As filed with the Securities and Exchange Commission on September 14, 2018

Registration No. 333-223034

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

AMENDMENT NO. 6 TO

FORM S-1 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

 

 

BORQS TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

British Virgin Islands

 

7373

 

N/A

(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

 

Building B23-A,
Universal Business Park
No. 10 Jiuxianqiao Road
Chaoyang District, Beijing 100015,
China
(86) 10-5975-6336

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

 

Pat Sek Yuen Chan

Chief Executive Officer

Borqs Technologies, Inc.

Building B23-A,

Universal Business Park

No. 10 Jiuxianqiao Road

Chaoyang District, Beijing 100015
China
(86) 10-5975-6336

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)

 

Copies to

 

Barry I. Grossman

Ellenoff, Grossman & Schole LLP

1345 Avenue of the Americas

New York, NY 10105

(212) 370-1300

Mitchell S. Nussbaum

Loeb & Loeb LLP

345 Park Avenue

New York, NY 10154

(212) 407-4000

 

 

 

Approximate date of commencement of proposed sale to the public : As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer  ☐
Non-accelerated filer ☒ (Do not check if a smaller reporting company) Smaller reporting company ☐
  Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

 

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

EXPLANATORY NOTE

 

This registration statement contains two prospectuses:

 

 

Offering Prospectus. A prospectus which covers the offering, issuance and sale by us of up to $11,500,000 (assuming full exercise of the underwriters’ over-allotment option) of our ordinary shares, of which $7,503,769 of the ordinary shares sold in this offering may be offered and sold by the Participating Stockholders, and

     
 

Resale Prospectus. A prospectus to be used for the resale by the Selling Stockholders of up to 1,807,823 of the Registrant’s ordinary shares.

 

The Resale Prospectus is substantively identical to the Offering Prospectus, except for the following principal points:

 

  the outside and inside covers are different;
     
  the tables of contents are different;
     
  page i of the Offering Prospectus is not included in the Resale Prospectus;
     
  the section entitled “The Offering” on page 7 of the Offering Prospectus is different;
     
  the section entitled “Use of Proceeds” on page 46 of the Offering Prospectus is different;
     
  the section entitled “Description of Securities” beginning on page 99 of the Offering Prospectus is not included in the Resale Prospectus;
     
  a section entitled “Selling Stockholders” is included in the Resale Prospectus;
     
  the section entitled “Underwriters” beginning on page 113 of the Offering Prospectus is different and is entitled “Plan of Distribution;” and
     
  the section entitled “Legal Matters” beginning on page 116 of the Offering Prospectus is different.

 

The Registrant has included in this Registration Statement a set of alternate pages for the Resale Prospectus to reflect the foregoing differences. The Offering Prospectus will exclude the alternate pages and will be used for the public offering by the Registrant. The Resale Prospectus will be substantively identical to the Offering Prospectus except for the addition or substitution of the alternate pages and will be used for the resale offering by the Selling Stockholders.

 

 

 

 

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PROSPECTUS (Subject to Completion)

 

Dated September 14, 2018 

 

2,666,667 Ordinary Shares

 

 

Borqs Technologies, Inc. is offering 2,666,667 of its ordinary shares, at a public offering price of US$                  of which 2,001,005 ordinary shares are being sold by the Participating Stockholders identified in this prospectus. We will not receive any proceeds from the sale of ordinary shares sold by the Participating Stockholders.

 

 

 

Our ordinary shares are listed on The Nasdaq Capital Market under the symbol “BRQS.” On September 11, 2018, the last reported sale price of our ordinary shares on The Nasdaq Capital Market was US$4.50 per ordinary share. We have assumed a public offering price of $3.75 per ordinary share. The public offering price will be determined between us, the underwriters and investors based on market conditions at the time of pricing and may be at a discount of up to 20% of the assumed $3.75 offering price.

 

 

 

We are an “emerging growth company” as defined under the federal securities laws. Investing in our ordinary shares involves risks. See “ Risk Factors ” beginning on page 11.

 

 

 

PRICE US$       PER ORDINARY SHARE

 

 

 

   

Price to
Public

 

Underwriting
Discounts and
Commissions (1)

 

Proceeds to
Borqs Technologies, Inc.

 

Proceeds to Participating Stockholders

Per Share   US$   US$   US$   US$
Total   US$   US$   US$   US $

 

 

(1) In addition to the underwriting discount, we have agreed to issue to the representative of the underwriters warrants to purchase a number of ordinary shares equal to 4% of the total number of ordinary shares being sold in the offering, including the over-allotments, if any, and to reimburse the underwriters for expenses incurred by it. See the section titled “Underwriters” for a description of the total compensation payable to the underwriters.

 

Borqs Technologies, Inc. has granted the underwriters the right to purchase up to an additional 400,000 ordinary shares (equivalent to 15% of the total number of ordinary shares sold in this offering) at the public offering price less underwriting discount.

 

The Securities and Exchange Commission and state regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The underwriters expect to deliver the ordinary shares to purchasers on or about       , 2018.

 

Sole Book-Running Manager

 

Maxim Group LLC

 

Co-Manager

 

The Benchmark Company

 

       , 2018

 

 

 

 

TABLE OF CONTENTS

 

 

Page

Prospectus Summary 1
The Offering 7
Summary Consolidated Financial Data 8
Risk Factors 11
Market, Industry and Other Data 46
Use of Proceeds 46
Market Price of Our Ordinary Shares 46
Dividend Policy 47
Capitalization 47
Dilution 48
Selected Consolidated Financial Data 49
Management’s Discussion and Analysis of Financial Condition and Results of Operations 51
Special Note Regarding Forward-Looking Statements 51
Business 70
Management 84
Executive Compensation 89
Certain Relationships and Related Person Transactions 94
Principal Shareholders and Participating Stockholders 97
Description of Securities 99
Taxation 104
Underwriters 113
Legal Matters 116
Experts 116
Where You Can Find Additional Information 116
Index to Consolidated Financial Statements F-1

 

 

 

Neither we, the Participating Stockholders nor any of the underwriters have authorized anyone to provide you with additional information or information that is different from or to make any representations other than those contained in this prospectus or in any free-writing prospectus prepared by or on behalf of us or the Participating Stockholders to which we may have referred you in connection with this offering. We, the Participating Stockholders and the underwriters take no responsibility for, and can provide no assurances as to the reliability of, any other information that others may give you. We and the Participating Stockholders are offering to sell, and seeking offers to buy, our ordinary shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our ordinary shares. Our business, financial condition, results of operations and future growth prospects may have changed since that date.

 

Unless the context requires otherwise, the words “we,” “us,” “our,” “the Company” and “Borqs” refer to Borqs Technologies, Inc. and its subsidiaries and consolidated affiliated entities taken as a whole. For purposes of this prospectus, unless the context otherwise requires, the term “shareholders” shall refer to the holders of our ordinary shares.

 

For investors outside the United States, neither we, the Participating Stockholders nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this offering and the distribution of this prospectus and any such free-writing prospectus outside the United States.

 

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PROSPECTUS SUMMARY

 

This summary highlights information contained in greater detail elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. You should read the entire prospectus carefully before making an investment in our ordinary shares. You should carefully consider, among other things, our consolidated financial statements and related notes and the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

 

BORQS TECHNOLOGIES, INC.

 

Overview

 

Borqs Technologies, Inc. (“we”, “the Company” or “Borqs”) is a global leader in software, development services and products providing customizable, differentiated and scalable Android-based smart connected devices and cloud service solutions. We are a leading provider of commercial grade Android platform software for mobile chipset manufacturers, mobile device Original Equipment Manufacturers (“OEMs”) and mobile operators, as well as complete product solutions of mobile connected devices for enterprise and consumer applications.

 

Our Connected Solutions Business Unit (“BU”) works closely with chipset partners to develop new connected devices. Borqs developed the reference Android software platform and hardware platform for Intel and Qualcomm phones and tablets. In recent years, we have been awarded significant business contracts from Intel and Qualcomm, leading global chipset manufacturers. We provide Connected Solutions customers with customized, integrated, commercial grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare software platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The BorqsWare Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things (“IoT”) devices. The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end services for their devices. Our activities with Intel have reduced over the last two years due to Intel’s strategy to exit the mobile industry, and there are no material agreements with Intel on which we are substantially dependent. For the year 2017, Intel was no longer a customer of the Company. However, our activities with Qualcomm have increased over the last two years, including developmental work on chipsets for mobile devices and wearable products.

 

Our Mobile Virtual Network Operator (“MVNO”) BU provides a full range 2G/3G/4G voice and data services for general consumer usage and IoT devices, as well as traditional telecom services such as voice conferencing, and acts as a sales and promotion channel for the products developed by the Connected Solutions BU.

 

The Connected Solutions BU represented 73.4%, 70.9% and 79.2% of our net revenues in the year ended December 31, 2015, 2016 and 2017, respectively. In the year ended December 31, 2015, 2016 and 2017, Borqs generated 85%, 93% and 86% of its net revenues from customers headquartered outside of China and 15%, 7% and 14% of its net revenues from customers headquartered within China. As of June 30, 2018, Borqs had collaborated with 6 mobile chipset manufacturers and 29 mobile device OEMs to commercially launch Android based connected devices in 11 countries, and sales of connected devices with the BorqsWare software platform solutions are embedded in more than 14 million units worldwide.

 

Borqs has dedicated significant resources to research and development, and has research and development centers in Beijing, China and Bangalore, India. As of June 30, 2018, 350 of our 509 employees were technical professionals dedicated to platform research and development and product specific customization.

 

Borqs has achieved significant growth since inception in 2007. Net revenues increased from $75.1 million in 2015 to $120.6 million in 2016, to $154.3 million in 2017. We recorded net income of $0.8 million and $2.6 million in the years 2015 and 2016 respectively. For 2017, we had a net loss of $12.4 million which included non-cash merger related costs of $14.5 million; excluding such non-cash merger related costs would result in non-GAAP adjusted net income of $2.1 million for 2017 as compared to a net income of $2.6 million for 2016. We recorded a net income of $2.0 million in the three months ended June 30, 2018 and a net income of $3.4 million in the six months ended June 30, 2018, as compared with a net loss of $965, 000 in the three months ended June 30, 2017 and a net loss of $947, 000 in the six months ended June 30, 2017.

 

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Recent Developments

 

Potential acquisition of Shanghai KADI Technologies Co., Ltd.  On January 8, 2018, we entered into a letter of intent to acquire a 60% equity interest in Shanghai KADI Technologies Co., Ltd (“KADI”), a Chinese company that develops software and hardware solutions for electric vehicle control modules, such as charging, battery management and vehicle controls. Pursuant to the letter of intent, and as is being negotiated in a definitive agreement, we intend to pay $11.7 million in cash to KADI and $3.3 million in our ordinary shares to the selling shareholders of KADI based on achievement of net income targets for the years 2018, 2019 and 2020. KADI is not a customer or supplier of Borqs. In accordance with the letter of intent, we have made four scheduled cash advances to KADI totaling $600,000 which will be deducted from our initial cash payments to KADI under the definitive agreement being negotiated. If the transaction is not consummated within nine months after the signing of the letter of intent, the advance payments will be converted into shares representing five percent of the outstanding capital stock of KADI. There are no termination fees or penalties under the letter of intent. Assuming the parties reach a definitive agreement and proceed to closing, part of the proceeds from this offering as contemplated herewith will be used to support the funding of the potential acquisition of KADI. See “Use of Proceeds.”

 

KADI has worked with the leading automotive companies in China, including Chery, Dong Feng Motors, Geely Auto and Shenzhen Pin Chuan Electric Energy Co. Its founder, Dr. Hu Lin, has nearly 20 years of professional experience working with companies in the automotive industry, including Volkswagen and Delphi.

 

KADI has been awarded a RMB320 million (US$50 million) multi-year supply contract for its core electric control modules from Shenzhen Espirit Technology Co., Ltd. (“Espirit”), which is a key automotive contractor in China. Borqs believes that KADI’s products will complement Borqs’ existing automobile in-vehicle-infotainment (IVI) solutions, in terms of sales and distribution, and research and development. Borqs anticipates that the experience of its software engineers will enhance KADI’s capabilities while Borqs’ supply chain management team will ensure efficient delivery of hardware products. Assuming the acquisition of KADI is completed, Borqs expects to provide $7.7 million to KADI in 2018 to service the Espirit supply contract, of which approximately $4 million is anticipated to be used for capital expenditures, and $3.7 million is anticipated to be used for working capital needs. We are in discussions with KADI to negotiate a modified payment schedule in light of the fact that the proceeds raised in this offering are insufficient to fund the acquisition of KADI.

 

Beginning in May 2018, KADI will deliver certain control modules, including steering control, air conditioning and for other electric bus functions, to Dong Feng Motor Group’s Super Dragon Electric Bus Program. Such products represent approximately 10% of the Espirit supply contract.

 

Upon the completion of our acquisition of 60% of KADI, we will have an exclusive option, valid until December 31, 2021, to purchase the remaining 40% of KADI at a 9% premium to the consideration paid for the first 60%.

 

Repurchase of Shares from Zhengqi. On January 10, 2018, we entered into a stock repurchase agreement (“Stock Repurchase Agreement”) with Zhengqi International Holding Limited (“Zhengqi”), pursuant to which we agreed to repurchase 966,136 of our ordinary shares that were originally issued and sold to Zhengqi on August 18, 2017, at an aggregate purchase price of approximately $10 million, or $10.40 per share. In addition, Zhengqi agreed to forfeit all of its rights to 1,278,776 shares held in escrow. The Stock Repurchase Agreement provides that those shares will be treated in the following manner: transfer 51,151 shares (4% of the total) to the indemnity escrow account; and deliver 1,227,625 shares to the former Borqs International shareholders based on their respective proportionate interests in the merger consideration. We and Zhengqi are currently making arrangements for the completion of this transaction, which we anticipate will be within 2018. As of August 3, 2018, the 1,278,776 escrow shares were forfeited and released from escrow and the Company had obtained the consent of its existing lenders with respect to the transaction. The return and cancellation of the 966,136 shares remain in process. Proceeds from this offering will not be used to repurchase the shares from Zhengqi.

 

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Investment in Shenzhen Crave Communication Co., Ltd. On January 18, 2018, we entered into an agreement with Shenzhen Crave Communication Co., Ltd (“Crave”) and Colmei Technology International Ltd. (“Colmei”), along with the shareholders of Crave and Colmei (“CC Selling Shareholders”), pursuant to which we agreed to acquire 13.8% of the outstanding shares of Crave and 13.8% of the outstanding shares of Colmei from the CC Selling Shareholders. The transaction closed on March 22, 2018, and under the agreement, the purchase consideration consists of ordinary shares and cash. On the closing, we issued 473,717 ordinary shares to the order of the CC Selling Shareholders and agreed to pay cash in the amount of $10.0 million to be paid to the CC Selling Shareholders over a period of 36 months. In addition, subject to Board approval, we agreed to issue 183,342 additional shares to the CC Selling Shareholders if the aggregate value of the ordinary shares initially issued at the closing to the CC Selling Shareholders under this agreement was less than $3.0 million on August 18, 2018 (the “Calculation Date”). We are currently in discussions with the CC Selling Shareholders to extend the Calculation Date to a mutually agreed date. No proceeds from this offering will be used to pay any of the $10.0 million cash consideration to the CC Selling Shareholders.

 

Crave is a manufacturer of mobile terminal devices located in Shenzhen China. With multiple high speed SMT lines, assembly lines and packaging lines, its annual capacity reaches over 10 million units in its Shenzhen facility. Crave exports final products for customers in South America, India, Indonesia, the Philippines and Vietnam. Colmei, which is under common ownership with Crave, is a sales entity located in Hong Kong that has established relationships with international banks to facilitate transactions with its global clients. Crave is one of our material suppliers from which we source necessary components for our customers, and we believe our investments in Colmei and Crave provide us with indirect access to supply chain financing, competitive component pricing and prioritized production capacity. Prior to this investment, we have contracted Crave and Colmei for multiple projects related to manufacturing our products, including a large variety of phone models and releases.

 

Award of MVNO License to Yuantel Telecom . On July 23, 2018, the Ministry of Industry and Information Technology of China (the “MIIT”) awarded the official commercial MVNO license to Yuantel Telecom, our subsidiary that runs our mobile virtual network operator or MVNO business.  The license is valid from July 12, 2018 to July 12, 2023.

 

Risks Related to Our Business and Investment in Our Ordinary Shares

 

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the risks highlighted in the section titled “Risk Factors” immediately following this prospectus summary before making an investment decision. We may be unable for many reasons, including those that are beyond our control, to implement our business strategy successfully. These risks include:

 

  Our future capital needs are uncertain and our independent registered public accounting firm has expressed in its report on our 2017 audited financial statements a substantial doubt about our ability to continue as a going concern;

 

  We generate a significant portion of our net revenues from a small number of major customers and key projects;

 

  We are dependent upon the Android platform and, if Google determines to no longer develop the Android platform and our further development is not taken up by reliable alternative sources, our business could be materially harmed;

 

  Our control of our VIEs is based upon contract rather than equity;

 

  We face potential risks associated with our ability to fund our expansion plans, including acquisitions, and our operations due to fund restrictions both from currency transfer and conversion restrictions placed on us by the PRC government; and

 

  The current license to operate our services in the PRC is based on an MVNO license issued to us in July 2018 by the MIIT, which is valid until July 12, 2023. If we cannot maintain the license, we will need to cease operating as a MVNO and our total revenues will be significantly reduced.

 

The risks and uncertainties related to our business and our industry also include, but are not limited to:

 

  Our ability to manage our business expansion and increasingly complicated operations effectively;

 

  Our ability to use, protect and enhance our brands;

 

  Our ability to compete effectively in the marketplace;

 

  Our ability to remediate our material weakness and maintain an effective system of internal controls; and

 

  Our ability to make acquisitions, including our potential acquisition of KADI, and to successfully integrate these acquisitions and establish and maintain strategic relationships.

 

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See “Risk factors” for a more detailed discussion of these and other risks and uncertainties that we may face.

 

If we are unable to adequately address these and other risks we face, our business, financial condition, operating results and prospects may be adversely affected.

 

Corporate History and Information

 

We were incorporated in the British Virgin Islands on July 1, 2015 as a blank check company, formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar business combination with one or more businesses or entities. As a result of a merger on August 18, 2017 of one of our subsidiaries (which we formed for this purpose) with and into Borqs International Holding Corp (“Borqs International”), a company incorporated in the Cayman Islands in 2007, we acquired the entire issued share capital of Borqs International, which became our wholly-owned subsidiary, and we ceased to be a shell company. We conduct our business principally through BORQS Beijing Ltd. (“Borqs Beijing”), which is our wholly-owned Chinese subsidiary. In addition, we conduct parts of our operations through subsidiaries in China, India, Hong Kong and South Korea.

 

As of June 30, 2018, we were authorized to issue an unlimited number of shares and our share capital consisted of 31,307,522 issued and 31,303,350 outstanding ordinary shares, and we had issued 5,750,000 public warrants, 531,875 private warrants, and 417,166 assumed warrants. Our ordinary shares and public warrants began trading on The Nasdaq Capital Market (“Nasdaq”) under the symbols “BRQS” and “BRQSW,” respectively, on or around August 21, 2017. On October 12, 2017, we were notified by Nasdaq that we were not in compliance with Nasdaq Listing Rules 5505(a)(3) and 5515(a)(4), given that our ordinary shares and public warrants did not meet the minimum initial listing requirements of 300 round lot holders of ordinary shares and 400 round lot holders of public warrants. On December 11, 2017, we were notified that our request for continued listing of our ordinary shares on Nasdaq was granted, subject to providing an update regarding the status of our efforts to evidence compliance with the minimum 300 round lot shareholder requirement on or before February 14, 2018, and full compliance with that requirement by no later than April 10, 2018. The Panel also advised the Company that it had determined to delist our warrants. To regain compliance with Nasdaq’s listing requirement of 300 round lot holders of ordinary shares, we implemented a restricted ordinary shares purchase program with eligible employees of our wholly-owned subsidiary in India, Borqs Software Solutions Private Ltd. Pursuant to the program, 222 employees purchased an aggregate of 29,170 ordinary shares at a purchase price of $9.40 per share, which was deducted from their regular compensation on March 23, 2018. On April 12, 2018, we were notified by the Panel that we had regained compliance with the listing requirement of 300 round lot holders and that our ordinary shares would continue to be listed on Nasdaq. Our public warrants have been trading on the OTC Markets system under the symbol “BRQSW” since October 23, 2017.

