accordance with Section 6.8; or
(ii) acknowledging that the claimed failure to perform has occurred and
providing a date by which the Receiving Party will cure the past failure to
perform exercising reasonable diligence. If the Claiming Party delivers notice
objecting to the date by which the Receiving Party will cure the past failure to
perform, the Parties shall proceed to Dispute Resolution in accordance with
Section 6.8. Otherwise, the Receiving Party shall be considered in Non-Monetary
Default only if the failure to perform has not been cured by the date set forth
in the Receiving Party’s notice, at which time either Party may commence Dispute
Resolution in accordance with Section 6.8.
6.8 Dispute Resolution . Either Party may deliver to the other
Party a dispute notice setting forth a brief description of the issues to be
resolved through the dispute resolution mechanism set forth in this Section 6.8
(“Dispute Notice”). The Dispute Notice shall specify the provision or
provisions of this Agreement and the facts or circumstances that are the subject
matter of the dispute(s). Immediately following the receipt of a Dispute
Notice, the Parties shall cause their representatives to meet and seek to
resolve the disputed item(s) cordially through informal negotiations. If the
Parties’ representatives are unable to resolve the dispute(s) within ten (10)
days of the receipt of a Dispute Notice, the dispute(s) shall be referred to a
representative of senior management from each Party, who, acting reasonably and
in good faith, shall seek to resolve the dispute(s) to the mutual satisfaction
of the Parties. If the representatives of senior management are unable to
resolve the dispute(s) within ten (10) days of the referral of the dispute(s) to
those representatives, then the dispute(s) shall be submitted to binding
arbitration to be conducted by the Judicial Arbitration and Mediation Services,
Inc. (“JAMS”), sitting in San Diego County, California, for resolution by a
single arbitrator acceptable to both Parties. If the Parties fail to agree to
an arbitrator within ten (10) days of a written demand for arbitration being
sent by one Party to the other Party, then JAMS shall select the arbitrator
according to the JAMS Rules for Commercial Arbitration. The arbitration shall
be conducted pursuant to the California Code of Civil Procedure and the
California Code of Evidence. The award of the arbitrator shall be final and
binding on the Parties and may be enforced by any court of competent
jurisdiction.
6.9 Attorneys’ Fees . If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of this
Agreement, the prevailing Party shall be entitled to reasonable attorneys’ fees,
costs and necessary disbursements in addition to any other relief to which such
Party may be entitled.
Page 18 of 20
6.10 Severability . The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
6.11 Delays or Omissions . No delay or omission to exercise any
right, power or remedy accruing to any Party under this Agreement, upon any
breach or default of any other Party under this Agreement, shall impair any such
right, power or remedy of such non-breaching or non-defaulting Party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of either Party of any
breach or default under this Agreement, or any waiver on the part of either
Party of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement or by law or otherwise afforded to
either Party, shall be cumulative and not alternative.
6.12 Cancellation and Novation of Isaac SPA and First Isaac Amendment
. This Agreement cancels and supersedes in their entirety and constitutes a
novation of the Isaac SPA and the First Isaac Amendment.
6.13 Entire Agreement; Amendments . This Agreement, including the
Disclosure Schedule, constitute the full and entire understanding and agreement
between the Parties with respect to the subject matter hereof, and any other
written or oral agreement relating to the subject matter hereof existing between
the Parties is expressly canceled. Any amendment of this Agreement shall be
effective only by a writing signed by both of the Parties.
6.14 Counterparts . This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same Agreement.
[The balance of this page intentionally left blank. Signature Page to follow.]
Page 19 of 20
IN WITNESS WHEREOF , the Parties have executed this Amended and Restated Stock
Purchase Agreement as of the date first written above.
COMPANY: PURCHASER:
China Tel Group, Inc., a Nevada corporation Isaac Organization, Inc., a
Canadian corporation
By: /s/ George Alvarez
By /s/ Antonios Isaac
George Alvarez Antonios Isaac
Chief Executive Officer Chief Executive Officer
Address of the Company : Address of the Purchaser :
12526 High Bluff Drive, Suite 155
San Diego, California 92130
Facsimile: 1 (858) 259-6661
E-Mail: galvarez@chinatelgroup.com 105 Schneider Road
Ottawa, Ontario K2K 1Y3 CANADA
Facsimile: 1 (613) 254-8912
E-mail: tony@isaac.com
Page 20 of 20
EXHIBIT A
DISCLOSURE SCHEDULE OF CHINATEL GROUP, INC.
TO AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
BETWEEN CHINATEL GROUP, INC. AND ISAAC ORGANIZATION, INC .
Section 2.5 – Litigation Pending or Threatened
§ Edgar Pereda Gomez (convertible noteholder)
§ Michael Fischer (convertible noteholder)
§ Francisco Perezcalva (convertible noteholder)
Section 2.7 – Non-Compliance with Other Instruments
§ Perusat Debts to Telefonica, Banco Continental, and Interbank
§ The Company’s debts to Ken Hobbs and Colin Tay
§ Convertible Note holders in the amount of $10,861,679
Section 2.9(a) – Debts to or from Directors, Officer, Employees and Affiliates
§ See 10-K for the period ending December 31, 2009.
Section 2.11(a) – Real Property Leased
§ Del Mar- 12526 High Bluff Drive, Suite 155, San Diego California 92130
§ Beijing- 1101-1105 Tower B, Beijing Global Trade Center, 36 North
Third Road East
Dongcheng District, Beijing China 100013
§ Perusat- Av. Camino Real 493 Of. 1101 San Isidro, 27 Lima-Peru
Section 2.11(b) – Personal Property; Not Operational or Title Not Marketable
§ Perusat Telephone equipment has a loan of approximately $130,000
Section 2.12 – Material Liabilities Incurred Since Last Financial Statements
§ The Company, including its subsidiaries, has incurred approximately
$350,000 in additional debt during the three months ended March 31, 2010
Section 2.13 – Changes Having a Material Adverse Effect Since Last Financial
Statements
(a) Financial Condition
§ The Company, including its subsidiaries, has incurred a loss of
approximately $7.3 million for the three months ended March 31, 2010.
Costs incurred of $7 million related to the option costs paid to Trussnet
Capital Partners (HK) Ltd (“TCP”) (interest and extension fees),
additional expenses totaled approximately $1 million less the recognition
of $1 million gain from the forfeited deposit received from Excel Era
Limited.
(b) Damage; Destruction; Loss
§ None
(c) Waiver or Compromise of Debt or Valuable Right
§ None
(d) Payment or Satisfaction of Obligation, Claim, Lien or Encumbrance
§ The Company, in the second quarter of 2010, has issued or is in the
process of issuing the Company’s Series A common stock (“Shares”) in
settlement of its accounts payable owed to Trussnet USA, Inc. (Delaware)
with the Company’s Shares. An additional agreement is being finalized to
settle the interest and extension fees due to TCP for shares of the
Company. Shares were also issued in April 2010 in settlement of amount due
to Independent Contractors.
§ Shares were issued in April of 2010, in settlement of debt relating to
the acquisition of Perusat S.A.
(e) Contract or Agreement
§ Del Mar Lease
§ Fourth Amendment to TCP Promissory Note
(f) Resignation or Termination of Any Officer or Key Employee
§ None
(g) Mortgage, Pledge, Security Interest or Lien in Assets
§ None
(h) Loans or Guarantees to Employees, Officers or Directors
§ None
2
(i) Redemption, Purchase or Acquisition of Company’s Stock
§ Redeemable Notes
(j) Sale or Assignment of Company’s Intellectual Property
§ None
(k) Cancellation of Any Order From or Loss of Major Customer
§ None
(l) Knowledge of Other Event or Condition
§ None
(m) Arrangement or Commitment For Future Change Covered Under Section
2.13
§ None
Section 2.14 – Annual Compensation Paid/Payable in Excess of $500,000 per Year
§ None
Section 2.15 – Tax Returns and Payments
§ The Company is in the process of preparing short year tax returns for
the year 2008. The Company incurred losses during all of the periods
currently being prepared and does not expect any significant tax liability
due to those losses. The Company is also in the process of preparing the
2009 income tax returns. With the losses incurred, the Company does not
anticipate any significant tax liabilities.
Section 2.20 – Net Operating Loss Carryforward
§ The Company, as stated in the financial statements, as of December 31,
2009, has available for Federal income tax purposes a net operating loss
carry forward of approximately $165 million, expiring in the year 2028,
that may be used to offset future taxable income. The Company believes
this to be true and accurate.