 

Our principal executive offices are located at Building B23-A, Universal Business Park, No. 10 Jiuxianqiao Road, Chaoyang District, Beijing, 100015 China. Our telephone number is +86 10-5975-6336. Our website address is www.borqs.com . The information contained on our website is not incorporated by reference into this prospectus.

 

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The following diagram illustrates our current corporate structure of each of our material subsidiaries, consolidated VIEs and the subsidiaries of the VIEs.

 

Corporate Organizational Chart

 

 

 

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Borqs Subsidiaries and Consolidated Affiliated Entities

 

The following is a summary of our material subsidiaries and consolidated affiliated entities:

 

Borqs Beijing Ltd. (“Borqs Beijing”), a wholly foreign owned enterprise established under the laws of the PRC in 2007, is our primary operating entity and 100% owned by Borqs Hong Kong Limited;

 

Borqs Hong Kong Limited (“Borqs Hong Kong”), a limited company established under the laws of Hong Kong in 2007, engages in the software and services business and is 100% owned by Borqs International Holding Corp.;

 

Borqs Software Solutions Private Limited (“Borqs Software Solutions”), a private limited company established under the laws of India in 2009, engages in the R&D for software and is 99.99% owned by Borqs International Holding Corp. and 0.01% owned by Borqs Hong Kong;

 

Borqs Korea (“Borqs Korea”), a company established under the laws of South Korea in 2012, engages in the R&D of software and is 100% owned by Borqs Hong Kong;

 

Beijing Borqs Software Technology Co, Ltd. (“Borqs Software”), a company established under the laws of the PRC in 2008, engages in government subsidized software development and engineering projects as well as other software and services business and is 100% owned by Beijing Big Cloud Century Technology Limited (“BC-Tech”), which is 100% owned by Borqs Beijing;

 

Beijing Borqs Wireless Technology Co, Ltd. (“Borqs Wireless”), a company established under the laws of the PRC in 2013, engages in software development and engineering projects as well as other software and services business and is 100% owned by BC-Tech, which is 100% owned by Borqs Beijing;

 

Beijing Big Cloud Century Network Technology Co., Ltd. (“BC-NW”), a company established under the laws of the PRC in 2014, is the variable interest entity through which Borqs Beijing controls Yuantel Telecom, the entity which operates the MVNO business,

 

Yuantel (Beijing) Telecommunications Technology Co., Ltd. (“Yuantel Telecom”), a company established under the laws of the PRC in 2004, engages in MVNO services and is 95% owned by Yuantel (Beijing) Investment Management Co., Ltd., which is 79% owned by BC-NW, which is 100% beneficially owned and controlled by Borqs Beijing through contractual control arrangements; and

 

Beijing Tongbaohuida Technology Co., Ltd. (“Tongbaohuida”), a company established under the laws of the PRC in 2012 and is 100% owned by Yuantel Telecom. Tongbaohuida has been inactive for the years 2016 and 2017.

 

Implications of Being an Emerging Growth Company

 

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or “JOBS Act.” We have elected to take advantage of specified reduced reporting and other requirements available to us, as an emerging growth company, that are otherwise applicable to public companies. These provisions include, among other things:

 

  exemption from the auditor attestation requirement in the assessment of our internal controls over financial reporting;

 

  exemption from new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies;

 

  exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board (United States), requiring mandatory audit firm rotation or a supplement to our auditor’s report in which the auditor would be required to provide additional information about the audit and our financial statements;

 

  an exemption from the requirement to seek non-binding advisory votes on executive compensation and golden parachute arrangements; and

 

  reduced disclosure about executive compensation arrangements.

 

We may take advantage of these provisions until October 20, 2020, unless we earlier cease to be an emerging growth company, which would occur if our annual gross revenues exceed $1.0 billion, if we issue more than $1.0 billion in non-convertible debt in a three-year period, or if the market value of our ordinary shares held by non-affiliates exceeds $700.0 million as of any January 1 before that time, in which case we would no longer be an emerging growth company as of the following December 31. Investors may find our ordinary shares less attractive if we rely on the exemptions, which may result in a less active trading market and increased volatility in our stock price. We have taken advantage of the reduced reporting requirement with respect to disclosure regarding our executive compensation arrangements and expect to take advantage of the exemption from auditor attestation on the effectiveness of our internal control over financial reporting. For as long as we take advantage of the reduced reporting obligations, the information that we provide shareholders may be different from information provided by other public companies. We have not elected to “opt out” of the extended transition period relating to the exemption from new or revised financial accounting standards and as a result, we will not necessarily comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.

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THE OFFERING

 

Ordinary shares offered by us 665,662 shares
   
Ordinary shares offered by Participating Stockholders

2,001,005 shares

   
Option to purchase additional shares exercisable for
45 days from the closing of this offering
400,000 shares (equivalent to 15% of the total number of ordinary shares sold in this offering)
   
Ordinary shares to be outstanding after this offering

                    shares (        shares if the option to purchase additional shares is exercised in full)

   
Use of proceeds

We estimate that our net proceeds from this offering will be approximately $1.4 million. If the underwriters exercise their option to purchase additional shares in full, we estimate that our net proceeds from this offering will be approximately $2.8 million. We intend to use our net proceeds from this offering to fund our pending acquisition of Shanghai KADI Technologies Co., Ltd. and for general working capital purposes. See “Use of Proceeds.” We will not receive any proceeds from the sale of the ordinary shares by the Participating Stockholders.

   
Representative’s Warrants We have agreed to issue to Maxim Group LLC in connection with this offering a warrant to purchase 4% of the ordinary shares sold in the offering (“Representative’s Warrants”). The Representative’s Warrants will have an exercise price equal to 120% of the offering price of the ordinary shares sold in this offering and may be exercised on a cashless basis. The Representative’s Warrants are exercisable commencing 180 days after the effective date of the registration statement related to this offering, and will be exercisable for three years after the effective date. The Representative’s Warrants are not redeemable by us and have certain demand and “piggyback” registration rights (See “Underwriters — Representative’s Warrants”).
   
Risk factors See “Risk Factors” beginning on page 11 and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our ordinary shares.
   
The Nasdaq Capital Market ticker symbol “BRQS”

 

The number of ordinary shares to be outstanding after this offering is based on 31,307,522 issued and 31,303,350 ordinary shares outstanding as of June 30, 2018, and excludes:

 

  2,686,629 ordinary shares issuable upon the exercise of stock options outstanding as of June 30, 2018, with a weighted-average exercise price of $5.12 per share;

 

 

The repurchase and cancellation of 966,136 ordinary shares outstanding as of June 30, 2018 pursuant to our Stock Repurchase Agreement with Zhengqi, executed on January 10, 2018;

 

  3,558,104 ordinary shares issuable upon the exercise of warrants (See “Description of Securities — Warrants”);

 

  3,853,602 ordinary shares reserved for future issuance under our 2017 Equity Incentive Plan, or Incentive Plan, as of June 30, 2018;

 

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  640,000 ordinary shares issuable upon the exercise of EarlyBirdCapital, Inc.’s (“EarlyBird Capital”) purchase option (See “Description of Securities — Purchase Option”); and

 

  The number of ordinary shares issuable upon the exercise the Representative’s Warrants. The Representative’s Warrants will have an exercise price equal to 120% of the offering price of the ordinary shares sold in this offering and may be exercised on a cashless basis. The Representative’s Warrants are exercisable commencing 180 days after the effective date of the registration statement related to this offering, and will be exercisable for three years after the effective date. The Representative’s Warrants are not redeemable by us and have certain demand and “piggyback” registration rights (See “Underwriters — Representative’s Warrants”).

 

Our Incentive Plan also provides for automatic annual increases in the number of shares reserved thereunder. See “Executive Compensation — Employee Benefit Plans” for additional information.

 

Except as otherwise indicated, all information in this prospectus assumes:

 

 

no exercise or cancellation of outstanding options or vesting of RSUs subsequent to June 30, 2018; and

 

  no exercise by the underwriters of their overallotment option.

 

SUMMARY CONSOLIDATED FINANCIAL DATA

 

We have derived the summary consolidated statement of operations data for the years ended December 31, 2015, 2016, and 2017 and the summary consolidated balance sheet data as of December 31, 2016 and 2017 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the summary consolidated statement of operations data for the three months ended June 30, 2017 and 2018 and the summary consolidated balance sheet data as of June 30, 2018 from our unaudited interim consolidated financial statements included elsewhere in this prospectus. Our unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, on the same basis as our audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal, recurring adjustments, that are necessary for the fair statement of our consolidated financial position as of June 30, 2018 and our consolidated results of operations for the three months ended June 30, 2017 and 2018. You should read the following summary consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results to be expected for any other period in the future.

 

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Statement of Operations:

 

   

Year Ended

December 31,

   

Three Months Ended

June 30,

   

Six Months Ended

June 30,

 
    2015     2016     2017     2017     2018     2017     2018  
    (US$ in thousands)  
Net revenues:                                          
Software     22,468       14,912       11,212       3,499       1,624       6,583       3,880  
Hardware     32,647       70,536       111,021       11,122       47,018       32,801       95,136  
MVNO     16,007       29,309       30,118       6,987       7,220       12,919       14,729  
Others     3,950       5,829       1,956       521       477       1,036       850  
                                                         
Total net revenues     75,072       120,586       154,307       22,129       56,339       53,339       114,595  
                                                         
Cost of revenues                                                        
Software     (12,699 )     (7,491 )     (7,247 )     (1,612 )     (668 )     (3,942 )     (1,437 )
Hardware     (26,101 )     (57,452 )     (96,247 )     (10,008 )     (42,535 )     (29,246 )     (85,934 )
MVNO     (16,225 )     (28,784 )     (22,836 )     (4,533 )     (5,247 )     (9,820 )     (10,308 )
Others     (2,980 )     (1,709 )     (811 )     (288 )     (180 )     (488 )     (351 )
Total cost of revenues     (58,005 )     (95,436 )     (127,141 )     (16,441 )     (48,630 )     (43,496 )     (98,030 )
                                                         
Total gross profit     17,067       25,150       27,166       5,688       7,709       9.843       16,565  
                                                         
Operating expenses:                                                        
Sales and marketing expenses     (7,359 )     (5,874 )     (7,952 )     (1,646 )     (1,665 )     (2,985 )     (3,347 )
General and administrative expenses     (4,883 )     (10,042 )     (20,753 )     (2,599 )     (2,260 )     (4,157 )     (5,356 )
Research and development expenses     (7,206 )     (5,742 )     (6,443 )     (1,184 )     (1,452 )     (1,476 )     (2,341 )
  Changes in the fair value of warrant liabilities     -       (12 )     (200 )     -       -       (161 )     -  
                                                         
Total operating expenses     (19,448 )     (21,670 )     (35,348 )     (5,429 )     (5,377 )     (8,779 )     (11,044 )
                                                         
Other operating income     3,094       1,760       272       1       -       267       -  
                                                         
Operating income (loss)     713       5,240       (7,910 )     260       2,332       1,331       5,521  
                                                         
Interest income     61       65       14       8       2       10       8  
Interest expense     (156 )     (797 )     (1,877 )     (524 )     (1,117 )     (1,143 )     (1,362 )

 

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    Year Ended
December 31,
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2015     2016     2017     2017     2018     2017     2018  
    (US$ in thousands)  
Other income     208       114       633       51       14       354       53  
Other expense     (35 )     (59 )     (121 )     (158 )     (2 )     (276 )     (47 )
Foreign exchange gain (loss)     855       692       (779 )     (156 )     633       (333 )     259  
                                                         
Profit (Loss) before income taxes     1,646       5,255       (10,040 )     (519 )     1,862       (57 )     4,432  
Income tax expense     (851 )     (2,659 )     (2,319 )     (446 )     146       (890 )     (1,037 )
Net income (loss)     795       2,596       (12,359 )     (965 )     2,008       (947 )     3,395  

 

    Year Ended
December 31,
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2015     2016     2017     2017     2018     2017     2018  
    (US$ in thousands)  
Less: net (loss) income attributable to noncontrolling interests     (1,316 )     (632 )     210       197       178       119       366  
Net income (loss) attributable to Borqs Technologies, Inc.     2,111       3,228       (12,569 )     (1,162 )     1,830       (1,066 )     3,029  
Add: accretion to redemption value of convertible redeemable preferred shares     (2,417 )     (976 )     (6,956 )     (150 )     -       (448 )     -  
Allocation to holders of Preferred Shares           (2,252 )                           -       -  
Net loss attributable to ordinary shareholders     (306 )           (19,525 )     (1,312 )     1,830       (1,514 )     3,029  
                                                         
(Loss) earnings per share:                                                        
Basic     (0.07 )     0.00       (1.52 )     (0.31 )     0.07       (0.36 )     0.11  
Diluted     (0.07 )     0.00       (1.52 )     (0.31 )     0.07       (0.36 )     0.11  
                                                         
Shares used in (loss) earnings per share computation:                                                        
Basic     4,224,090       4,224,725       12,842,671       4,259,898       26,830,514       4,243,964       26,613,800  
Diluted     4,224,090       4,224,725       12,842,671       4,259,898       27,675,005       4,243,964       27,585,851  
Net income (loss)     795       2,596       equity )     (965 )     2,008       (947 )     3,395  
Other comprehensive (loss) income, net of tax of nil:                                                        
Foreign currency translation adjustments, net of tax of nil     (1,491 )     (1,575 )     2,207       546       (2,397 )     851       (1,005 )
Other comprehensive (loss) income, net of tax of nil     (1,491 )     (1,575 )     2,207       546       (2,397 )     851       (1,005 )
Comprehensive (loss) income     (696 )     1,021       (10,152 )     (419 )     (389 )     (96 )     2,390  
Less: comprehensive (loss) income attributable to noncontrolling interest     (1,519 )     (730 )     298       197       100       119       348  
Comprehensive income (loss) attributable to the Borqs Technologies, Inc.     823       1,751       (10,450 )     (616 )     (489 )     (215 )     2,042  

 

Balance Sheet:

 

    December 31,     June 30,  
    2016     2017     2018  
    (US$ in thousands)  
Balance Sheet Data                  
Current assets     58,079       119,531       88,797  
Total assets     78,030       148,732       133,627  
Current liabilities     50,487       92,748       62,235  
Total liabilities     64,519       101,727       80,838  
Shareholders’ (deficit) equity     (55,351 )     47,005       52,789  
Total liabilities and shareholders’ equity     78,030       148,732       133,627  

  

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RISK FACTORS

 

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our ordinary shares. The occurrence of any of the events or developments described below could materially and adversely affect our business, financial condition, results of operations and growth prospects. In such an event, the market price of our ordinary shares could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently believe are not material may also impair our business, financial condition, results of operations and growth prospects.

 

Risks Related to our Business and Industry

 

Our future capital needs are uncertain and our independent registered public accounting firm has expressed in its report on our 2017 audited financial statements a substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital or obtain loans from financial institutions and our operations could be curtailed if we are unable to obtain the required additional funding when needed.  We may not be able to do so when necessary, and/or the terms of any financings may not be advantageous to us.

 

Our financial statements for the year ended December 31, 2017 included in our Annual Report on Form 10-K filed on April 2, 2018, have been prepared assuming we will continue to operate as a going concern.  However, due to our recurring losses from operations, and working capital deficiency, there is substantial doubt about our ability to continue as a going concern.  Because we continue to experience negative cash flow, our ability to continue as a going concern is subject to our ability to obtain necessary funding from outside sources, including obtaining additional funding from the sale of our securities, grants or other forms of financing.  Our continued negative cash flow increases the difficulty in completing such sales or securing alternative sources of funding, and there can be no assurances that we will be able to obtain such funding on favorable terms or at all.  If we are unable to obtain sufficient financing from the sale of our securities or from alternative sources, we may be required to reduce, defer or discontinue certain of our research and development and operating activities or we may not be able to continue as a going concern.  As a result, our independent registered public accounting firm has expressed in its auditors’ report on the financial statements included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, a substantial doubt regarding our ability to continue as a going concern.  Our financial statements do not include any adjustments that might result from the outcome of the uncertainty regarding our ability to continue as a going concern. If we cannot continue as a going concern, our shareholders may lose their entire investment in our ordinary shares.  Future reports from our independent registered public accounting firm may also contain statements expressing doubt about our ability to continue as a going concern.

 

Due to liquidity concerns arising from our negative cash flow, we anticipate that we will need to raise additional funds to finance operations.

 

As of June 30, 2018, we had accumulated deficit of $71.482 million, net income of $3.395 million and net cash inflow from operation of $1.552 million for the six month period then ended. As of December 31, 2017, we had accumulated deficit of $74.231 million and suffered net loss of $12.359 million and negative cash flow from operating of $14.939 million for the year then ended. This condition raises substantial doubt about our ability to continue as a going concern.

 

To support our research and development activities and general corporate purposes as well as our pending acquisition of KADI, we will need to raise additional capital to fund our future operations. Our cash needs will depend on numerous factors, including our revenues, completion of our product development activities, our ability to realize synergies from the acquisition with KADI, market acceptance of electric, plug-in electric and fuel cell vehicles, customer and market acceptance and use of our products, and our ability to reduce and control costs. We expect to devote substantial capital resources to, among other things, fund operations, and continue research and development programs in China and in India. If we are unable to secure such additional financing, it will have a material adverse effect on our business and we may have to limit operations in a manner inconsistent with our development and commercialization plans. If additional funds are raised through the issuance of equity securities or convertible debt securities, it will be dilutive to our shareholders and could result in a decrease in our stock price.

 

We have funded our operations primarily with proceeds from public and private offerings of our ordinary shares and secured and unsecured debt instruments. Our negative cash flow and cash uses, our projections of the level of cash that will be required for our operations, the terms of the private placement transactions that we completed in the past, and the restricted availability of credit for emerging industries, may impair our ability to raise capital on terms that we consider reasonable and at the levels that we will require over the coming months. We cannot provide any assurances that we will be able to secure additional funding from public or private offerings on terms acceptable to us, if at all. If we are unable to obtain the requisite amount of financing needed to fund our planned operations, it would have a material adverse effect on our business and ability to continue as a going concern.

 

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The agreements governing the loan facilities we currently have contain restrictions and limitations that could significantly affect our ability to operate our business, raise capital, as well as significantly affect our liquidity, and therefore could adversely affect our results of operations.

 

Covenants governing our loan facilities with SPD Silicon Valley Bank Co., Ltd. (“SSVB”) and Partners For Growth IV, L.P. and Partners For Growth V, L.P. (collectively, “PFG”) restrict, among other things, our ability to:

 

  pay dividends or distributions, repurchase or redeem equity;

 

  incur or permit to exist any additional indebtedness or liens;

 

  guarantee or otherwise become liable with respect to the obligations of another party or entity;

 

  acquire any assets, except in the ordinary course of business, or make any investments; and

 

  sell all or substantially all of our assets.

 

Our ability to comply with these provisions may be affected by events beyond our control. Although each of SSVB and PFG have consented to our transactions with Crave/Colmei, KADI, our repurchase of shares from Zhengqi, and as to the transactions contemplated by this offering, such covenants and obligations are ongoing, any the breach of any such covenants or obligations not otherwise waived or cured could result in a default under the applicable debt obligations and could trigger acceleration of those obligations. In addition, the loan agreements with SSVB and PFG requires us to satisfy certain financial covenants, including quarterly EBITDA thresholds. Any defaults under our loan agreements with SSVB and PFG could adversely affect our growth, our financial condition, our results of operations and our ability to make payments on our debt. The ability to make payments of principal and interest on indebtedness will depend on our financial condition, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control. If sufficient cash flow is not generated from operations to service such debt, we may be required, among other things, to:

 

seek additional financing in the debt or equity markets;

 

delay, curtail or abandon altogether our research & development or investment plans;

 

refinance or restructure all or a portion of our indebtedness; or

 

sell selected assets.

 

Such measures might be insufficient to service the indebtedness. In addition, any such financing, refinancing or sale of assets may not be available on commercially reasonable terms, or at all. If funds are not available when needed, or available on acceptable terms, we may be required to delay, scale back or eliminate some of our obligations, including with respect to our commitments in connection with our investments into KADI and Crave/Colmei, the repurchase of our shares from Zhengqi, and this offering. In addition, we may not be able to grow market share, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, which could negatively impact our business, operating results and financial condition.

 

Defaults under our loan agreements with SSVB and PFG and procurement agreement with HHMC Microelectronic Co., Limited could result in a substantial loss of our assets.

 

We have pledged our assets as collateral under the loan agreements with SSVB and PFG. Additionally, pursuant to a procurement agreement with HHMC Microelectronics Co., Limited (“HHMC”), HHMC has the right to take possession of goods purchased on behalf of Borqs to pay off any advances owed.

 

The initial term of the procurement agreement was extended to May 28, 2018. We have not been notified by HHMC that they seek to accelerate the loan payments and we are currently in discussions with HHMC for another extension.  Outstanding loan amounts under revolving loan facilities we have with SSVB mature on February 28, 2019, and if needed, we may either extend or refinance the loans. A failure to repay any of the indebtedness under our agreements with any of our lenders as it becomes due or to otherwise comply with the covenants contained in any of such agreements could result in an event of default thereunder. If not cured or waived, an event of default under any of such agreements could enable the lenders thereunder to declare all borrowings outstanding on such debt, together with accrued and unpaid interest and fees, to be due and payable and terminate all commitments to extend further credit. The lenders could also elect to foreclose on our assets securing such debt. In such an event, the Company may not be able to refinance or repay all of its indebtedness, pay dividends or have sufficient liquidity to meet operating and capital expenditure requirements. Any such acceleration could cause us to lose a substantial portion of our assets and will substantially adversely affect our ability to continue our operations.

 

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We have in the past failed to comply with financial covenants in certain of our loan documents, which has resulted in potential defaults under certain of our loan documents. These and similar breaches of our loan documents in the future could adversely affect our financial condition and our ability to meet our payment obligations on our indebtedness.

 

We have in the past breached certain financial covenants under our loan agreements with SSVB and PFG. Specifically, we failed to meet a monthly quick ratio threshold, under U.S. GAAP basis, for several months in the second, third and fourth quarters of 2017 under the SSVB loan agreement and a minimum 3-month trailing EBITDA target under the PFG loan agreement as of the third quarter of 2017.  Such breach could result in acceleration of the repayment according to the contract term. Therefore, the outstanding balance of $3.032 million was reclassified as current liability as of June 30, 2018. We have not been notified by either lender that they seek to accelerate the loan payments because of such breaches and neither lender has expressly waived such breaches and any resulting defaults.  We are currently negotiating with both lenders to make adjustments to the specific financial covenants to more appropriately reflect the business nature of the Company in 2018 and going forward, particularly allowing for the inclusion of inventories while removing certain non-cash stock based compensation in deriving the covenant ratios.  In the event the lenders choose not to make adjustments to the covenant ratios and consider the occurrence of these breaches as events of default under our current loan agreements, the lenders may elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit to us.

 

In the event of the acceleration of our indebtedness or if we are unable to otherwise maintain compliance with covenants set forth in these arrangements or if these arrangements are otherwise terminated for any reason, management may be forced to make further reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or curtail, suspend or cease planned programs or operations generally, which would have a material adverse effect on our business, results of operations, financial position and liquidity.

 

If alternative mobile operating system platforms become more widely used or accepted, or mobile chipset manufacturers, mobile device OEMs and mobile operators do not continue to make product and service offerings compatible with the Android platform, our business could be materially harmed.

 

The mobile operating system platform industry is intensely competitive and characterized by rapid technological changes, which often result in shifts in market share among the industry’s participants as one operating system may become more widely used than others. For example, in the past the Symbian mobile operating system platform, or Symbian, from Nokia Corporation, or Nokia, dominated market share for consumer products and the BlackBerry mobile operating system platform, or BlackBerry, from Research in Motion Limited, or RIM, dominated market share for enterprise products. In the past five years, with the rise of the iOS mobile operating system platform, or iOS, from Apple Inc., or Apple, and the Android platform, both the Symbian and Blackberry platforms have experienced a substantial decline. There can be no assurance that the Android platform will continue to compete effectively with alternative mobile operating system platforms, such as the iOS platform or Windows Mobile operating system platform, or Windows Mobile, from Microsoft Corporation. If these or other mobile operating system platforms become more widely used or accepted, such as operating system platforms being developed by Baidu, Inc., or Baidu, and Alibaba.com Ltd., or Alibaba, in China, the market appeal of the Android platform and our Android+ software and service platform solutions could be diminished, which could materially adversely affect our business and financial performance.

 

Furthermore, the competitiveness of our Android+ software and service platform solutions is dependent upon the continued compatibility of the Android platform with the offerings of our customers. If these customers choose not to continue to adopt the Android platform or they are unable to retain or increase their market share, the demand for our Android+ software and service platform solutions may be diminished, which could materially adversely affect our business and financial performance.

 

We generate a significant portion of our net revenues from a small number of major customers and key projects and any loss of business from these customers or key projects could reduce our net revenues and significantly harm our business.

 

We have derived, and believe that in the foreseeable future we will continue to derive, a significant portion of our net revenues from a small number of major customers and key projects. Our top five customers in 2015, 2016 and 2017 accounted for 55.3%, 51.7% and 69.3% of our net revenues in 2015, 2016 and 2017, respectively. Our top five customers in the six months ended June 30, 2018 accounted for 95.1% of our net revenues during such period.

 

Our ability to maintain close relationships with our major customers is essential to the growth and profitability of our business. However, the volume of work performed for a specific customer is likely to vary from year-to-year and project-to-project, especially since we are generally not the exclusive Android platform software and service solutions provider for our customers, some of our customers have in-house research and development capabilities and we do not have long-term purchase commitments from any of our customers. A major customer in one year may not provide the same level of net revenues for us in any subsequent year. The products we provide to our customers, and the net revenues and income from those products, may decline or vary as the type and quantity of products changes over time. In addition, reliance on any individual customer for a significant portion of our net revenues may give that customer a degree of pricing leverage when negotiating contracts and terms of service with us.

 

In addition, a number of factors not within our control could cause the loss of, or reduction in, business or revenues from any customer, and these factors are not predictable. These factors include, among others, a customer’s decision to re-negotiate the royalty payment of a contract if the volume of unit sales exceeds original expectations, pricing pressure from competitors, a change in a customer’s business strategy, or failure of a mobile chipset manufacturer or mobile device OEM to develop competitive products. Our customers may also choose to pursue alternative technologies and develop alternative products in addition to, or in lieu of, our products, either on their own or in collaboration with others, including our competitors. The loss of any major customer or key project, or a significant decrease in the volume of customer demand or the price at which we sells our products to customers, could materially adversely affect our financial condition and results of operations.

 

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We have limited experience with our current product offerings, which makes it difficult to predict our future operating results.

 

From our inception in 2007 through 2014, we focused primarily on providing our Android+ software platform solutions to mobile chipset manufacturers, mobile device OEMs and mobile operators as well as complete product solutions of mobile connected devices for enterprise and consumer applications. In 2014, after acquiring Yuantel Investment, we entered into the MVNO business. As we continue to grow our business and markets, we plan to increase our service product offerings in both our Connected Solutions BU and MVNO BU. However, the success of these new product offerings will depend on many factors, including timely and successful research and development, pricing, market and consumer acceptance of such new products and the product offerings of our competitors. If new product offerings are not successful, our revenue growth will suffer and our results of operations may be harmed. Further, we do not have significant experience in the MVNO business and cannot be assured that our investments in the development of our MVNO business will result in increased revenue.

 

We provide mobile communication services as a mobile virtual network operator in China. The current license to operate such services is based on an MVNO license issued to us in July 2018 by the MIIT which is valid until July 12, 2023. If we cannot maintain this license we will need to cease operating as a MVNO and our total revenues will be significantly reduced.

 

In 2014, after acquiring Yuantel Investment, we entered into the MVNO business. Our MVNO BU contributed 26.6%, 29.1% and 20.8% of our net revenues in 2015, 2016 and 2017, respectively. Our MVNO BU contributed 13.7%  and 13.6% of our net revenues for the three and six months ended June 30, 2018, respectively.

 

The ability of our MVNO to provide mobile communication services in China was based on trial licenses granted by the Ministry of Industry and Information Technology of China (the “MIIT”) under the mobile virtual network trial program initiated by the MIIT in 2013 to implement the Chinese State Council’s encouragement of private investments in various industries, including telecommunication industry. The trial program and all trial licenses issued thereunder, including our own, were originally set to expire as of December 31, 2015. According to the trial program policies issued by the MIIT, the MIIT will work on formalizing commercial policies regarding the operation of MVNO based on the development of the trial program. On December 28, 2015, the MIIT issued a notice stating that while the government is “diligently researching and determining the formal commercial policies regarding the operation of MVNO, the temporary licenses issued continue to allow MVNO enterprises to operate, and the base telecommunication enterprises shall continue to provide cooperation, support and maintenance services”, as translated from the MIIT’s notice. All MVNOs in China, including us, will continue to operate and provide mobile communication services for subscribers based on the trial licenses.

 

The MIIT issued a Notice on the Official Commercial Use of Mobile Communication Resale Business (the “Official Notice”) on April 28, 2018, which took effect on May 1, 2018. The Official Notice requires an enterprise that has obtained a trial license, or the Pilot Enterprise to execute commercial contracts with a basic telecommunications company and apply for the telecommunications business license to replace the trial license. The Pilot Enterprise is allowed to continue to carry out its MVNO business during such application period. According to the Official Notice, the Pilot Enterprise will be ordered to terminate its MVNO business under certain circumstances, including (1) termination of cooperation between the Pilot Enterprise and the basic telecommunications enterprise resulting in Pilot Enterprise’s failure to operate its business; (2) failure to obtain the telecommunications business license within 2 years of the date of promulgation of the Official Notice; (3) occurrence of serious telecommunication fraud cases or malignant group accidents due to the Pilot Enterprise’s malpractice. In addition, the Official Notice requires the MVNO enterprise to establish network security management systems, deploy corresponding management personnel, implement the real-name registration for telephone users, protect users’ personal information, effectively implement the prevention and crackdown of communication information fraud, and standardize its user service agreements and financial management systems. We submitted our application for the official MVNO license. In July 2018, the MIIT has issued the MVNO license to us which will expire on July 12, 2023. However, uncertainties exist with respect to the interpretation and implementation of the newly issued Official Notice, and thus we cannot assure you that we will be able to maintain the MVNO license.

 

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If we cannot maintain the official MVNO license, we will be forced to cease this operation, and our total revenues will be significantly reduced and our investment into this business will be completely lost. We rely on China United Network Communications Group Co., Ltd (“China Unicom”), the incumbent operator, to provide us with attractive and competitive bulk wholesale rates of voice-per-minute and MB-of-data to compete with our competitors. If we are not provided competitive bulk wholesale rates from China Unicom, we will not be able to maintain our gross margin and will not be able to operate profitably, which may lead to shutting down the MVNO BU entirely.

 

Failure to complete real-name registration of all users of our MVNO services could subject us to penalties, damage our reputation and brand, and harm our business and results of operations.

 

Chinese laws require telecommunication business operators to verify and register real names and identification information of users of mobile phones. For example, in September 2016, the MIIT and certain other governmental departments issued the Notice regarding Prevention of and Cracking Down Telecommunication or Online Frauds to emphasize the real-name registration requirements and to further require telecommunication business operators, including MVNOs, to complete the real-name registration for all of their existing users by end of 2016. In August 2016 and February 2017, we were given a warning by the MIIT for our failure to strictly comply with the real-name registration requirement. We have since rectified such failure in accordance with the MIIT’s requirements and have also established internal policies and require all our staff to strictly comply with the real-name registration requirements for new users. However, we cannot assure you that all our staff will strictly implement our internal policies or that all users will provide authentic information to us. If we are found by the authorities not to comply with the real-name registration requirement, we may be subject to penalties, or be required to suspend or terminate our MVNO business. In addition, complying with these laws and regulations could cause us to incur substantial costs.

 

PRC laws and regulations governing our businesses and the validity of certain of our contractual arrangements are uncertain. If we are found to be in violation, we could be subject to sanctions. In addition, changes in PRC laws and regulations or changes in interpretations thereof may materially and adversely affect our business.

 

The PRC government restricts or imposes conditions on foreign investment in telecommunication business. We and our PRC subsidiaries are considered foreign persons or foreign-invested enterprises under PRC foreign investment related laws. As a result, we are subject to PRC legal restrictions on or conditions for foreign ownership of telecommunication business. Due to these restrictions and conditions, we conduct our MVNO business in China through BC-NW, our variable interest entity and the subsidiaries of BC-NW. As all the registered shareholders of BC-NW are PRC citizens and all other shareholders of the subsidiaries of BC-NW are also PRC citizens or PRC domestic enterprises, BC-NW and our subsidiaries are therefore considered PRC domestic enterprises under PRC law. The “registered shareholders” of BC-NW refer to those shareholders who have pledged their equity interest in BC-NW to Borqs Beijing and entered into exclusive option agreements with Borqs Beijing as part of the contractual arrangements. Our contractual arrangements with BC-NW and the registered shareholders of BC-NW allow it to have the power to direct the activities of BC-NW and our subsidiaries that most significantly impact economic performance.

 

There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including, but not limited to, the laws and regulations governing the MVNO business, or the enforcement and performance of our contractual arrangements with BC-NW. These laws and regulations may be subject to change, and their official interpretation and enforcement may involve substantial uncertainty. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.

 

Although we believe we are in compliance with current PRC laws and regulations, we cannot assure you that the PRC government would agree that our contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. The PRC government has broad discretion in determining penalties for violations of laws and regulations. If the PRC government determines that we do not comply with applicable law, it could revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right to collect revenues, block our websites, require us to restructure our operations, impose additional conditions or requirements with which we may not be able to comply, impose restrictions on our business operations or on our customers, or take other regulatory or enforcement actions against us that could be harmful to our business. Any of these or similar occurrences could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of any of our consolidated affiliated entities that most significantly impact our economic performance, and/or our failure to receive the economic benefits from any of our consolidated affiliated entities, we may not be able to consolidate such entity in our consolidated financial statements in accordance with U.S. GAAP.

 

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Our MVNO business is dependent upon China Unicom for voice and data service as well as reliability and accessibility of to China’s telecommunications and Internet infrastructure.

 

We provide our MVNO services via telecommunications and Internet networks, and therefore our ability to fulfill our contracts and generate revenue and profits is dependent on those systems remaining available and accessible with minimal disruption or interruption. Just as we are dependent on the reliability of our software and systems and the telecommunications networks of our customers, we are also dependent on the operational reliability and capacity of China’s overall telecommunications and Internet infrastructure. Should this infrastructure or key portions of it be disabled or become nonfunctional, we may not be able to secure alternate means of communication or alternate means of accessing needed information. Our operational results could suffer as a result.

 

Through our subsidiary, Yuantel Investment, we purchase wholesale rates for mobile voice and data services from China Unicom, a PRC state-owned telecommunications service provider, and repackage the voice and data services into competitive bundles for our Chinese customers.  We purchase bulk voice-per-minute and MB-of-data service from China Unicom at attractive wholesale rates pursuant to a Business Cooperation Agreement with China Unicom dated as of January 10, 2018.  The agreement is for a one year term, ending December 31, 2018.  There is no guarantee that the supply of telecommunications resources or competitive rates provided by China Unicom will be renewed when the contract term ends.  If the agreement is not renewed, we will not be able to maintain our gross margin and will not be able to operate profitably, which may lead us to cease operations of the MVNO BU entirely.

 

We operate in multiple rapidly evolving industries. If we fail to keep up with technological developments and changing requirements of our customers, business, financial condition and results of operations may be materially and adversely affected.

 

The mobile industry is rapidly evolving and subject to continuous technological developments. Our success depends on our ability to keep up with these technological developments and the resulting changes in customers’ demands. There may also be changes in the industry landscape as different types of platforms compete with one another for market share. If we do not adapt our Android+ software and service platform solutions to such changes in an effective and timely manner as more mobile operating system platforms become available in the future, we may suffer a loss in market share. Given that we operate in a rapidly evolving industry, we also need to continuously invest significant resources in research and development in order to enhance our existing products and to respond to changes in customer preference, new challenges and industry changes in a timely and effective manner. If we fail to keep up with technological developments and continue to innovate to meet the needs of our customers, our Android+ software and service platform solutions may become less attractive to customers, which in turn may adversely affect our reputation, competitiveness, results of operations and prospects.

 

We face intense competition from onshore and offshore third party software providers in the Android platform and software market, and, if we are unable to compete effectively, it may lose customers and our revenues may decline.

 

The Android platform and software market is highly fragmented and competitive, and we expect competition to persist and intensify from both existing competitors and new market entrants. We believe that the principal competitive factors in our industry are reliability and efficiency, performance, product features and functionality, development complexity and time-to-market, price, support for multiple architectures and processors, interoperability with other systems, support for emerging industry and customer standards and protocols and levels of training, technical services and customer support.

 

Our business model is to provide a full suite of Android+ software and service platform solutions to a broad range of customers, including mobile chipset manufacturers, mobile device OEMs and mobile operators. As of the date of this prospectus, we are not aware of any significant independent competitor that provides a full range of Android platform software and service solutions as we do to the range of customers it has, although we have a number of competitors that provide one or several Android platform software and/or service solutions to one or more of our range of customers. See “Business — Competition.”

 

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In addition, we face competition from companies seeking to compete with the Android platform by developing their own operating systems, such as Baidu and Alibaba in China, and major mobile device OEMs, such as Foxconn Technology Group and BYD Electronic (International) Company Limited, which are able to develop low-level software for mobile chipsets, as well as Huawei, GTE and Xiaomi.

 

We believe that we presently compete favorably with respect to each segment identified above. However, the market for Android platform software and service solutions is still rapidly evolving, and we may not be able to compete successfully against current and potential competitors in the future. In addition, some of our independent competitors are more focused on one or several particular segments of the value chain and may deliver better services in those segments than we do. Furthermore, some of our competitors may have significantly greater financial, technical, marketing, sales and other resources and significantly greater name recognition than we have. If we are unable to compete successfully on the principal competitive factors described above or otherwise, our business could be harmed.

 

As an MVNO, we face intense competition in the wireless communications market and if we cannot compete effectively our revenues, profits, cash flows and growth may be adversely affected.

 

The wireless communications market is extremely competitive, and competition for customers is increasing. We compete with other MVNOs such as Snail Mobile, d.Mobile and Soshare. We are one of the top MVNOs in China as measured in terms of registered subscribers, and we intend to expand our market share organically or by acquiring smaller MVNOs. However, we continue to face intense competition from the dozens of other MVNOs and we may not be able to compete successfully in the future. In addition, continued consolidation in the industry creates even large competitors, and such competitors may have greater financial, technical, personnel and marketing resources and a larger market share than us, and we may not be able to compete successfully against them. If we are unable to compete successfully on the principal competitive factors described above or otherwise, our MVNO business could be harmed.

 

We may undertake acquisitions, investments, joint ventures or other strategic alliances in the future, which could expose us to new operational, regulatory and market risks. In addition, such future and past undertakings may not be successful, which may adversely affect our business, results of operations, financial condition and prospects.