3
Exhibit 99.2
FOURTH AMENDMENT TO PROMISSORY NOTE
This Fourth Amendment to Promissory Note (“Fourth Amendment”), effective as of
May 9, 2010 (“Effective Date”), amends and supplements the terms and conditions
of that certain Promissory Note dated March 9, 2009 (“Note”) between China Tel
Group, Inc., a Nevada corporation (“Maker”), and Trussnet Capital Partners (HK)
Ltd., a Hong Kong limited liability company (“Payee”), in the original principal
amount of US$191,000,000 (“Original Principal Amount”), as previously amended by
the First Amendment to Promissory Note, effective as of March 5, 2010 (“First
Amendment”), the Second Amendment to Promissory Note, effective as of March 16,
2010 (“Second Amendment”), and the Third Amendment to Promissory Note, effective
as of April 7, 2010 (“Third Amendment”).
RECITALS
A. Payee has not assigned any of its beneficial interest in the Note, as
amended, and is the holder of all right, title and interest under the
Note, as amended.
B. Maker has entered into an Amended and Restated Stock Purchase Agreement
(“SPA”) with Isaac Organization, Inc., the closing of which is contingent
upon Payee’s willingness to extend the terms of the Note, as amended,
consistent with the payment schedule described in the SPA.
C. Maker and Payee desire to extend the Maturity Date under the Note, as
amended, further amend the Note and to clarify and restate the past and
future application of payments towards principal, interest and extension
fees.
AGREEMENT
1. Except as restated in this Fourth Amendment, the First Amendment,
Second Amendment and Third Amendment are of no further force and effect.
Except as expressly modified by this Fourth Amendment, all other terms and
conditions of the Note remain in full force and effect.
2. Section 1 of the Note entitled Interest is amended to provide that,
commencing March 9, 2010, interest shall accrue on the lesser of the
Original Principal Amount or the actual principal balance of the End Note
at the rate of Ten Percent (10%) per annum calculated on a daily basis
using a 365 day calendar year.
3. Section 2 of the Note entitled Maturity Date is amended to December 31,
2011. Maker has received two prior extensions of the Maturity Date, each
for a period of thirty (30) days. For each prior extension, Maker shall
pay an extension fee of one percent (1%) of the Original Principal Amount.
By this Fourth Amendment, Maker is granted a third extension of the
Maturity Date, for which Maker shall pay an extension fee at a yearly rate
of four percent (4%) of the Original Principal Amount.
4. Maker promises to pay Payee all amounts due under the Note, as amended,
in lawful money of the United States. Payee may elect to receive payment
of all or any portion of the past or future accrued interest and/or
extension fees, but not any portion of the Original Principal Amount, in
either U.S. Dollars or in shares of Series A common stock of Maker
(“Shares”). If Payee elects to receive payment of the permitted amount in
Shares, such Shares shall be issued to Payee at a price per share of the
lesser of: (i) ninety-five cents ($0.95); or (ii) eighty percent (80%) of
the volume weighted average of the closing bid price for the Shares on the
Over the Counter Bulletin Board quotation system for the ten (10) day
period prior to the date Payee delivers a written election to receive such
payment in the form of Shares (“Share Calculation”). Payee has elected,
effective May 9, 2010, to receive Shares for the difference between the
total amount due under the Note (after application of all cash payments
received through the Effective Date) and the Original Principal Amount.
Any future election by Payee to receive payment in the form of Shares
shall be exercised no more frequently than quarterly, commencing August 1,
2010. Unless otherwise agreed, any Shares issued to Payee by Maker will
not have not been registered under the Securities Act of 1933, as amended
(“Act”) and may not be offered or sold, absent registration under the Act
and applicable state securities laws or an applicable exemption from those
registration requirements.
5. Payee shall have the right to allocate any subsequent payments between
accrued interest, reduction of the principal balance, or a combination of
both.
6. As to any payment made after the Effective Date that is applied against
the principal balance, Payee promises to pay, within ten (10) days, an
equal amount to CECT-Chinacomm Communications Co. Ltd., a corporation
organized under the laws of the Peoples Republic of China
(“CECT-Chinacomm”) or to Chinacomm Ltd., a corporation organized under the
laws of the Cayman Islands (“Chinacomm Cayman”), in fulfillment of Payee’s
contract to acquire the shares of Chinacomm Cayman, which shares Payee has
sold to Maker in exchange for the Note.