 

We intend to grow both organically by expanding our current business lines and geographic coverage and through acquisitions, investments, joint ventures or other strategic alliances if the appropriate opportunities arise. These potential business plans, acquisitions, investments, joint ventures and strategic alliances may expose us to new operational, regulatory and market risks, as well as risks associated with additional capital requirements. In addition, we may not be able to identify suitable future acquisition or investment candidates or joint venture or alliance partners. Even if we identify suitable candidates or partners, we may be unable to complete an acquisition, investment or alliance on terms commercially acceptable to us. If we fail to identify appropriate candidates or partners, or complete desired acquisitions, investments or alliances, including but not limited to the proposed KADI acquisition, we may not be able to implement our strategies effectively or efficiently.

 

In addition, our ability to successfully integrate acquired companies and their operations may be adversely affected by a number of factors, including, among others, the ability to capitalize on anticipated synergies, diversion of resources and management’s attention, difficulties in retaining personnel of the acquired companies, unanticipated problems or legal liabilities and tax and accounting issues. If we fail to integrate any acquired company efficiently, our earnings, revenues, gross margins, operating margins and business operations could be adversely affected. The integration of acquired companies is a complex, time-consuming and expensive process.

 

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We are dependent upon the Android platform and, if Google determines to no longer develop the Android platform and our further development is not taken up by reliable alternative sources, our business could be materially harmed.

 

Our business model is dependent upon the Android platform, which is a free and fully open source mobile software platform developed by Google. The Android platform has been updated frequently since our original release and the development of the Android platform is an ongoing process which we do not control. If Google determines to no longer develop the Android platform or our further development is not taken up by reliable alternative sources, such as another third party or the open source community, demand for our Android+ software and service platform solutions could decline significantly and our revenue and financial condition could be materially harmed.

 

If our customers move more research and development work in-house, lower demand for our solutions could reduce our net revenues and harm our business.

 

Collaboration with customers is essential to the growth and profitability of our business. However, our customers may elect to move more research and development work in-house, and reduce collaboration with us for Android platform projects. There are many factors beyond our control that could cause our customers to move their work in-house, such as spending reductions due to a challenging economic environment, corporate restructuring, cost control, pricing pressure and concerns regarding the protection of technology know-how, trade secrets and other intellectual property rights. If our customers decide to change their strategy by moving more research and development work in-house, our net revenues may decline, and our business, financial condition and results of operations may be adversely affected.

 

Our quarterly results may fluctuate significantly and may not fully reflect the underlying performance of our business.

 

Our quarterly operating results, including the levels of our revenue, gross margin, profitability, cash flow and deferred revenue, may vary significantly in the future, and period-to-period comparisons of our operating results may not be meaningful. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. Our quarterly financial results may fluctuate as a result of a variety of factors, many of which are outside of our control and, as a result, may not fully reflect the underlying performance of our business. Fluctuations in quarterly results may negatively impact the value of our ordinary shares. Factors that may cause fluctuations in our quarterly financial results include, but are not limited to:

 

  our ability to attract new customers;

 

  our ability to convert users of our limited free versions to paying customers;

 

  the addition or loss of large customers, including through acquisitions or consolidations;

 

  our customer retention rate;

 

  the timing of recognition of revenue;

 

  the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;

 

  network outages or security breaches;

 

  general economic, industry and market conditions;

 

  increases or decreases in the number of features in our services or pricing changes upon any renewals of customer agreements;

 

  changes in our pricing policies or those of our competitors;

 

  the timing and success of new services and service introductions by us and our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or strategic partners; and

 

  the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies.

 

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If we fail to effectively manage our technical operations infrastructure, our customers may experience service outages and delays in the further deployment of our services, which may adversely affect our business.

 

We have experienced significant growth in the number of users and the amount of data that our operations infrastructure supports. We seek to maintain sufficient excess capacity in our operations infrastructure to meet the needs of all of our customers. We also seek to maintain excess capacity to facilitate the rapid provisioning of new customer deployments and the expansion of existing customer deployments. In addition, we need to properly manage our technological operations infrastructure in order to support version control, changes in hardware and software parameters and the evolution of our services. However, the provision of new hosting infrastructure requires significant lead-time. We have experienced, and may in the future experience, website disruptions, outages and other performance problems. These problems may be caused by a variety of factors, including infrastructure changes, human or software errors, viruses, security attacks, fraud, spikes in customer usage and denial of service issues. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time, which may harm our reputation and operating results. Furthermore, if we do not accurately predict our infrastructure requirements, our existing customers may experience service outages that may subject us to financial penalties, financial liabilities and customer losses. If our operations infrastructure fails to keep pace with increased sales, customers may experience delays as we seek to obtain additional capacity, which could adversely affect our reputation and our revenue.

 

Most of our engagements with customers are for a specific project only and do not provide for subsequent engagements. If we are unable to generate a substantial number of new engagements for projects on a continuing basis, our business and results of operations will be adversely affected.

 

Our customers generally retain us on project-by-project basis in connection with specific projects rather than on a recurring basis under long-term contracts. Historically, a significant portion of our net revenues has been comprised of software fees, relating to one-time research and engineering work performed for customers. For 2015, 2016 and 2017, our net revenues from software fees were $22.5 million, $14.9 million and $11.2 million, respectively, representing 29.9%, 12.4% and 7.3% of total net revenues. For the six months ended June 30, 2018, our net revenues from software fees were $3.9 million, representing 3.4% of total net revenues. Although a significant amount of our net revenues are generated from repeat business, which we define as revenues from a customer who also contributed to our revenues during the prior fiscal year, our engagements with our customers are typically for individual projects that are often on a non-exclusive, project-by-project basis. In addition, a majority of our customer contracts from which we generate product fees can be terminated by customers with or without cause. There are many factors outside of our control that might lead customers to terminate a contract or project with us, including, among others:

 

  financial difficulties for our customers;

 

  business going to our competitors or remaining in-house;

 

  unsuccessful launch of a product;

 

  disclosure of core technology by a third party; and

 

  mergers and acquisitions or significant corporate restructurings by our customers.

 

Furthermore, some of our customer contracts specify that if a change of control occurs during the term of the contract, the customer has the right to terminate the contract upon advance notice. If our customers terminate our contracts before completion or choose not to renew their contracts, our business, financial condition and results of operations may be materially and adversely affected.

 

Therefore, we have to continuously seek new engagements while our current engagements are being performed or are completed or terminated, and we are constantly seeking to expand our business with existing customers and secure new customers. If we are unable to generate a substantial number of new engagements on a continuing basis, our business and results of operations will be adversely affected.

 

Because of the characteristics of open source software, there may be fewer technology barriers to entry in the Android platform and software market in which we compete, and it may be relatively easy for competitors, some of which may have greater resources than we have, to enter our markets and compete with us.

 

One of the characteristics of open source software is that anyone can modify and redistribute the existing open source software and use it to compete against us. Such competition can develop without the degree of overhead and lead time required by traditional proprietary software companies. It is possible for new competitors with greater resources than us to develop their own Android platform software and service solutions, potentially reducing the demand for, and putting pricing pressure on, our Android+ software and service platform solutions. In addition, some competitors make their open source software available for free download and use on an ad hoc basis, or may position their open source software as a loss leader in order to win customers. There can be no assurance that we will be able to compete successfully against current and future competitors or that competitive pressure and/or the availability of open source software will not result in price reductions, reduced operating margins and loss of market share, any of which could seriously harm our business.

 

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Security and privacy breaches may expose us to liability and harm our reputation and business.

 

As part of our business we receive and process information about our employees, customers and partners, and we may store (or contract with third parties to store) our customers’ data. There are numerous laws governing privacy and the storage, sharing, use, disclosure and protection of personally identifiable information and user data. Specifically, personally identifiable and other confidential information is increasingly subject to legislation and regulations in numerous domestic and international jurisdictions. The regulatory framework for privacy protection in China and worldwide is currently evolving and is likely to remain uncertain for the foreseeable future. We could be adversely affected if legislation or regulations in China and elsewhere on the world where we have business operations are expanded to require changes in business practices or privacy policies, or if the relevant governmental authorities in China and elsewhere on the world where we have business operations interpret or implement their legislation or regulations in ways that negatively affect our business, financial condition and results of operations. For example, in November 2016, China released the Cybersecurity Law, which took effect in June 2017. The Cybersecurity Law requires network operators to perform certain functions related to cybersecurity protection and the strengthening of network information management. For instance, under the Cybersecurity Law, network operators of key information infrastructure, including network operators of key information infrastructures in public communications and information industry, generally shall, during their operations in the PRC, store the personal information and important data collected and produced within the territory of the PRC and their purchase of network products and services that may affect national securities shall be subject to national cybersecurity review. While we take security measures relating to our Android+ software and service platform solutions, specifically, and our operations (including MVNO business operation), generally, those measures may not prevent security breaches that could harm our business and we cannot assure you that the measures we have taken or will take are adequate under the Cybersecurity Law and other relevant laws and regulations. Advances in computer capabilities, inadequate technology or facility security measures or other factors may result in a compromise or breach of our systems and the data we store and process. Our security measures may be breached as a result of actions by third parties or employee error or malfeasance. A party who is able to circumvent our security measures or exploit inadequacies in our security measures, could, among other things, misappropriate proprietary information (including information about our employees, customers and partners and our customers’ information), cause the loss or disclosure of some or all of this information, cause interruptions in our operations or our customers’ or expose our customers to computer viruses or other disruptions or vulnerabilities. Any compromise of our systems or the data it stores or processes could result in a loss of confidence in the security of our Android+ software and service platform solutions, damage our reputation, disrupt our business, lead to legal liability and adversely affect our financial condition and results of operations. Moreover, a compromise of our systems could remain undetected for an extended period of time, exacerbating the impact of that compromise. Actual or perceived vulnerabilities may lead to claims against us by our customers, partners or other third parties, which could be material. While our customer agreements typically contain provisions that seek to limit our liability, there is no assurance these provisions will be enforceable and effective under applicable law. In addition, the cost and operational consequences of implementing further data protection measures could be significant.

 

We are vulnerable to technology infrastructure failures, which could harm our reputation and business.

 

We rely on our technology infrastructure for many functions, including selling our Android+ software and service platform solutions, supporting our customers and billing, collecting and making payments. We also rely on our own technology infrastructure, which is located on a third-party site, as well as the technology infrastructure of third parties, to provide some of our back-end services. This technology infrastructure may be vulnerable to damage or interruption from natural disasters, power loss, telecommunication failures, terrorist attacks, computer intrusions and viruses, software errors, computer denial-of-service attacks and other events. A significant number of the systems making up this infrastructure are not redundant, and our disaster recovery planning is not sufficient for every eventuality. This technology infrastructure is also subject to break-ins, sabotage and intentional acts of vandalism by internal employees, contractors and third parties. Despite any precautions we or our third-party partners may take, such problems could result in, among other consequences, interruptions in our services and loss of data, which could harm our reputation, business and financial condition. We do not carry business interruption insurance sufficient to protect us from all losses that may result from interruptions in our services as a result of technology infrastructure failures or to cover all contingencies. Any interruption in the availability of our websites and on-line interactions with customers and partners would create a large volume of questions and complaints that would need to be addressed by our support personnel. If our support personnel cannot meet this demand, customer and partner satisfaction levels may fall, which in turn could cause additional claims, reduced revenue, reputation damage or loss of customers.

 

We may not be able to continue to use or adequately protect our intellectual property rights, which could harm our business reputation and competitive position.

 

Although Android is an open source mobile software platform for mobile devices, we are not required to share the source code for our Android software, which we have invested significant resources to develop. Accordingly, we believe that patents, trademarks, trade secrets, copyright, software registration and other intellectual property we use are important to our business. We rely on a combination of patent, trademark, copyright, software registration and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our intellectual property and brand name. Any failure by us to maintain or protect our intellectual property rights, including any unauthorized use of our intellectual property by third parties or use of “Borqs” as a company name to conduct software or services business, may adversely affect our current and future revenues and our reputation.

 

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In addition, the validity, enforceability and scope of protection available under intellectual property laws with respect to the mobile and Internet industries in China, where a significant part of our business and operations are located, are uncertain and still evolving. Implementation and enforcement of PRC intellectual property-related laws have historically been deficient, ineffective and hampered by corruption and local protectionism. Accordingly, protection of intellectual property rights in China may not be as effective as in the United States or other countries. Furthermore, policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. Such litigation and an adverse determination in any such litigation, if any, could result in substantial costs and diversion of resources and management attention, which could harm our business and competitive position.

 

We also may be required to enter into license agreements with certain third parties to use their intellectual property for our business operations. If such third parties fail to perform under these license agreements or if the agreements are terminated for any reason, our business and results of operations may be negatively impacted. Furthermore, if we are deemed to be using third parties’ intellectual property without due authorization, we may become subject to legal proceedings or sanctions, which may be time-consuming and costly to defend, divert management attention and resources or require us to enter into licensing agreements, which may not be available on commercial terms, or at all.

 

The international nature of our business exposes it to risks that could adversely affect our financial condition and results of operations.

 

We conduct our business throughout the world in multiple locations. Our corporate structure also spans multiple jurisdictions, with our parent holding company incorporated in the British Virgin Islands and intermediate and operating subsidiaries incorporated in China, Hong Kong, India and Brazil, with branch offices in Japan and South Korea. In addition, one of our growth strategies is to further expand our business in Europe and into the United States. As a result, we are exposed to risks typically associated with conducting business internationally, many of which are beyond our control. These risks include, among others:

 

  significant currency fluctuations between the Renminbi and the U.S. dollar and other currencies in which we transact business;

 

  difficulty in identifying appropriate mobile chipset manufacturers, mobile device OEMs, mobile operators and/or joint venture partners, and establishing and maintaining good relationships with them;

 

  legal uncertainty owing to the overlap and inconsistencies of different legal regimes, problems in asserting contractual or other rights across international borders and the burden and expense of complying with the laws and regulations of various jurisdictions;

 

  potentially adverse tax consequences, such as scrutiny of transfer pricing arrangements by authorities in the countries in which we operate;

 

  adverse effect of inflation and increase in labor costs;

 

  current and future tariffs and other trade barriers, including restrictions on technology and data transfers;

 

  general global economic downturn;

 

  unexpected changes in political environment and regulatory requirements; and

 

  terrorist attacks and other acts of violence or war.

 

The occurrence of any of these events could have a material adverse effect on our results of operations and financial condition.

 

Furthermore, we are in the process of implementing policies and procedures designed to facilitate compliance with laws and regulations in various jurisdictions applicable to us, but there can be no assurance that our employees, contractors or agents will not violate such laws and regulations or our policies. Any such violations could, individually or in the aggregate, materially and adversely affect our financial condition and operating results.

 

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We may not be able to manage our anticipated growth and our current and planned resources may not be adequate to support our expanding operations; consequently, our business, results of operations and prospects may be materially and adversely affected.

 

We have experienced rapid growth since we commenced operations. Our rapid expansion may expose us to new challenges and risks. To manage the further expansion of our business and the growth of our operations and personnel, we need to continuously expand and enhance our infrastructure and technology, and improve our operational and financial systems and procedures and controls. For example, we currently manage all of our human resources functions manually and expect that we will need to upgrade our current system as we continue to increase our headcount. We also need to expand, train and manage our growing employee base. In addition, our management will be required to obtain, maintain or expand relationships with mobile chipset manufacturers, mobile device OEMs and mobile operators, as well as other third-party business partners. We cannot assure you that our current and planned personnel, infrastructure, systems, procedures and controls will be adequate to support our expanding operations. If we fail to manage our expansion effectively, our business, results of operations and prospects may be materially and adversely affected.

 

Due to intense competition for highly skilled personnel, we may fail to attract and retain qualified personnel to support our research and development operations; as a result, our ability to bid for and obtain new projects may be adversely affected and our net revenues could decline.

 

The mobile industry relies on the talents and efforts of highly skilled personnel, and our success depends to a significant extent on our ability to recruit, train, develop, retain and motivate qualified personnel for all areas of our organization. The mobile industry in China has experienced significant levels of employee attrition. Our attrition rates were 18% in 2015, 12% in 2016 and 14% in 2017. We may encounter higher attrition rates in the future, particularly if the mobile industry continues to experience strong growth.

 

Competition in our industry for qualified employees, especially technical employees, is intense, and our competitors directly target our employees from time to time. We have also experienced employees leaving us to start competing businesses or to join the in-house research and development teams of our customers. The loss of the technical knowledge and industry expertise of any of these individuals could seriously impede our success. Moreover, the loss of these individuals, particularly to a competitor, some of which are in a position to offer greater compensation, and any resulting loss of customers or trade secrets and technological expertise could further lead to a reduction in our market share and adversely affect our business. If we are required to increase the compensation payable to our qualified employees to compete with certain competitors with greater resources than we have or to discourage employees from leaving us to start competing businesses, our operating expenses will increase which, in turn, will adversely affect our results or operations.

 

Our success depends substantially on the continuing efforts of our senior executives and other key personnel, and our business may be severely disrupted if we lose their services.

 

Our future success heavily depends upon the continued services of our senior executives and other key employees. In particular, we rely on the expertise, experience, customer relationships and reputation of Pat Chan, our founder, chairman and chief executive officer. We currently do not maintain key man life insurance for any of the senior members of our management team or other key employees. If one or more of our senior executives or key employees are unable or unwilling to continue in their present positions, it could disrupt our business operations, and we may not be able to replace them easily or at all. In addition, competition for senior executives and key employees in our industry is intense, and we may be unable to retain our senior executives and key employees or attract and retain new senior executive and key employees in the future, in which case our business may be severely disrupted, and our financial condition and results of operations may be materially and adversely affected.

 

If any of our senior executives or key employees joins a competitor or forms a competing company, it may lose customers, know-how and other key employees and staff members to them. Also, if any of our business development managers, who generally keep a close relationship with our customers, joins a competitor or forms a competing company, we may lose customers, and our net revenues may be materially and adversely affected. Additionally, there could be unauthorized disclosure or use of our technical knowledge, practices or procedures by such employees. All of our executives and key employees have entered into employment agreements with us that contain non-competition provisions, non-solicitation and nondisclosure covenants. However, if any dispute arises between our executive officers or key employees and us, such non-competition, non-solicitation and nondisclosure provisions might not provide effective protection to us, especially in China, where most of these executive officers and key employees reside, in light of the uncertainties with China’s legal system. See “Risk Factors — Risks Related to Doing Business in China — Uncertainties with respect to the PRC legal system could harm us.”

 

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A significant majority of our outstanding ordinary shares are held by a small number of shareholders, which may have significantly greater influence on us due to the size of their shareholdings relative to other shareholders.

 

As of September 1, 2018, Zhengqi International Holding Limited, Intel Capital Corporation, Norwest Venture Partners X, L.P., Asset Horizon International Limited, Keytone Ventures L.P., and GSR Ventures II and affiliates, beneficially own approximately 11.0%, 12.8%, 11.3%, 11.1%, 10.2%, and 8.8% respectively, of our outstanding ordinary shares. These major shareholders have significant influence in determining the outcome of any corporate transactions or other matters submitted to our shareholders for approval, including mergers, consolidations and schemes of arrangement, election and removal of directors and other significant corporate actions. They may not act in our best interests or our minority shareholders’ interests. In addition, without the consent of these major shareholders, we could be prevented from entering into transactions that could be beneficial to us. This concentration of ownership may also discourage, delay or prevent a change in control, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our ordinary shares. These actions may be taken even if they are opposed by our other shareholders.

 

In the course of preparing our consolidated financial statements, we identified material weaknesses, significant deficiencies and other deficiencies in our internal controls over financial reporting.

 

Prior to our acquisition of Borqs International by way of merger, Borqs International was a private company with limited accounting personnel and other resources with which to address our internal controls and procedures for financial reporting. As of December 31, 2017, we identified a material weakness in our internal controls over financial reporting, and are in the process of implementing remedial steps to improve our internal controls over financial reporting. If we fail to timely achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal control over financial reporting. Moreover, effective internal control over financial reporting is necessary for us to produce reliable financial reports and is important to help prevent fraud. If we fail to maintain effective internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could harm our business and the trading price of our ordinary shares. For instance, on September 25, 2017, we received a letter from Zhengqi International Holding Limited (“Zhengqi”), which stated that Zhengqi believed the Company had supplied to it material untrue and falsified financial statement information. Zhengqi also alleged it was damaged by the alleged untrue and falsified financial statement information. We concluded that the allegations by Zhengqi were unfounded, and responded on October 9, 2017, seeking additional information. Zhengqi has not responded to our inquiry. In addition, we anticipate that we will incur considerable costs and devote significant management time and efforts and other resources to our efforts to maintain effective internal control over financial reporting.

 

Our management is responsible for establishing and maintaining adequate internal controls over financial reporting. Our internal controls over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

 

We identified two material weaknesses in internal controls over financial reporting during our preparation of the financial statements for the fiscal year ended December 31, 2016: (i) an insufficient number of financial reporting personnel with an appropriate level of knowledge and experience in U.S. GAAP and SEC reporting requirements and financial reporting programs; and (ii) insufficient controls to ensure that appropriate accruals are made for expenses. Since then, the Company has undertaken or is in the process of undertaking certain remedial steps to improve its internal controls over financial reporting.

 

Following the above-mentioned efforts, as of December 31, 2017, based on an assessment performed by our management on the performance of the remediation measures described above, we determined that the material weakness in providing for effective accruals in internal control over financial reporting had been remediated. However the material weakness relating to hiring sufficient U.S. GAAP-qualified accounting personal had not yet been fully remediated. We plan to take additional measures to improve our internal control over financial reporting, including (i) hiring additional qualified professionals with U.S. GAAP accounting experience in the year 2018; (ii) providing U.S. GAAP and SEC reporting training to our accounting personnel; and (iii) preparing a comprehensive written accounting policies and procedures manual that can effectively and efficiently guide our finance and accounting personnel in addressing significant accounting issues and preparing financial statements that are in compliance with U.S. GAAP and SEC requirements. In addition, we intend to engage an external service provider by the end of 2018 to assist management in evaluating our current internal control over financial reporting and implementing necessary controls and measures to assist it in preparing for compliance with internal control reporting.  

 

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If we fail to maintain effective internal controls over financial reporting, we may not be able to accurately and timely report our financial results and investor confidence and the market price of our ordinary shares may be adversely impacted.

 

We are required to evaluate the effectiveness of disclosure controls and procedures and internal controls over financial reporting. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal controls over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal controls over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. As described elsewhere in this prospectus, we have identified a material weakness in our internal controls over financial reporting as of December 31, 2017. If we fail to timely achieve and maintain the adequacy of our internal controls, we may not be able to conclude that we have effective internal controls over financial reporting. Additionally, such weakness in internal controls has adversely affected our disclosure controls and procedures, and as of December 31, 2017, such disclosure controls and procedures were ineffective. Ineffective disclosure controls and procedures and internal controls over financial reporting could also cause material misstatements in our financial statements and investors to lose confidence in our reported financial and other information, which could have a negative effect on the trading price of our ordinary shares.

 

Our independent registered public accounting firm is not required to attest to and report on the effectiveness of our internal controls over financial reporting until after we are no longer an emerging growth company. At that time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal controls over financial reporting is documented, designed, or operating. Failing to maintain effective disclosure controls and internal controls over financial reporting could have a material and adverse effect on our business and operating results and could cause a decline in the price of our ordinary shares. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the Nasdaq Stock Market.

 

We are subject to various anti-corruption and anti-bribery laws, including the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and PRC and Indian anti-corruption and anti-bribery laws; any determination that we have violated such laws could damage our business and reputation, limit our ability to bid for certain business opportunities, and subject us to significant criminal and civil penalties, civil litigation (such as shareholder derivative suits), and commercial liabilities.

 

We are subject to anti-corruption and anti-bribery laws in the United States, United Kingdom, China, and India that prohibit certain improper payments made directly or indirectly to government departments, agencies, and instrumentalities; officials of those government departments, agencies, and instrumentalities; political parties and their officials; candidates for political office; officials of public international organizations; persons acting on behalf of the foregoing; and commercial counterparties. These laws include the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act 2010, the PRC Criminal Law, the PRC Anti-Unfair Competition Law, the Indian Prevention of Corruption Act 1988, the Indian Penal Code and anti-corruption laws in various Indian states.

 

We are engaged in business in a number of countries that are regarded as posing significant risks of corruption. Of particular note, we conduct operations, have agreements with state-controlled enterprises and other third parties and make sales in the PRC, and we have research and development activities in India, each of which may be exposed to corruption risk. It is our policy to implement safeguards and procedures to prohibit these practices by our employees, officers, directors, or by third parties acting on our behalf. However, we cannot rule out the risk that any of our employees, officers, directors, or third parties acting on our behalf may engage in breaches of our policies or anti-corruption laws, for which we might be held responsible.

 

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Allegations of violations of these anti-corruption and anti-bribery laws, and investigation into such allegations, could negatively affect our reputation, business, operating results, and financial condition. The violation of these laws may result in substantial monetary and even criminal sanctions, follow-on civil litigation (such as shareholder derivative suits), and monitoring of our compliance program by the United States or other governments, each of which could negatively affect our reputation, business, operating results, and financial condition. In addition, the United States or other governments may seek to hold us liable for violations of these laws committed by companies in which we invest or acquire.

 

There can be no assurance that our securities, including our ordinary shares, will continue to be listed on Nasdaq or, if listed, that we will be able to comply with the continued listing standards of Nasdaq, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

 

To continue listing our ordinary shares on The Nasdaq Stock Market, we will be required to demonstrate compliance with Nasdaq’s continued listing requirements, particularly the requirement to maintain a minimum number of holders (300 round-lot holders). We were previously not in compliance with Nasdaq’s listing requirement that we have at least 300 round-lot shareholders but regained compliance with this requirement on April 12, 2018 by implementing a restricted shares purchase program with eligible employees of Borqs Software Solutions Private Ltd., our wholly-owned subsidiary in India, pursuant to which 222 employees voluntarily purchased an aggregate of 29,170 ordinary shares at a purchase price of $9.40 per share. Program participants paid for their purchase of shares by having the purchase amounts deducted from their regular compensation on March 23, 2018. On April 12, 2018, Nasdaq informed us that we had regained compliance with the listing requirement of 300 round lot holders and that our ordinary shares would continue to be listed on Nasdaq.

 

On December 11, 2017, Nasdaq advised the Company that it had determined to delist the Company’s public warrants. Our public warrants have been trading on the OTC Markets system under the symbol “BRQSW” since October 23, 2017. Our ordinary shares have continued to trade on Nasdaq regardless of the Panel’s decision to delist our public warrants.

 

We cannot assure you that we will be able to meet Nasdaq’s continued listing requirement or maintain other listing standards. If our ordinary shares are delisted by Nasdaq, and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, then, as with our public warrants, which have been delisted from Nasdaq and are trading on the OTC Markets, we could face significant material adverse consequences, including:

 

  less liquid trading market for our securities;

 

  more limited market quotations for our securities;

 

  determination that our ordinary shares and/or warrants are a “penny stock” that requires brokers to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our securities;

 

  more limited research coverage by stock analysts;

 

  loss of reputation; and

 

  more difficult and more expensive equity financings in the future.

 

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If our ordinary shares remain listed on NASDAQ, our ordinary shares will be covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. If our securities were no longer listed on Nasdaq and therefore not “covered securities”, we would be subject to regulation in each state in which we offer our securities.

 

We may, from time to time, be involved in future litigation in which substantial monetary damages are sought.

 

We may from time to time be involved in future litigation in which substantial monetary damages are sought.  Litigation claims may relate to intellectual property, contracts, employment, securities and other matters arising out of the conduct of our current and past business activities. For instance, we are currently in arbitration with Samsung Electronics Co., Ltd. (“Samsung”) to resolve a dispute regarding royalties payable to us under a software license agreement we had with Samsung. Samsung alleges that, for the period starting the fourth quarter of 2010 through mid-2012, we were overpaid royalties in the amount of approximately $1.67 million due to a clerical error in their accounting department that enabled us to receive royalties on sales of Samsung handsets that did not contain our software.  Samsung is seeking repayment of the $1.67 million plus accrued interest of 12% per annum and as well as reimbursements of reasonable fees including attorney fees and arbitration costs. After arbitration hearings that were held in May 2018, the parties are awaiting a ruling from the arbitrator on Samsung’s claim and the result is unpredictable. Any claims, whether with or without merit, could be time consuming, expensive to defend and could divert management's attention and resources. We may maintain insurance against some, but not all, of these potential claims, and the levels of insurance we do maintain may not be adequate to fully cover any and all losses. Nonetheless, the results of any future litigation or claims are inherently unpredictable, and such outcomes could have a material adverse effect on our results of operations, cash from operating activities or financial condition.

    

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Risks Related to Doing Business in China

 

China’s economic, political and social conditions, as well as changes in any government policies, laws and regulations, could have a material adverse effect on our business.

 

A substantial portion of our operations are conducted in China, and a significant portion of our net revenues are derived from customers where the contracting entity is located in China. Accordingly, our business, financial condition, results of operations, prospects and certain transactions we may undertake are subject, to a significant extent, to economic, political and legal developments in China.

 

China’s economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for our services and products depends, in large part, on economic conditions in China. Any slowdown in China’s economic growth may cause our potential customers to delay or cancel their plans to purchase our services and products, which in turn could reduce our net revenues.

 

Although China’s economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth through allocating resources, controlling the incurrence and payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these policies, laws and regulations could adversely affect the economy in China and could have a material adverse effect on our business.

 

The PRC government has implemented various measures to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources, which have for the most part had a positive effect on our business and growth. However, we cannot assure you that the PRC government will not repeal or alter these measures or introduce new measures that will have a negative effect on us. China’s social and political conditions may also not be as stable as those of the United States and other developed countries. Any sudden changes to China’s political system or the occurrence of widespread social unrest could have a material adverse effect on our business and results of operations.

 

Uncertainties with respect to the PRC legal system could harm us.

 

Our operations in China are governed by PRC government laws and regulations. The PRC legal system is a civil law system based on written statutes. Unlike common law systems, prior court decisions have limited precedential value. Borqs Beijing is generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to wholly foreign-owned enterprises, and our other wholly-owned subsidiaries in China may be subject to certain laws and regulations in connection with investments made by foreign-invested enterprises.

 

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system and recently-enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Moreover, some regulatory requirements issued by certain PRC government authorities may not be consistently applied by other government authorities, including local government authorities, thus making strict compliance with all regulatory requirements impractical, or in some circumstances, impossible. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

 

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Recent trade policy initiatives announced by the United States administration against the PRC may adversely affect our business.

 

On August 14, 2017, the President of the United States issued a memorandum instructing the U.S. Trade Representative (“USTR”) to determine whether to investigate under section 301 of the U.S. Trade Act of 1974 (Trade Act), laws, policies, practices, or actions of the PRC government that may be unreasonable or discriminatory and that may be harming U.S. intellectual property rights, innovation, or technology development. Based on information gathered in that investigation, the USTR published a report on March 22, 2018 on the acts, policies and practices of the PRC government supporting findings that such are unreasonable or discriminatory and burden or restrict U.S. commerce.

 

On March 8, 2018, the President exercised his authority to issue the imposition of significant tariffs on imports of steel and aluminum from a number of countries, including the PRC. Subsequently, the USTR announced an initial proposed list of 1,300 goods imported from the PRC that could be subject to additional tariffs and initiated a dispute with the World Trade Organization against the PRC for alleged unfair trade practices. The President has indicated that his two primary concerns to be addressed by the PRC are (i) a mandatory $100 billion reduction in the PRC/U.S. trade deficit and (ii) limiting the planned $300 billion PRC government support for advanced technology industries including artificial intelligence, semiconductors, electric cars and commercial aircraft. On June 15, 2018, the President announced that the U.S. would go ahead with tariffs on $50 billion worth of Chinese goods, including agriculture and industrial machinery, which prompted the PRC government to consider imposing tariffs on $50 billion worth of goods from the U.S., including beef, poultry, tobacco and cars. In response to the PRC’s proposed retaliatory measures, the President announced on June 19, 2018 that the U.S. would compile a list of $200 billion in China goods for levies should the PRC move forward with their proposed tariffs. On August 7, 2018, the U.S. announced a tariff of 25% on approximately $16 billion worth of mostly industrial goods from China, including tractors, plastic tubes and antennas, which went into effect on August 23, 2018. In response, on August 8, 2018, China announced a 25% tariff on $16 billion worth of US goods, including large passenger cars, motorcycles, chemical items and diesel fuel, which also went into effect on August 23, 2018. On September 7, 2018, the President warned that he was prepared to impose tariffs on another $267 billion of Chinese goods, which in addition to the other previously announced tariffs, would cover virtually all of China’s imports into the U.S.   Despite a September 12, 2018 invitation by the U.S. to China to restart trade talks, which China has welcomed, according to publicly available information the President has instructed his administration to proceed with $200 billion in tariffs on Chinese products.

 

In addition to the proposed retaliatory tariffs, the President has also directed the U.S. Secretary of the Treasury to develop new restrictions on PRC investments in the U.S. aimed at preventing PRC-controlled companies and funds from acquiring U.S. firms with sensitive technologies. Congress is currently considering new legislation, the Foreign Investment Risk Review Modernization Act, to modernize the restrictive powers imposed by the Committee on Foreign Investment in the United States.

 

This evolving policy dispute between the PRC and the U.S. is likely to have significant impact on the industries in which we participate, directly and indirectly, and no assurance can be given that any individual customer or product for whom we develop software solutions, or significant groups of companies or a particular industry, will not be adversely affected by any governmental actions taken by either the PRC or the U.S., perhaps materially. In view of the positions of the respective trade representatives, it is not possible to predict with any certainty the outcome of this dispute or whether it will involve other agencies or entities brought in to resolve the policy differences of the two countries.

 

Our subsidiaries in China are subject to restrictions on making dividends and other payments to it or any other affiliated company.

 

We are a holding company and may rely on dividends paid by our PRC subsidiaries for our cash needs, including the funds necessary to pay dividends and other cash distributions to our shareholders to the extent we choose to do so, to service any debt it may incur and to pay our operating expenses. Current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our PRC subsidiaries are required to set aside at least 10% of our after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of our registered capital. Appropriations to the employee welfare funds are at the discretion of the board of directors of Borqs Beijing. These reserves are not distributable as cash dividends.

 

In addition, under the PRC Enterprise Income Tax Law, or the EIT Law, which became effective on January 1, 2008, dividends paid to us by our PRC subsidiaries are subject to withholding tax. Currently, the withholding tax rate is 10.0% (subject to reductions by the relevant tax treaties, if applicable).

 

Furthermore, if our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us.

 

To date, our PRC subsidiaries have not paid dividends to us out of their accumulated profits. In the future, we do not expect to receive dividends from our PRC subsidiaries because the accumulated profits of these PRC subsidiaries are expected to be used for their own business or expansions. Any limitation on the ability of our PRC subsidiaries to distribute dividends or other payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.

 

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The discontinuation of any of the preferential tax treatments currently available to our PRC subsidiaries could materially increase our tax liabilities.

 

Preferential tax treatments and incentives granted to our PRC subsidiaries by PRC governmental authorities are subject to review and may be adjusted or revoked at any time in the future. The discontinuation or revocation of any preferential tax treatments and incentives currently available to them will cause their effective tax rate to materially increase, which will decrease our net income and may adversely affect our financial condition and results of operations.

 

We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

 

On February 3, 2015, the State Administration of Taxation, or the SAT issued a Public Notice Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or Public Notice 7, where a non-resident enterprise transfers taxable assets, through the offshore transfer of a foreign intermediate holding company, the non-resident enterprise, being the transferor, maybe subject to PRC enterprise income tax, if the indirect transfer is considered to be an arrangement which does not have a reasonable commercial purpose to circumvent enterprise income tax payment obligations. In addition, Public Notice 7 further provides certain criteria on how to assess reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. Public Notice 7 also brings challenges to both the foreign transferor and transferee (or other person who is obligated to pay for the transfer) of the taxable assets. Where a non-resident enterprise conducts an “indirect transfer” by transferring the taxable assets indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise being the transferor, or the transferee, or the PRC entity which directly owned the taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form” principle, the PRC tax authority may re-characterize such indirect transfer as a direct transfer of the equity interests in the PRC tax resident enterprise and other properties in China. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of up to 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

 

On October 17, 2017, the SAT issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-Resident Enterprises, or Announcement 37, which became effective on December 1, 2017. The Announcement 37 further clarifies the practice and procedure of the withholding of non-resident enterprise income tax.

 

We face uncertainties with respect to the reporting and consequences of private equity financing transactions, share exchange or other transactions involving the transfer of our ordinary shares by investors that are non-PRC resident enterprises, or sale or purchase of shares in other non-PRC resident companies or other taxable assets by us. We and other non-resident enterprises in our group may be subject to filing obligations or being taxed if we and other non-resident enterprises affiliated with us are transferors in such transactions, and may be subject to withholding obligations if we and other non-resident enterprises affiliated with us are transferees in such transactions, under Public Notice 7 and Announcement 37. For the transfer of shares in us by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in the filing under Public Notice 7 and Announcement 37. As a result, we may be required to expend valuable resources to comply with Public Notice 7 and Announcement 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that we and other non-resident enterprises affiliated with us should not be taxed under these circulars. The PRC tax authorities have the discretion under Public Notice 7 and Announcement 37 to make adjustments to the taxable capital gains based on the difference between the fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make adjustments to the taxable income of the transactions under Public Notice 7 and Announcement 37, our income tax costs associated with such transactions will be increased in the event that we are a transferee of such transactions, which may have an adverse effect on our financial condition and results of operations. Heightened scrutiny over acquisition transactions by the PRC tax authorities may also have a negative impact on potential acquisitions we may pursue in the future.

 

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It is unclear whether we will be considered a PRC “resident enterprise” under the EIT Law and, depending on the determination of our PRC “resident enterprise” status, we may be subject to 25.0% PRC enterprise income tax on our worldwide income, and holders of our ordinary shares may be subject to PRC withholding tax on dividends paid by us and gains realized on their transfer of our ordinary shares.

 

The EIT Law and our Implementing Regulations, both of which became effective on January 1, 2008, provide that enterprises established outside of China whose “ de facto management bodies” are located in China are considered “resident enterprises.” The Implementing Regulations of the EIT Law define the term “ de facto management bodies” as a body which substantially manages, or has control over the business, personnel, finance and assets of an enterprise. On April 22, 2009, the SAT issued the Notice Regarding Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. According to Circular 82, certain PRC-controlled enterprises will be classified as “resident enterprises” if all of the following conditions are met: (a) the senior management and core management departments in charge of our daily operations function have their presence mainly in the PRC; (b) our financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; (c) our major assets, accounting books, company seals, and minutes and files of our board and shareholders’ meetings are located or kept in the PRC; and (d) more than half of the enterprise’s directors or senior management with voting rights habitually reside in the PRC. Further, the Administrative Measures of Enterprise Income Tax of Chinese controlled Offshore Incorporated Resident Enterprises (Trial), or Bulletin No. 45, took effect on September 1, 2011, and provides more guidance on the implementation of Circular 82. The State Administration of Taxation issued an amendment to Circular 82 delegating the authority to our provincial branches to determine whether a Chinese-controlled overseas-incorporated enterprise should be considered a PRC resident enterprise, in January 2014.

 

Although Circular 82, our amendment and Bulletin No. 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the determining criteria set forth in Circular 82 and Bulletin No. 45 may reflect the SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises, regardless of whether they are controlled by PRC enterprises or individuals. Although we do not believe that our legal entities organized outside of the PRC constitute PRC resident enterprises, it is possible that the PRC tax authorities could reach a different conclusion.

 

If we are treated as a PRC “resident enterprise,” we will be subject to PRC enterprise income tax on our worldwide income, as well as PRC enterprise income tax reporting obligations. Our income such as interest on other non-PRC sourced income may be subject to PRC enterprise income tax at a rate of 25.0%. In addition, although under the EIT Law and our Implementing Rules dividends paid to us by our PRC subsidiaries would qualify as “tax-exempt income,” we cannot assure you that such dividends will not be subject to a 10.0% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes.