7. Section 5(b) of the Note entitled Payment on Maturity Date; Mandatory
Prepayments is deleted and of no further force and effect.
8. Maker shall have the right to prepay the Note, as amended (in whole or
in part), at any time and without penalty.
9. Payee waives enforcement of any event of default described in Section 7
of the Note entitled Events of Default that may have occurred prior to the
Effective Date of this Fourth Amendment.
10. For purposes of delivering any notice required or permitted under the
Note, Maker’s address is amended to 12526 High Bluff Road, Suite 155, San
Diego, California 92130, and Payee’s address is amended to Room M202
Haleson Building, 1 Jubilee Street, Central, Hong Kong.
11. Payee shall physically affix this Fourth Amendment to the Note and
shall not seek to endorse, negotiate or otherwise assign the Note separate
from the Fourth Amendment.
12. This Fourth Amendment may be executed in one or more counterparts,
each of which shall be deemed to be an original copy, and all of which,
when taken together, shall constitute one and the same document.
MAKER: PAYEE:
CHINA TEL GROUP, INC. TRUSSNET CAPITAL PARTNERS (HK) LTD.
By /s/ George Alvarez
George Alvarez, its Chief Executive Officer By /s/ Colin Tay
Colin Tay, its President
2
Exhibit 99.3
FOR IMMEDIATE RELEASE:
CHINATEL CONSUMATES AN AMENDED AND RESTATED STOCK PURCHASE AGREEMENT WITH
ISAAC AND AN EXTENSION OF ITS PROMISSORY NOTE
SAN DIEGO, CA –May 12, 2010 – China Tel Group, Inc. (ChinaTel) (OTCBB: CHTL) , a
provider of high speed wireless broadband and telecommunications infrastructure
engineering and construction services, today announced it has entered into an
Amended and Restated Stock Purchase Agreement (SPA) with Isaac Organization,
Inc. (Isaac) for up to $640 million in stock and warrants. The SPA provides
that ChinaTel will sell up to 49% of its Series A common stock in installment
payments from Isaac of up to $15 million or more per month through December
2011, aggregating up to $320 million, including the $11 million already paid,
and receive up to$320 million more should Isaac exercise its warrants received
in consideration for the full payment of the purchase price for the Series A
common stock. ChinaTel will control the flow of investment by making regular
funding requests to meet its deployment needs. Once Isaac has invested $205
million, ChinaTel has the unilateral right to cease making funding requests if
it determines it is in its best interests.
ChinaTel also announced it has secured an extension of the maturity date of its
$191 million promissory note to Trussnet Capital Partners (HK), Ltd. (TCP) until
December 31, 2011.
ChinaTel’s CEO, George Alvarez, explained: “The two contracts now better
compliment each other. Isaac is comfortable knowing ChinaTel will have the
resources to repay its promissory note to Trussnet Capital Partners (HK) Ltd. in
a timely manner.”
“We are extremely excited about finally completing a defined roadmap to ensure
that we reach our destination. With Isaac as our financial partner and working
as a team, we are now focused and will be able to deploy the most extensive
wireless broadband network in the world,” exclaimed Colin Tay, the President of
ChinaTel.
About China Tel Group, Inc.
China Tel Group, Inc. (ChinaTel), through its controlled subsidiaries, provides
fixed telephony, conventional long distance, high-speed wireless broadband and
telecommunications infrastructure engineering and construction services.