 

Furthermore, if we are considered a PRC resident enterprise under the EIT Law, shareholders who are deemed non-resident enterprises may be subject to the PRC enterprise income tax at the rate of 10% upon the dividends payable by us or upon any gains realized from the transfer of our ordinary shares, if such income is deemed derived from China, provided that (i) such foreign enterprise investor has no establishment or premises in China, or (ii) it has establishment or premises in China but our income derived from China has no real connection with such establishment or premises. If we are required under the EIT Law to withhold PRC income tax on our dividends payable to our non-PRC resident enterprise shareholders, or if any gains realized from the transfer of our ordinary shares by our non-PRC resident enterprise shareholders are subject to the PRC enterprise income tax, your investment in our ordinary shares could be materially and adversely affected.

 

In addition, if we are considered a PRC resident enterprise and relevant PRC tax authorities consider dividends we pay with respect to our shares and the gains realized from the transfer of our shares to be income derived from sources within the PRC, it is possible that such dividends and gains earned by non-resident individuals may be subject to PRC individual income tax at a rate of 20%. If we are required under PRC tax laws to withhold PRC income tax on dividends payable to our non-PRC investors that are non-resident individuals or if you are required to pay PRC income tax on the transfer of our ordinary shares, the value of your investment in our ordinary shares may be materially and adversely affected.

 

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We may not be able to obtain certain treaty benefits on dividends paid by our PRC subsidiary to us through our Hong Kong Subsidiary.

 

Under the EIT Law, dividends generated from retained earnings after January 1, 2008 from a PRC company to a foreign parent company are subject to a withholding tax rate of 10.0% unless the foreign parent’s jurisdiction of incorporation has a tax treaty with China that provides for a preferential withholding arrangement. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income or the Hong Kong Tax Treaty, which became effective on August 21, 2006, a company incorporated in Hong Kong, such as Borqs Hong Kong, will be subject to withholding income tax at a rate of 5% on dividends it receives from our PRC subsidiary if it holds a 25.0% or more interest in that particular PRC subsidiary at all times within the 12-month period immediately preceding the distribution of dividends and be a “beneficial owner” of the dividends. In February 2018, the SAT issued the Announcement on Issues Relating to Beneficial Owners under Tax Treaties , or the SAT Announcement 9, which became effective from April 1, 2018 and supersedes the Notice on Interpretation and Determination of Beneficial Owners under Tax Treaties issued by the SAT on October 27, 2009 (or the Circular 601) and the Announcement Regarding Recognition of Beneficial Owners under Tax Treaties released by the SAT on June 29, 2012 (or the Announcement 30). Pursuant to Announcement 9, applicants who intend to prove their status of the “beneficial owner” shall submit the relevant documents to the relevant tax bureau according to the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements and the SAT Announcement 9. “Beneficial Owners” are residents who have ownership and the right to dispose of the income or the rights and properties giving rise to the income. These rules also set forth certain adverse factors against the recognition of a “Beneficial Owner”, such as not carrying out substantive business activities. Whether a non-resident enterprise may obtain tax benefits under the relevant tax treaty will be subject to approval of the relevant PRC tax authority and will be determined by the PRC tax authority on a case-by-case basis. SAT Announcement 9 further provides that a comprehensive analysis should be made when determining the beneficial owner status based on various factors that supported by various types of documents including the articles of association, financial statements, records of cash movements, board meeting minutes, board resolutions, staffing and materials, relevant expenditures, functions and risk assumption as well as relevant contracts and other information. In August 2015, the SAT promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or SAT Circular 60, which became effective on November 1, 2015. SAT Circular 60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises may, if they determine by self-assessment that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply for the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-filing examinations by the relevant tax authorities. 

 

As a result, although our PRC subsidiary, Borqs Beijing, is currently wholly owned by Borqs Hong Kong, we cannot assure you that we would be entitled to the tax treaty benefits and enjoy the favorable 5.0% rate applicable under the Hong Kong Tax on dividends. If Borqs Hong Kong cannot be recognized as the beneficial owner of the dividends to be paid by our PRC subsidiaries to us, such dividends will be subject to a normal withholding tax of 10% as provided by the EIT Law.

 

Restrictions on foreign currency may limit our ability to receive and use our revenue effectively.

 

The PRC government imposes controls on the conversion of the Renminbi into foreign currencies and, in certain cases, the remittance of foreign currency out of China. We receive part of our revenue in Renminbi. Under our current corporate structure, our British Virgin Islands holding company primarily relies on dividend payments from our PRC and Hong Kong subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE, by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, accumulated after-tax profits generated from the operations of Borqs Beijing in China may be used to pay dividends to us. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain approval from SAFE to use cash generated from the operations of our PRC subsidiaries to pay off any debt in a currency other than Renminbi owed to entities outside China, or to make other capital expenditure payments outside China in a currency other than Renminbi. The PRC government may at our discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

 

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Fluctuations in the value of the RMB may have a material adverse effect on your investment.

 

The value of the RMB against the U.S. Dollar and other currencies is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. Dollar, and the RMB appreciated more than 20.0% against the U.S. Dollar over the following three years. However, the People’s Bank of China regularly intervenes in the foreign exchange market to limit fluctuations in Renminbi exchange rates and achieve policy goals. During the period between July 2008 and June 2010, the exchange rate between the RMB and the U.S. Dollar had been stable and traded within a narrow band. However, the Renminbi fluctuated significantly during that period against other freely traded currencies, in tandem with the U.S. Dollar. Since June 2010, the Renminbi has fluctuated against the U.S. Dollar, at times significantly and unpredictably, and in recent months the RMB has depreciated significantly against the U.S. Dollar. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the RMB and the U.S. Dollar in the future.

 

Approximately half of our revenues and costs are denominated in RMB. Any significant revaluation of RMB may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our ordinary shares in U.S. dollars. For example, an appreciation of RMB against the U.S. dollar would make any new RMB denominated investments or expenditures more costly to us, to the extent that it needs to convert U.S. dollars into RMB for such purposes. An appreciation of RMB against the U.S. dollar would also result in foreign currency translation losses for financial reporting purposes when we translate our U.S. dollar denominated financial assets into RMB, as RMB is our reporting currency. Conversely, a significant depreciation of the RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our earnings, which in turn could adversely affect the price of our ordinary shares. Furthermore, a significant depreciation of the RMB against the U.S. dollar may have a material adverse impact on our cash flow in the event we need to convert our RMB into U.S. dollars to repay our U.S. dollar denominated payment obligations.

 

PRC regulations relating to the establishment of offshore holding companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.

 

The SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Round-Trip Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies on October 26, 2005, or Circular 75, requiring PRC residents, including PRC resident individuals and PRC companies, to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies owned by such PRC residents, referred to in the notice as an “offshore special purpose vehicle.” The PRC resident individuals include not only PRC citizens, but also foreign natural persons who habitually reside in China due to economic interests. SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or Circular 37, on July 4, 2014, which replaced the Circular 75. Circular 37 requires PRC residents to register with local branches of SAFE in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, referred to in Circular 37 as a “special purpose vehicle.” Under Circular 37, a PRC resident who is a foreign nature person is not required to complete the registration if he/she uses assets outside China or equity interests in offshore entities to special purpose vehicles. The term “control” under Circular 37 is broadly defined as the operation rights, beneficiary rights or decision-making rights acquired by the PRC residents in the offshore special purpose vehicles or PRC companies by such means as acquisition, trust, proxy, voting rights, repurchase, convertible bonds or other arrangements. Circular 37 further requires amendment to the registration in the event of any changes with respect to the basic information of the special purpose vehicle, such as changes in a PRC resident individual shareholder, name or operation period; or any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. If the shareholders of the offshore holding company who are PRC residents do not complete their registration with the local SAFE branches, the PRC subsidiaries may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to the offshore company, and the offshore company may be restricted in our ability to contribute additional capital to our PRC subsidiaries. Moreover, failure to comply with SAFE registration and amendment requirements described above could result in liability under PRC law for evasion of applicable foreign exchange restrictions. On February 28, 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or Circular 13, which became effective on June 1, 2015. In accordance with Circular 13, entities and individuals are required to apply for foreign exchange registration of foreign direct investment and overseas direct investment, including those required under the Circular 37, with qualified banks, instead of SAFE. The qualified banks, under the supervision of SAFE, directly examine the applications and conduct the registration.

 

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We requested all of our current shareholders and/or beneficial owners to disclose whether they or their shareholders or beneficial owners fall within the ambit of Circular 37 and Circular 13 and to register with the local SAFE branch as required under Circular 37 and Circular 13 as applicable. As of the date of this prospectus, we are aware that a few of our natural person shareholders who are not PRC citizens may otherwise be deemed as PRC residents pursuant to the definitions under the SAFE regulations, but we are not aware that any of them uses assets inside China or equity interest in PRC companies to invest in the Company. Before the issuance of Circular 37, we had attempted to submit applications to the Beijing branch of SAFE for such individual shareholders in accordance with Circular 75, but those applications were not accepted by the Beijing branch of SAFE because those individuals are not PRC citizens. After Circular 37 became effective, we understand these individuals are not required to conduct the registrations since they do not use assets within China or equity interests in PRC companies to invest in the Company. We cannot assure you, however, that the SAFE’s opinion will be the same as our opinion and all of these individuals can successfully complete required filings or updates on a timely manner, or at all in the event these individuals required to conduct the filings. Besides, we have issued and may in future issue shares to certain PRC citizens for the purpose of acquisition of other companies and we have or will request them to register with the local SAFE branch as required under Circular 37 and Circular 13. We cannot assure you, however, that the all of these individuals can successfully complete required filings or updates on a timely manner, or at all. Furthermore, as there is uncertainty concerning the reconciliation of the new regulations with other approval requirements, it is unclear how these regulations, and any further regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We can provide no assurance that we currently are, and we will in the future continue to be, fully informed of identities of all our shareholders or beneficial owners who are PRC residents, and we cannot provide any assurance that all of our shareholders and beneficial owners who are PRC residents will comply with our request to make, obtain or update any applicable registrations or comply with other requirements required by Circular 37 and Circular 13 or other related rules in a timely manner. Any failure or inability by any of our shareholders or beneficial owners who are PRC residents to comply with SAFE regulations may subject them to fines or other legal sanctions, such as potential liability for our PRC subsidiaries and, in some instances, for their legal representatives and other liable individuals, as well as restrictions on our ability to contribute additional capital into our PRC subsidiaries or our PRC subsidiaries’ ability to distribute dividends to, or obtain foreign-exchange-denominated loans from our offshore holding companies. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

 

Failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

 

In December 2006, the People’s Bank of China promulgated the Administrative Measures of Foreign Exchange Matters for Individuals, which set forth the respective requirements for foreign exchange transactions by individuals (both PRC or non-PRC citizens) under either the current account or the capital account. In January 2007, SAFE issued implementing rules for the Administrative Measures of Foreign Exchange Matters for Individuals, which, among other things, specified approval requirements for certain capital account transactions such as a PRC citizen’s participation in the employee stock ownership plans or stock option plans of an overseas publicly-listed company. In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules, which replaced the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas Publicly-Listed Companies issued by SAFE in March 2007. Under these rules, PRC residents who participate in stock incentive plans in an overseas publicly-listed company are required to register with SAFE or our local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly-listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of our participants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes.

 

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We and our PRC resident employees who participate in our employee stock incentive plans are subject to these regulations. If we or our PRC option grantees fail to comply with these regulations, we or our PRC option grantees may be subject to fines and other legal or administrative sanctions. We plan to process the SAFE application for our ESOP within the year 2018.

 

PRC regulations establish complex procedures for some acquisitions conducted by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

 

The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, adopted by six PRC regulatory agencies in August 2006 and amended in June 2009, among other things, established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. In addition, the Implementing Rules Concerning Security Review on the Mergers and Acquisitions by Foreign Investors of Domestic Enterprises, issued by the Ministry of Commerce in August 2011, specify that mergers and acquisitions by foreign investors involved in “an industry related to national security” are subject to strict review by the Ministry of Commerce, and prohibit any activities attempting to bypass such security review, including by structuring the transaction through a proxy or contractual control arrangement. We believe that our business is not in an industry related to national security, but it cannot preclude the possibility that the Ministry of Commerce or other government agencies may publish explanations contrary to our understanding or broaden the scope of such security reviews in the future, in which case our future acquisitions in the PRC, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Moreover, the Anti-Monopoly Law requires that the Ministry of Commerce be notified in advance of any concentration of undertaking if certain filing thresholds are triggered. We may grow our business in part by directly acquiring complementary businesses in China. Complying with the requirements of the laws and regulations mentioned above and other PRC regulations to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share. Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected.

 

Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.

 

The Ministry of Commerce, or the MOFCOM published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. A draft Foreign Investment Law drafted by the MOFCOM and the National Development and Reform Commission, or the NDRC, has been included in the list of draft laws submitted to the Standing Committee of the National People’s Congress for deliberation under the 2018 Legislation Plan of the State Council. However, it is uncertain when the draft would be signed into law and whether the draft version submitted for deliberation or the final version would have any substantial changes from the draft version published by the MOFCOM. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate governance and business operations in many aspects.

 

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Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company should be treated as a foreign-invested enterprise, or an FIE. According to the definition set forth in the draft Foreign Investment Law, FIEs refer to enterprises established in China pursuant to PRC law that are solely or partially invested by foreign investors. The draft Foreign Investment Law specifically provides that entities established in China (without direct foreign equity ownership) but “controlled” by foreign investors, through contract or trust for example, will be treated as FIEs. Once an entity falls within the definition of FIE, it may be subject to foreign investment “restrictions” or “prohibitions” set forth in a “negative list” to be separately issued by the State Council later. If an FIE proposes to conduct business in an industry subject to foreign investment “restrictions” in the “negative list,” the FIE must go through a market entry clearance by the Ministry of Commerce before being established. An FIE is prohibited from conducting business in an industry subject to foreign investment “prohibitions” in the “negative list”. However, an FIE, during the market entry clearance process, may apply in writing to be treated as a PRC domestic enterprise if its foreign investor(s) is/are ultimately “controlled” by PRC government authorities and its affiliates and/or PRC citizens. In this connection, “control” is broadly defined in the draft law to cover the following summarized categories: (i) holding 50% or more of the voting rights of the subject entity; (ii) holding less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to exert material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations.

 

The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including us with respect to our MVNO business, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. Under the draft Foreign Investment Law, variable interest entities that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is included in the “negative list” as restricted industry, the VIE structure may be deemed legitimate only if the ultimate controlling person(s) is/are of PRC nationality (either PRC government authorities and its affiliates or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the variable interest entities will be treated as FIEs and any operation in the industry category on the “negative list” without market entry clearance may be considered as illegal.

 

The draft Foreign Investment Law has not taken a position on what actions shall be taken with respect to the existing companies with a VIE structure, whether or not these companies are controlled by Chinese parties, while it is soliciting comments from the public on this point. Moreover, it is uncertain whether the telecommunication business, in which our variable interest entity operates, will be subject to the foreign investment restrictions or prohibitions set forth in the “negative list” to be issued. If the enacted version of the Foreign Investment Law and the final “negative list” mandate further actions, such as Ministry of Commerce market entry clearance, to be completed by companies with existing VIE structure like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.

 

The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs.

 

Aside from investment implementation report and investment amendment report that are required at each investment and alteration of investment specifics, an annual report is mandatory, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these information reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.

 

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The enforcement of the labor laws and other labor-related regulations in the PRC may adversely affect our results of operations.

 

On June 29, 2007, the Standing Committee of the National People’s Congress of China enacted the Labor Contract Law, which became effective on January 1, 2008 and revised on December 28, 2012. The Labor Contract Law introduces specific provisions related to fixed-term employment contracts, part-time employment, probation, consultation with labor union and employee assemblies, employment without a written contract, dismissal of employees, severance, and collective bargaining, which together represent enhanced enforcement of labor laws and regulations. According to the Labor Contract Law, an employer is obliged to sign an unlimited-term labor contract with any employee who has worked for the employer for ten consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract must have an unlimited term, with certain exceptions. The employer must pay severance to an employee where a labor contract is terminated or expires, with certain exceptions. In addition, the government has continued to introduce various new labor-related regulations after the effectiveness of the Labor Contract Law. Among other things, it is required that that annual leave ranging from five to 15 days be made available to employees and that the employee be compensated for any untaken annual leave days in the amount of three times of the employee’s daily salary, subject to certain exceptions. As a result of these regulations designed to enhance labor protection and increasing labor costs in China, our labor costs have increased. In addition, as the interpretation and implementation of these new regulations are still evolving, we cannot assure you that our employment practice will at all times be deemed in compliance with the new regulations. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes or investigations, our business and results of operations may be adversely affected.

 

Our failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.

 

Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations. Our failure to make contributions to various employee benefit plans and to comply with applicable PRC labor-related laws may subject us to late payment penalties. If we are subject to such penalties in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.

 

If the custodians or authorized users of our controlling non-tangible assets, including corporate chops and seals, fail to fulfill their responsibilities or misappropriate or misuse those assets, our business and operations could be materially and adversely affected.

 

In China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature. Under PRC law, legal documents for corporate transactions, including contracts and leases that our business relies upon, are executed using “corporate chops,” which are instruments that contain either the official seal of the signing entity or the signature of a legal representative whose designation is registered and filed with the State Administration for Industry and Commerce, or SAIC.

 

Our PRC subsidiaries generally execute legal documents with corporate chops. One or more of our corporate chops may be used to, among other things, execute commercial sales or purchase contracts, procurement contracts and office leases, open bank accounts, issue checks and to issue invoices. We believe that it has sufficient controls in place over access to and use of the chops. Our chops, or chops, including the chops at headquarters level and of each PRC subsidiary, are kept securely at our legal department under the direction of the executive officers at vice president level or higher. Use of chops requires proper approvals in accordance with our internal control procedures. The custodian at our legal department also maintains a log to keep a detailed record or each use of the chops.

 

However, we cannot assure you that unauthorized access to or use of those chops can be prevented. Our designated employees who hold the corporate chops could abuse their authority by, for example, binding us to contracts against our interests or intentions, which could result in economic harm, disruption or our operations or other damages to them as a result of any contractual obligations, or resulting disputes, that might arise. If the party contracting with us asserted that we did not act in good faith under such circumstances, then we could incur costs to nullify such contracts. Such corporate or legal action could involve significant time and resources, while distracting management from our operations. In addition, we may not be able to recover corporate assets that are sold or transferred out of our control in the event of such a misappropriation if a transferee relies on the apparent authority of the representative and acts in good faith.

 

If a designated employee uses a chop in an effort to obtain control over one or more of our PRC subsidiaries, we would need to take legal action to seek the return of the applicable chop(s), apply for a new chop(s) with the relevant authorities or otherwise seek legal redress for the violation of their duties. During any period where we lose effective control of the corporate activities of one or more of our PRC subsidiaries as a result of such misuse or misappropriation, the business activities of the affected entity could be disrupted and we could lose the economic benefits of that aspect of our business. To the extent those chops are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and the operations of those entities could be significantly and adversely impacted.

 

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The financial statements included in this prospectus are audited by an auditor who is not inspected by the Public Company Accounting Oversight Board and, as such, you are deprived of the benefits of such inspection.

 

Our independent registered public accounting firm, as auditors of companies that are traded publicly in the United States and a firm registered with the PCAOB, is required by the laws of the United States to undergo regular inspections by the PCAOB to assess our compliance with the laws of the United States and professional standards. Because our auditors are located in the PRC, a jurisdiction where the PCAOB is currently unable to conduct inspections without the approval of the Chinese authorities, our auditors are not currently inspected by the PCAOB. In May 2013, PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the CSRC and the Ministry of Finance, which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by PCAOB, the China Securities Regulatory Commission, or the CSRC, or the Ministry of Finance in the United States and the PRC, respectively. PCAOB continues to be in discussions with the CSRC and the Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with PCAOB and audit Chinese companies that trade on U.S. exchanges.

 

Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditor’s audits and our quality control procedures. As a result, investors may be deprived of the benefits of PCAOB inspections.

 

The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

 

If additional remedial measures are imposed on China-based accounting firms, including our independent registered public accounting firm, in administrative proceedings brought by the SEC alleging those firms’ failure to meet specific criteria with respect to requests for the production of documents, we could be unable to timely file our future financial statements in compliance with the requirements of U.S. securities law.

 

In December 2012, the SEC instituted proceedings against five China-based accounting firms, including our independent registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to provide to the SEC the firms’ work papers related to their audits of China-based companies that are publicly traded in the U.S. The SEC has the authority to deny to any person, temporarily or permanently, the ability to practice before the SEC who is found by to have willfully violated any such laws or rules and regulations. On January 22, 2014, an initial administrative law decision was issued, censuring these accounting firms and suspending four of the five firms from practicing before the SEC for a period of six months. Four of these China-based accounting firms appealed to the SEC against this decision and, on February 6, 2015, each of the four China-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC. These firms’ ability to continue to serve all their respective clients is not affected by the settlement. The settlement requires the firms to follow detailed procedures to seek to provide the SEC with access to the firms’ audit documents via the China Securities Regulatory Commission. If the firms do not follow these procedures, the SEC could impose penalties such as suspensions, or it could restart the administrative proceedings. The settlement did not require the firms to admit to any violation of law and preserves the firms’ legal defenses in the event the administrative proceeding is restarted

 

In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, companies listed in the U.S. with major Chinese operations may find it difficult or impossible to retain auditors in respect of their operations in China, which could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about any such future proceedings against these audit firms may cause investor uncertainty regarding China-based, U.S.-listed companies and the market price of our ordinary shares may be adversely affected.

 

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If our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable to timely find another registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined not to be in compliance with the requirements of the Exchange Act. Such a determination could ultimately lead to the delay or abandonment of this offering, delisting of our ordinary shares from The Nasdaq Stock Market or deregistration from the SEC, which would substantially reduce or effectively terminate the trading of our ordinary shares in the U.S.

 

Our contractual arrangements may not be as effective in providing control over the variable interest entity as direct ownership.

 

We rely on contractual arrangements with our variable interest entity to operate our MVNO business in China. These contractual arrangements may not be as effective as direct ownership in providing us with control over our variable interest entity and our subsidiaries. If we had direct ownership of the variable interest entity, we would be able to exercise our rights as an equity holder directly to effect changes in the board of directors of the variable interest entity, which could effect changes at the management and operational level. Under our contractual arrangements, we may not be able to directly change the members of the board of directors of the variable interest entity and would have to rely on the variable interest entity and the variable interest entity equity holders to perform their obligations in order to exercise control over the variable interest entity. The variable interest entity equity holders may have conflicts of interest with us or our shareholders, and they may not act in the best interests of us or may not perform their obligations under these contracts. For example, our variable interest entity and our respective equity holders could breach their contractual arrangements with them by, among other things, failing to conduct their operations, including maintaining our websites and using our domain names and trademarks which the variable interest entity has exclusive rights to use, in an acceptable manner or taking other actions that are detrimental to our interests. Pursuant to the call option, we may replace the equity holders of the variable interest entity at any time pursuant to the contractual arrangements. However, if any equity holder is uncooperative and any dispute relating to these contracts or the replacement of the equity holders remains unresolved, we will have to enforce our rights under the contractual arrangements through the operations of PRC law and arbitral or judicial agencies, which may be costly and time-consuming and will be subject to uncertainties in the PRC legal system.

 

Any failure by our variable interest entity or our equity holders to perform their obligations under the contractual arrangements would have a material adverse effect on our business, financial condition and results of operations.

 

If our variable interest entity or our equity holders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. Although we have entered into exclusive option agreements in relation to the variable interest entity, which provide that we may exercise an option to acquire, or nominate a person to acquire, ownership of the equity in that entity to the extent permitted by applicable PRC laws, rules and regulations, the exercise of these call options is subject to the review and approval of the relevant PRC governmental authorities. We have also entered into share pledge agreements with respect to the variable interest entity to secure certain obligations of the variable interest entity or our equity holders to us under the contractual arrangements. However, the enforcement of such agreements through arbitral or judicial agencies may be costly and time-consuming and will be subject to uncertainties in the PRC legal system. Moreover, our remedies under the share pledge agreements are primarily intended to help it collect debts owed to us by the variable interest entity or the variable interest entity equity holders under the contractual arrangements and may not help us in acquiring the assets or equity of the variable interest entity.

 

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In addition, although the terms of the contractual arrangements provide that they will be binding on the successors of the variable interest entity equity holders, as those successors are not a party to the agreements, it is uncertain whether the successors in case of the death, bankruptcy or divorce of a variable interest entity equity holder will be subject to or will be willing to honor the obligations of such variable interest entity equity holder under the contractual arrangements. If the variable interest entity or our equity holder (or our successor), as applicable, fails to transfer the shares of the variable interest entity according to the respective exclusive option agreement or share pledge agreement, we would need to enforce our rights under the exclusive option agreement or share pledge agreement, which may be costly and time-consuming and may not be successful. The contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration or court proceedings in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. Moreover, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC law, and as a result it may be difficult to predict how an arbitration panel or court would view such contractual arrangements. As a result, uncertainties in the PRC legal system could limit our ability to enforce the contractual arrangements. Under PRC law, if the losing parties fail to carry out the arbitration awards or court judgments within a prescribed time limit, the prevailing parties may only enforce the arbitration awards or court judgments in PRC courts, which would require additional expense and delay. In the event we are unable to enforce the contractual arrangements, we may not be able to exert effective control over the variable interest entity and our subsidiaries, and our ability to conduct our business, as well as our financial condition and results of operations, may be materially and adversely affected.

 

We may lose the ability to use, or otherwise benefit from, the licenses, approvals and assets held by our variable interest entity, which could severely disrupt our business, render us unable to conduct some or all of our business operations and constrain our growth.

 

Although the significant majority of our revenues are generated, and the significant majority of our operational assets are held, by our wholly-foreign owned enterprises, which are our subsidiaries, our variable interest entity hold licenses and approvals and assets that are necessary for our business operations, as well as equity interests in a series of our portfolio companies, to which foreign investments are typically restricted or prohibited under applicable PRC law. The contractual arrangements contain terms that specifically obligate variable interest entity equity holders to ensure the valid existence of the variable interest entity and restrict the disposal of material assets of the variable interest entity. However, in the event the variable interest entity equity holders breach the terms of these contractual arrangements and voluntarily liquidate the variable interest entity or any of our subsidiary, or any of these entities declares bankruptcy and all or part of our assets become subject to liens or rights of third-party creditors, or are otherwise disposed of without our consent, we may be unable to conduct some or all of our business operations or otherwise benefit from the assets held by the variable interest entity or our subsidiaries, which could have a material adverse effect on our business, financial condition and results of operations. Furthermore, if our variable interest entity undergoes a voluntary or involuntary liquidation proceeding, our equity holders or unrelated third-party creditors may claim rights to some or all of the assets of such variable interest entity, thereby hindering our ability to operate our business as well as constrain our growth.

 

The equity holders, directors and executive officers of the variable interest entity, as well as our employees who execute other strategic initiatives may have potential conflicts of interest with us.

 

PRC laws provide that a director and an executive officer owes a fiduciary duty to the company he or she directs or manages. The directors and executive officers of the variable interest entity must act in good faith and in the best interests of the variable interest entity and must not use their respective positions for personal gain. We control our variable interest entity through contractual arrangements and the business and operations of our variable interest entity are closely integrated with the business and operations of our subsidiaries. Nonetheless, conflicts of interests for these individuals may arise due to dual roles both as directors and executive officers of the variable interest entity and as our directors or employees, and may also arise due to dual roles both as variable interest entity equity holders and as our directors or employees. We cannot assure you that these individuals will always act in our best interests should any conflicts of interest arise, or that any conflicts of interest will always be resolved in our favor. Moreover, we also cannot assure you that these individuals will ensure that the variable interest entity will not breach the existing contractual arrangements. If we cannot resolve any such conflicts of interest or any related disputes, we would have to rely on legal proceedings to resolve these disputes and/or take enforcement action under the contractual arrangements. There is substantial uncertainty as to the outcome of any such legal proceedings.

 

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The contractual arrangements with our variable interest entity may be subject to scrutiny by the PRC tax authorities. Any adjustment of related party transaction pricing could lead to additional taxes, and therefore substantially reduce our consolidated net income and the value of your investment.

 

The tax regime in China is rapidly evolving and there is significant uncertainty for taxpayers in China as PRC tax laws may be interpreted in significantly different ways. The PRC tax authorities may assert that we or our subsidiaries or the variable interest entity or their equity holders owe and/or are required to pay additional taxes on previous or future revenue or income. In particular, under applicable PRC laws, rules and regulations, arrangements and transactions among related parties, such as the contractual arrangements with our variable interest entity, may be subject to audit or challenge by the PRC tax authorities. If the PRC tax authorities determine that any contractual arrangements were not entered into on an arm’s length basis and therefore constitute a favorable transfer pricing, the PRC tax liabilities of the relevant subsidiaries and/or variable interest entity and/or variable interest entity equity holders could be increased, which could increase our overall tax liabilities. In addition, the PRC tax authorities may impose late payment interest. Our net income may be materially reduced if our tax liabilities increase.

 

Risks Related to the Electric Vehicle Industry

 

Future growth is dependent upon consumers’ willingness to adopt electric vehicles.

 

Due to our contemplated acquisition of a controlling position of Shanghai KADI Technologies Co., Ltd (“KADI”), our future prospects are highly dependent upon the timing and pace of consumer adoption of alternative fuel vehicles in general and electric vehicles in particular. The market for alternative fuel vehicles is relatively new and rapidly evolving, characterized by rapidly changing technologies, price and product competition, newly-emerging competitors, evolving government regulation and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors. If the market for electric vehicles in China does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and operating results will be harmed.

 

Developments in alternative technologies or improvements in the internal combustion engine may materially adversely affect the demand for our electric vehicle products.

 

Significant developments in alternative technologies, such as advanced diesel, ethanol, fuel cells or compressed natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced electric vehicle products, which could result in the loss of competitiveness of our vehicles, decreased revenue and a loss of market share to competitors.

 

If we are unable to keep up with advances in electric vehicle technology, we may suffer a decline in our competitive position.

 

We may be unable to keep up with changes in electric vehicle technology, and we may suffer a resulting decline in our competitive position. Any failure to keep up with advances in electric vehicle technology would result in a decline in our competitive position which would materially and adversely affect our business, prospects, operating results and financial condition. Our research and development efforts may not be sufficient to adapt to changes in electric vehicle technology.

 

Extended periods of low diesel or other petroleum-based fuel prices could adversely affect demand for electric vehicles, which would adversely affect our business and operating results.

 

We believe that much of the present and projected demand for commercial electric vehicles results from concerns about volatility in the cost of petroleum-based fuel, government regulations and economic incentives promoting fuel efficiency and alternative forms of energy, as well as the belief that climate change results in part from the burning of fossil fuels. If the cost of petroleum-based fuel decreased significantly, the government eliminated or modified its regulations or economic incentives related to fuel efficiency and alternative forms of energy, or if there is a change in the perception that the burning of fossil fuels negatively impacts the environment, the demand for commercial electric vehicles could be reduced, and our business and revenue could be harmed.

 

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We may be subject to product liability claims or recalls which could be expensive, damage our reputation or result in a diversion of management resources.

 

We may be subject to lawsuits resulting from injuries associated with the use of the vehicles in which the modules products of KADI are involved. We may incur losses relating to these claims or the defense of these claims. There is a risk that claims or liabilities will exceed our insurance coverage. In addition, we may be unable to retain adequate liability insurance in the future.

 

We may also be required to participate in recalls involving vehicles with our products, if any prove to be defective, or we may voluntarily initiate a recall or make payments related to such claims as a result of various industry or business practices or the need to maintain good customer relationships. Such a recall would result in a diversion of resources. While we do maintain product liability insurance, we cannot assure investors that it will be sufficient to cover all product liability claims, that such claims will not exceed our insurance coverage limits or that such insurance will continue to be available on commercially reasonable terms, if at all. Any product liability claim brought against us could have a material adverse effect on the results of our operations.

 

Since KADI’s products primarily involve the central control mechanism of electric vehicles, defective designs or defective components parts can cause significant damage or injury, and our liability risks will increase. While we have had no product liability claims to date, we have relatively little experience with these products, and our insurance coverage may not be sufficient to cover potential claims in the future.

 

Changes to the government subsidy support policies in the PRC and further delays in subsidy payments may have negative impacts on the electric vehicle market.

 

The subsidy support polices effective as of April 22, 2015 and the newly announced government subsidy support policies available in the PRC effective as of January 1, 2017, call for a 20% of reduction in central government subsidies per car in 2017 from the 2016 level, and a 20% of reduction in the subsidies for purchasers of certain new energy vehicles (except for fuel cell vehicles) in 2019 and 2020 as compared to 2017 subsidies and the total local government subsidy match to be not more than 50% of the total central government subsidies per car. The reduction of subsidies from both the central government and local governments will inevitably increase the costs to the consumers, which may cause temporary pressure for the EV market. The change in subsidy payment methods in 2017 from paid in advance to paid post-sale and any further delay in releasing subsidy payments for the EVs manufactured and sold in the prior years might also cause the adverse effects on the EV market.

 

Any of the above factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors presently not known to us or that we currently deem immaterial may also impair our business or results of operations. Although the production and sales of finished electric vehicles is subject to certain restrictions, we are not aware of any PRC regulations or proposed regulations that will specifically restrict or limit the electric vehicle component business currently conducted by KADI from foreign participation. As a result, we do not currently expect our pending ownership of KADI, or KADI’s relationships within the electric vehicle industry, to be adversely affected by our foreign ownership structure.

 

Risks Related to Our Recent Transactions

 

Our proposed acquisition of KADI may not be completed or may be delayed if we cannot obtain sufficient capital to fund the acquisition.

 

We have entered into a letter of intent to acquire a 60% equity interest in KADI, a Chinese company that develops software and hardware solutions for electric vehicle control modules, such as charging, battery management and vehicle controls. We have not yet finalized a definitive agreement to complete this acquisition, but we have made four scheduled cash advances to KADI totaling $600,000 which will be deducted from our initial cash payments to KADI under the definitive agreement being negotiated. We intend to use a portion of the proceeds from this offering to support the funding of the KADI acquisition. As we will not raise enough funds in this offering to fund the acquisition, we are in discussions with KADI to negotiate a modified payment schedule and may need to find alternative funding sources, or else we will not be able to consummate the acquisition of KADI. If the acquisition is not consummated within nine months after signing of the letter of intent, the advance payments will be converted into shares representing five percent of the outstanding capital stock of KADI. There are no termination fees or penalties under the letter of intent.

 

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If we are unable to sign a definitive agreement and complete the acquisition of KADI, our directors, executive officers and other employees will have expended extensive time and effort and will have experienced significant distractions from their work during the period the transaction was pending and we will have incurred significant third party transaction costs, in each case, without any commensurate benefit. In addition, the current market price of our ordinary shares may reflect a market assumption that the KADI acquisition will occur, and a failure to complete the transaction could result in a negative perception by the market of ours generally and a resulting decline in the market price of our ordinary shares. Any delay in the consummation of the acquisition or any uncertainty about the consummation of the acquisition could also negatively impact our stock price and future business and results of operations.

 

Even if we complete the acquisition of KADI, we may be unsuccessful at integrating the KADI business.

 

Our proposed acquisition of KADI involves multiple steps in seeing through the procurement of the supply contract awarded to KADI, and there is no assurance that KADI can satisfy its customer in the delivery of the products at this scale either in time or up to the quality standards acceptable to the customer. Assuming we proceed to enter into a definite agreement with KADI and consummate the proposed acquisition, there is no assurance that we can support KADI with the necessary funds in time for KADI to set up correctly for the manufacturing of the products. These and other factors unforeseen by both the Company and KADI, including but not limited to new competition, can also appear to affect the demand and pricing of the KADI products and ultimately cause our acquisition of KADI to fail. Also, there is no assurance that the management of KADI will successfully integrate with our management team to ensure a smooth operation going forward and to gain the intended benefits of this acquisition.

 

Dependency on key personnel of KADI.

 

There is no assurance that the management of KADI will successfully integrate with our management team to realize the intended benefits of the acquisition transaction. The business of KADI is dependent on Mr. Hu Lin, KADI’s chairman and chief executive. In the event that Mr. Lin were unable or unwilling to dedicate his full time to KADI’s business, or if he were to resign or start a competing business, our business and financial results would be adversely affected. KADI has no “key person” insurance on Mr. Lin or any other employee, and no employment agreement with Mr. Lin.

 

Our repurchase of shares from Zhengqi may adversely affect our liquidity and working capital.

 

We have agreed to repurchase 966,136 of our ordinary shares from one of our largest shareholders, Zhengqi, at the original purchase price and for an aggregate amount of $10.05 million. The repurchase transaction has not yet completed, and although the purchase price for the transaction has been remitted, the 966,136 repurchase shares currently remain outstanding. This repurchase will limit our available cash and may adversely affect our ability to carry out our operations normally due to this reduction in working capital.

 

We have been working with Zhengqi to satisfy certain conditions and make necessary arrangements before completing the repurchase, including submitting the shares to the transfer agent for cancellation. We obtained the consent of our existing lenders with respect to the repurchase and anticipate closing the transaction in 2018.  As of August 3, 2018, the 1,278,776 escrow shares were forfeited and released from escrow, of which 51,151 shares were placed in the indemnity escrow account established in connection with the merger by and among the Company, Borqs International, Zhengqi and other parties, and 1,227,625 shares were distributed to the former Borqs International shareholders in proportion to their ownership prior to the completion of the business combination on August 18, 2017. The return and cancellation of the 966,136 shares remain in process.

 

Our repurchase of shares from Zhengqi may trigger litigation by other shareholders.

 

Our agreement to repurchase shares from Zhengqi was not extended to all investors who purchased shares in the August 2017 private placement. Since we are repurchasing those shares at a premium to current market prices, other purchasers may seek similar treatment. In addition, a minority of our shareholders did not benefit from the return of 1,227,625 escrowed earnout shares to the former Borqs International shareholders on August 3, 2018. Those minority shareholders will receive no direct benefit of proposed repurchase and return, and there is no assurance that those minority holders will not make claims against us. Any such litigation brought by such minority shareholders could be time-consuming and costly, and could materially adversely affect our financial condition and results of operations.

 

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Dependency on Crave and Colmei and financial risks.

 

Our agreement to purchase shares of Crave and Colmei from the shareholders of those companies may lead us to be more dependent on Crave and Colmei for both components and manufacturing. There is no assurance that Crave and Colmei continue to provide competitive pricing of components and for manufacturing services. There is no assurance that the value of our ownership of Crave and Colmei will not decline, potentially causing a material adverse effect on our financial condition.

 

Risks Related to This Offering

 

Since the consummation of our acquisition of Borqs International by way of merger, our ordinary shares have not had an active, liquid trading market, and you may not be able to sell your ordinary shares at or above the public offering price, or at all.

 

Following the consummation of our acquisition of Borqs International by way of merger, there has not been an active, liquid public market for our ordinary shares. An active trading market for shares of our ordinary shares may never develop or be sustained following this offering. If an active trading market does not develop, you may have difficulty selling your shares of ordinary shares at an attractive price, or at all. The public offering price for our ordinary shares will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell your ordinary shares at or above the public offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our ordinary shares and may impair our ability to expand our business by using our ordinary shares as consideration in an acquisition.

 

The price of our ordinary shares could be volatile following this offering.

 

The market price of our ordinary shares following this offering may be volatile and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control. These factors include, among other things:

  actual or anticipated variations in our quarterly results of operations;

 

  recommendations by securities analysts;

 

  operating and stock price performance of other companies that investors deem comparable to us;

 

  news reports relating to trends, concerns and other issues in the financial services industry generally;

 

  perceptions in the marketplace regarding us and/or our competitors;

 

  new technology used, or services offered, by competitors; and

 

  changes in government regulations.