ChinaTel is presently building, operating and deploying networks in Asia and
South America: a 3.5GHz wireless broadband system in 29 cities across the
People’s Republic of China (PRC) with and for CECT-Chinacomm Communications Co.,
Ltd., a PRC company that holds a license to build the high speed wireless
broadband system; and a 2.5GHz wireless broadband system in cities across Peru
with and for Perusat, S.A., a Peruvian company that holds a license to build
high speed wireless broadband systems. ChinaTel’s vision remains clear: (i) to
acquire and operate wireless broadband networks in key markets throughout the
world; (ii) to deliver a new world of communications; and (iii) and invest in
building long-lasting relationships with customers and partners to lead the
broadband industry in customer service and responsiveness. Our strategy is to
build leading-edge IP-leveraged solutions advanced by our worldwide
infrastructure and leadership in emerging markets. www.ChinaTelGroup.com
About Isaac Organization
Isaac Organization, Inc. (Isaac) is a leading global private investment firm,
with approximately $5 billion worth of projects under management across a family
of funds. Isaac invests in companies across a broad range of geographies,
including the United States, Canada, China, Taiwan and South Korea. Guided by a
thorough approach to due diligence execution, research and market analysis,
Isaac has found one financial truth to be inviolate: growth and real wealth
happens over time and scrupulous due diligence. Isaac’s various funds invest in
commercial real estate buildings leased by several agencies of the United States
federal government, as well as by hospitals, medical clinics and other
industries, including technology, telecommunications and entertainment
companies. Isaac is also involved in urban development projects in Asia.
Safe Harbor Statement
This press release contains forward-looking statements that involve risks and
uncertainties. Actual results, events and performances could vary materially
from those contemplated by these forward-looking statements. These statements
involve known and unknown risks and uncertainties, which may cause the Company's
actual results, expressed or implied, to differ materially from expected
results. These risks and uncertainties include, among other things, product
demand and market competition. You should independently investigate and fully
understand all risks before making an investment decision.
Contacts:
Retail Investors
Tim Matula
ChinaTel Group, Inc.
Investor Relations
(Toll Free) 1-877-260-9170
investors@chinatelgroup.com
How many seasons does Lebron have in the NBA?
Hey Sandy did it to us...I have to admit he is one of the better con men I have met in my life.
You have to show greatness for many years (a.k.a Koeb, Shaq, Nash, et al) before you have the right to conquer the world (your own marketing companyies, etc).
Have you ever wondered why you don't see Lebron in the T-Mobile Fab 5 commercials? I doubt he has 5 serious NBA superstar friends.
I'm an IHUB lawyer. I advise folks to turn over all of their wealth to me as soon as they get it. Much less painful for them that way. :)
So Sandy has another 622 BILLION TO GO!!!
Vacuum Cleaner too!
Lakers in 4 over the SUNS!
That fine is easily paid if we issue another 81 billion shares. NO WORRIES!!
So they issue an 8-K this monring giving 3 million restricted shares to the majority shareholder and original CEO for consulting saervices. TOO FUNNY!!!!
You mean the blowout, not matchup.
I wish it was LA!! I only live 40 mils from downtown.
ITs not a home game for the Lakers. Its in UTAHJ, isnt it?
Doing well! And you? Lakers close out Utah tonight
I must really ask that all of you make appointments with your psychiatrist if you aren't a LAKER FAN! It'll do you some good. I can recommend som great LA doctors for you.
Just come down another 103 points and I will be happy Mr DOW!!
I see by the webcam on Times Square 3 people listened!! And down we go!!!!!
Your just a TWIT.
C'mon DOW, come to papa!!!
ROTFLMAO
You should start a contest right now. contest is to see who can pick closest to the DOW final loss today. I say down another 350. Any takers?
I am also snapping up as much F, CHTL, and CREE on these dips as I can afford.
Watch what happens. Patience myfriend, patience. My prediction is that their will be THREE large vendors with most of the marketshare in the cell\mobile\tablet space 3 years from now. Invest now in Nokia, HTC and Microsoft. All will triple within 36 months.
Yes I did. I'm just stunned that I've called each within MINUTES before each downturn.
Damn if I didn't call this correction and the last 3 CORRECTLY!! I need to write a book or something!!
It's amazing what happens behind the scenes.
Do you mean the LAPBAND folks?
Oh no. Sorry to hear that.
Whatever happened to Zeev?
VIX is up $16.00 to over $40!!
I meant all in one day.
My thinking is that now the personal housing market will come down another 20% over the summer due to the lack of govt supports and the commercial market will\is crashing and I'll bet its a 50% drop BY THE END OF SUMMER......ANd there are many ther bubbles about to burst.
I'm betting on it. Was right the last 2 corrections.
We need to get back to 8000 for a reality check IMHO.
Here comes your 10% + Market correction.
Here comes your 10% + Market correction.