 

In addition, if the market for stocks in our industry, or the stock market in general, experiences a loss of investor confidence, the trading price of our ordinary shares could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

 

Our insiders currently own, in the aggregate, approximately 75% of our outstanding ordinary shares and, as a result, are able to exert significant control over matters submitted to shareholders for approval.

 

After this offering, our officers, directors and shareholders who own more than 5% of our outstanding ordinary shares will, in the aggregate, beneficially own approximately 75% of our outstanding ordinary shares (assuming no exercise by the underwriters of their option to purchase additional shares and that none of such insiders purchase ordinary shares in this offering). As such, our insiders will be able to significantly influence or even unilaterally approve matters requiring approval by our shareholders, including the election of directors, certain decisions relating to our capital structure, amendments to our memorandum and articles of association, and the approval of mergers or other business combination transactions. The interests of these shareholders may not always coincide with the interests of our other shareholders and investors who acquired ordinary shares in this offering may have no effective voice in the management of our company.

 

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If equity research analysts publish unfavorable commentary or downgrade our ordinary shares, the price and trading volume of our ordinary shares could decline.

 

The trading market for our ordinary shares could be affected by whether equity research analysts publish research or reports about us and our business. We cannot predict at this time whether any research analysts will publish research and reports on us and our ordinary shares. If one or more equity analysts do cover us and our ordinary shares and publish research reports about us, the price of our stock could decline if one or more securities analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.

 

If any of the analysts who elect to cover us downgrades our stock, our stock price could decline rapidly. If any of these analysts ceases coverage of us, we could lose visibility in the market, which in turn could cause our ordinary shares price or trading volume to decline and our ordinary shares to be less liquid.

 

Failure to maintain effective internal controls over financial reporting could have a material adverse effect on our business and stock price.

 

We are required to comply with the SEC’s rules implementing Sections 302 and 404(a) of the Sarbanes-Oxley Act, which requires management to certify disclosure controls and procedures and, internal controls over financial reporting in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. In particular, we are required to certify our compliance with Section 404(a) of the Sarbanes-Oxley Act, which requires us to furnish annually a report by management on the effectiveness of our internal controls over financial reporting. Furthermore, unless we remain an emerging growth company and elect additional transitional relief available to emerging growth companies, or we qualify as a smaller reporting company under applicable SEC rules, then our independent registered public accounting firm will be required to attest and report on the effectiveness of our internal controls over financial reporting.

 

As described elsewhere herein, our management identified a material weakness in our internal controls over financial reporting as of December 31, 2017 relating to our lack of sufficient financial reporting, and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related disclosures to comply with U.S. GAAP and SEC financial reporting requirements. If we are unable to remediate this material weakness in our internal controls over financial reporting, or if we identify additional material weaknesses in our internal controls over financial reporting, our management will be unable to assert that our internal controls over financial reporting is effective and investors, counterparties and customers may lose confidence in the accuracy and completeness of our financial statements and reports, which could have an adverse effect on our liquidity, access to capital markets and perceptions of our creditworthiness and/or a decline in the market price of our ordinary shares. In addition, we could become subject to investigations by the stock exchange on which our securities are listed, the SEC, other regulatory authorities, which could require additional financial and management resources. These events could have an adverse effect on our business, financial condition and results of operations.

 

Future equity issuances could result in dilution, which could cause our ordinary shares price to decline.

 

We are generally not restricted from issuing additional ordinary shares, and there is no limit to the number of ordinary shares that we are authorized to issue by our memorandum and articles of association. We may issue additional ordinary shares in the future pursuant to current or future equity compensation plans, upon conversions of preferred shares or debt, upon exercise of warrants or in connection with future acquisitions or financings. If we choose to raise capital by selling our ordinary shares for any reason, the issuance would have a dilutive effect on the holders of our ordinary shares and could have a material negative effect on the market price of our ordinary shares.

 

Future sales of our ordinary shares may cause our ordinary shares price to decline.

 

If our existing shareholders sell, or indicate an intent to sell, amounts of our ordinary shares in the public market after the contractual lock-up and other legal restrictions on resale lapse, the trading price of our ordinary shares could decline. Based upon shares outstanding as of June 30, 2018, after this offering, assuming the sale of 2,666,667 ordinary shares by us and the Participating Stockholders and no exercise by the underwriters of their option to purchase additional shares, approximately 32 million ordinary shares will be outstanding. Of these shares, the ordinary shares to be sold in this offering will be freely tradable, unless such shares are held by “affiliates,” as that term is defined in Rule 144 under the Securities Act of 1933, as amended, or the Securities Act.

 

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Certain of our officers, directors and shareholders have entered into lock-up agreements with the underwriters in this offering for a period of 180 days following the date of this prospectus, unless certain conditions are met. Additionally, so long as at least $5,000,000 of shares are sold by the Participating Stockholders in this offering, each of Ninepoint Capital LLC and Zhengqi has agreed to lock up for a period of 135 days following the date of this prospectus that portion of such shareholder’s shares that are offered but not sold in this offering. Such lock-up may be waived by Maxim to the extent necessary with respect to any private placements taking place following the closing of this offering and as to which Maxim has been engaged as placement agent. An aggregate of 18,508,419 shares held by directors and principal shareholders, each such shareholder a beneficial owner of more than 5% of our ordinary shares, which number includes 1,000,000 shares held by Zhengqi, are not subject to any lock-up in connection with this offering.

 

In addition to the registration of the sale of ordinary shares to investors in an underwritten public offering, we are also registering for resale 1,807,823 ordinary shares, which with the exception of                     ordinary shares that are not sold by Zhengqi in this offering and 1,513,302 shares held by certain officers, directors and shareholders, will not be subject to lock-up agreements. These shares are being registered pursuant to certain registration rights agreements pursuant to which we have agreed, under certain circumstances, to file a registration statement to register the resale of a substantial number of shares held by certain of our existing shareholders, as well as to cooperate in certain public offerings of such shares. Registration of these shares under the Securities Act would result in such shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of such registration, except for shares purchased or subscribed for by affiliates. After the closing of this offering, holders of approximately 23,742,248 of our ordinary shares will continue to be entitled to registration rights to cover these and other shares purchased prior to or in connection with our acquisition of Borqs International. As such, upon registration of such shares, a substantial number of our ordinary shares may be sold in the public market, which may cause the trading price of our ordinary shares to decline. We may issue additional preferred shares in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our ordinary shares, which could depress the price of our ordinary shares.

 

Our board also has the power, without shareholder approval, to set the terms of any series of preferred shares that may be issued, including voting rights, dividend rights and preferences over our ordinary shares with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms. In the event that we issue preferred shares in the future that have preference over our ordinary shares with respect to payment of dividends or upon our liquidation, dissolution or winding up, or if we issue preferred shares with voting rights that dilute the voting power of our ordinary shares, the rights of the holders of our ordinary shares or the market price of our ordinary shares could be adversely affected. In addition, the ability of our Board to issue preferred shares without any action on the part of our shareholders may impede a takeover of us and prevent a transaction perceived to be favorable to our shareholders.

 

We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequence to U.S. holders of our ordinary shares.

 

We have not made a determination as to whether we would be classified as a “passive foreign investment company,” or PFIC, for U.S. federal income tax purposes for our preceding taxable year nor can we assure you that we will not be a PFIC for our current taxable year or any future taxable year. A foreign (non-U.S) corporation will be considered a PFIC for any taxable year if either (1) at least 75% of its gross income is passive income or (2) or least 50% of the value of its assets (generally based on an average of the quarterly values of the assets during a taxable year) is attributable to assets that produce or are held for the production of passive income. PFIC status depends on the composition of our assets and income and the value of our assets (including, among others, a pro rata portion of the income and assets of each subsidiary in which we own, directly or indirectly, at least 25% (by value) of the equity interest) from time to time. Depending on the amount of cash or cash equivalents we currently hold and the amount of cash we raise in this offering, which are generally treated as passive assets, and because the calculation of the value of our assets may be based in part on the value of our ordinary shares, which is likely to fluctuate, we may be a PFIC for any taxable year. If we were treated as a PFIC for any taxable year during which a U.S. Holder (as defined in the section entitled “Taxation – U.S. Federal Income Taxation – General”) held an ordinary share, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. For more information, see “Taxation – U.S. Federal Income Taxation – U.S. Holders – Passive Foreign Investment Company Rules.”

 

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We are an “emerging growth company,” and the reduced regulatory and reporting requirements applicable to emerging growth companies may make our ordinary shares less attractive to investors.

 

We are an “emerging growth company,” as described in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of reduced regulatory and reporting requirements that are otherwise generally applicable to public companies. These include, without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced financial reporting requirements, reduced disclosure obligations regarding executive compensation, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and golden parachute payments. The JOBS Act also permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies, which we intend to take advantage of.

 

We will remain an “emerging growth company” for up to five years following the acquisition of Borqs International by way of merger unless we earlier cease to be an emerging growth company, which would occur if our annual gross revenues exceed $1.0 billion, if we issue more than $1.0 billion in non-convertible debt in a three-year period, or if the market value of our ordinary shares held by non-affiliates exceeds $700.0 million as of any January 1 before that time, in which case we would no longer be an emerging growth company as of the following December 31. Investors may find our ordinary shares less attractive if we rely on the exemptions, which may result in a less active trading market and increased volatility in our stock price.

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements in the sections captioned “ Business ,” “ Risk Factors ,” “ Management’s Discussion and Analysis of Financial Condition and Plan of Operations ” and elsewhere. Any and all statements contained in this prospectus that are not statements of historical fact may be deemed forward-looking statements. Terms such as “may,” “might,” “would,” “should,” “could,” “project,” “estimate,” “pro-forma,” “predict,” “potential,” “strategy,” “anticipate,” “attempt,” “develop,” “plan,” “help,” “believe,” “continue,” “intend,” “expect,” “future,” and terms of similar import (including the negative of any of these terms) may identify forward-looking statements. However, not all forward-looking statements may contain one or more of these identifying terms. Forward-looking statements in this prospectus may include, without limitation, statements regarding the plans and objectives of management for future operations, earnings or loss per share, capital expenditures, dividends, capital structure or other financial items, our future financial performance, including any such statement contained in a discussion and analysis of financial condition by management or in the results of operations included pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), and the assumptions underlying or relating to any such statement.

 

The forward-looking statements are not meant to predict or guarantee actual results, performance, events or circumstances and may not be realized because they are based upon our current projections, plans, objectives, beliefs, expectations, estimates and assumptions and are subject to a number of risks and uncertainties and other influences, many of which we have no control over. Actual results and the timing of certain events and circumstances may differ materially from those described by the forward-looking statements as a result of these risks and uncertainties. Factors that may influence or contribute to the accuracy of the forward-looking statements or cause actual results to differ materially from expected or desired results may include, without limitation:

 

Market acceptance of our products and services;

 

Competition from existing products or new products that may emerge;

 

The implementation of our business model and strategic plans for our business and our products;

 

Estimates of our future revenue, expenses, capital requirements and our need for financing;

 

Our financial performance;

 

Current and future government regulations;

 

Developments relating to our competitors; and

 

Other risks and uncertainties, including those listed under the section titled “ Risk Factors .”

 

Readers are cautioned not to place undue reliance on forward-looking statements because of the risks and uncertainties related to them and to the risk factors. We disclaim any obligation to update the forward-looking statements contained in this prospectus to reflect any new information or future events or circumstances or otherwise, except as required by law. Readers should read this prospectus in conjunction with the discussion under the caption “ Risk Factors ,” our financial statements and the related notes thereto in this prospectus, and other documents which we may file from time to time with the SEC.

 

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MARKET, INDUSTRY AND OTHER DATA

 

This prospectus contains estimates and information concerning our industry, our business, and the market for our solutions, including market position, market size and growth rates of the markets in which we participate, that are based on industry publications, surveys and reports. Although we have not independently verified the accuracy or completeness of the data contained in these industry publications, surveys, and reports, we believe the publications, surveys and reports are generally reliable, although such information is inherently subject to uncertainties and imprecise. The industry in which we operate is subject to a high degree of uncertainty and risk due to variety of factors, including those described in the “Risk Factors.” These and other factors could cause results to differ materially from those expressed in these publications and reports.

 

USE OF PROCEEDS

 

We estimate that our gross proceeds from this offering will be approximately $2.5 million based on the sale of 665,662 of ordinary shares in this offering at an assumed public offering price of $3.75. We estimate that we will receive net proceeds of approximately $1.4 million, or approximately $2.8 million if the underwriter exercises its over-allotment option in full, after deducting the estimated underwriting discount and estimated offering expenses payable by us.

 

A $0.50 increase or decrease in the assumed public offering price of $3.75 per share would increase or decrease the expected net cash proceeds of the offering to us by approximately $332,831. An increase or decrease of 500,000 in the assumed number of ordinary shares sold in this offering would increase or decrease the expected net cash proceeds to us by approximately $1.7 million, assuming the public offering price of $3.75 per share.

 

We intend to use part of the net proceeds from this offering for the acquisition of a controlling stake in KADI. Pursuant to our existing letter of intent with KADI, the purchase price for such controlling stake includes a payment of $15.0 million, comprised of $11.7 million in cash to be paid to KADI in 2018 and 2019 for working capital and purchases of equipment, and $3.3 million in Borqs’ ordinary shares to be issued to the selling shareholders of KADI based on achievement of net income targets for the years 2018, 2019 and 2020. For 2018, we had anticipated to provide $7.7 million to KADI to service the Espirit supply contract, of which approximately $4 million is anticipated to be used for capital expenditures, and $3.7 million is anticipated to be used for working capital needs. We are in discussions with KADI to negotiate a modified payment schedule in light of the fact that the proceeds raised in this offering are insufficient to fund the acquisition of KADI. We intend to use part of the net proceeds from this offering to fund research and development activities and for general corporate purposes, including funding for our working capital needs.

 

All of the ordinary shares offered by the Participating Stockholders pursuant to this prospectus will be sold by the Participating Stockholders for their respective accounts. We will not receive any of the proceeds from these sales.

 

As of the date of this prospectus and except as explicitly set forth herein, we cannot specify with certainty all of the particular uses of the net proceeds from this offering. Pending use of the net proceeds from this offering as described above, we may invest the net proceeds in short-term interest-bearing investment grade instruments.

 

MARKET PRICE OF OUR ORDINARY SHARES

 

The following table sets forth, for the periods indicated, the high and low intra-day sales prices of our ordinary shares reported on The Nasdaq Stock Market.

 

    Low     High  
Fiscal Year ended December 31, 2016            
First Fiscal Quarter   $ 9.86     $ 10.20  
Second Fiscal Quarter   $ 10.00     $ 10.43  
Third Fiscal Quarter   $ 10.06     $ 11.20  
Fourth Fiscal Quarter   $ 10.20     $ 13.00  
Fiscal Year ended December 31, 2017                
First Fiscal Quarter   $ 10.25     $ 10.40  
Second Fiscal Quarter   $ 10.25     $ 10.50  
Third Fiscal Quarter   $ 5.10     $ 10.50  
Fourth Fiscal Quarter   $ 4.00     $ 6.02  
Fiscal Year ending December 31, 2018                
First Fiscal Quarter   $ 5.41     $ 10.00  
Second Fiscal Quarter   $ 5.20     $ 9.80  

Third Fiscal Quarter (through September 11, 2018)

  $ 4.10     $ 5.60  

 

The last reported sale price for our ordinary shares on Nasdaq on September 11, 2018 was $4.50 per share. As of September 14, 2018, there were approximately 270 holders of record of our ordinary shares, not including any persons who hold their ordinary shares in “street name”.

 

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Dividend Policy

 

We have never declared or paid any cash dividends on our shares, and we do not currently intend to pay any cash dividends after the offering or for the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our ordinary shares will be at the discretion of our Board and will depend upon, among other factors, our financial condition, operating results, current and anticipated cash needs, plans for expansion and other factors that our Board may deem relevant.

 

CAPITALIZATION

 

The following table sets forth our cash, cash equivalents, and marketable securities and capitalization as of June 30, 2018 on an:

 

  actual basis; and

 

  as adjusted basis to give effect to the sale of 2,666,667 ordinary shares by us and the Participating Stockholders in this offering based upon the receipt by us of the estimated net proceeds from this offering at an assumed public offering price of $3.75 per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, assuming the underwriters do not exercise the over-allotment option, and the application of the net proceeds from this offering as described in “Use of Proceeds.”

 

The as adjusted information below is illustrative only, and our cash, cash equivalents, and marketable securities, additional paid-in capital, total shareholders’ equity, and total capitalization following the completion of this offering will be adjusted based on the actual public offering price, the actual number of ordinary shares that we and the Participating Stockholders sell in this offering and other terms of the offering determined at the pricing of this offering. You should read this information together with our consolidated financial statements and related notes appearing elsewhere in this prospectus and the information set forth in “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

    June 30, 2018  
    Actual     As Adjusted (1)  
    (US$ in thousands)  
Cash and cash equivalents     1,305       4,154  
Shareholders’ equity:                
Ordinary shares, no par value per share; unlimited authorized, 31,307,522 shares issued and 31,303,350 outstanding, actual and 32,373,184 and 32,369,012 shares as adjusted         $  
Additional paid-in capital     124,058       127,661  
Statutory reserve     2,156       2,156  
Accumulated deficit     (71,482 )     (72,236 )
Accumulated other comprehensive loss     (1,494 )     (1,494 )
Noncontrolling interest     (449 )     (449 )
Total shareholders’ equity     52,789       55,638  
Total capitalization     133,627       136,476  

 

The number of ordinary shares to be outstanding after this offering is based on 31,307,522 issued and 31,303,350 ordinary shares outstanding as of June 30, 2018, and excludes:

 

  2,686,629 ordinary shares issuable upon the exercise of stock options outstanding as of June 30, 2018, with a weighted-average exercise price of $5.12 per share;

 

 

(1) Each $0.50 increase (decrease) in the assumed public offering price of $3.75 per share, would increase (decrease) our cash, cash equivalents and marketable securities, total shareholders’ equity and total capitalization by approximately $0.3 million, assuming that the number of ordinary shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions payable by us. Each increase (decrease) of 500,000 shares in the number of shares offered by us would increase (decrease) the amount of our cash, cash equivalents and marketable securities, total shareholders’ equity and total capitalization by approximately $1.7 million, assuming a public offering price of $3.75 per share, after deducting estimated underwriting discounts and commissions payable by us. The as adjusted information discussed above is illustrative only and will adjust based on the actual initial price to the public and other terms of this offering determined at pricing.

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  3,558,104 ordinary shares issuable upon the exercise of warrants (See “Description of Securities — Warrants”);

 

  The cancellation of 966,136 shares when the Zhengqi repurchase transaction is completed;

 

  3,757,884 ordinary shares reserved for future issuance under our 2017 Equity Incentive Plan, or Incentive Plan, as of June 30, 2018; and

 

  640,000 ordinary shares issuable upon the exercise of EarlyBirdCapital’s purchase option (See “Description of Securities — Purchase Option”).

 

 

Ordinary shares issuable upon the exercise of a warrant issued to Maxim Group LLC in connection with this offering equal to 4% of the total number of ordinary shares sold in the offering (See “Underwriters — Representative’s Warrants”) .

 

Our Incentive Plan also provide for automatic annual increases in the number of shares reserved thereunder. See “Executive Compensation — Employee Benefit Plans” for additional information.

 

Except as otherwise indicated, all information in this prospectus assumes:

 

 

no exercise or cancellation of outstanding options or vesting of RSUs subsequent to June 30, 2018; and

 

  no exercise by the underwriters of their option to purchase up to an additional ordinary shares in this offering (equivalent to 15% of the total ordinary shares sold in this offering).

 

DILUTION

 

If you purchase ordinary shares in this offering, you will experience dilution to the extent of the difference between the price per share you pay in this offering and the net tangible book value per share of our ordinary shares immediately after this offering. The net tangible book value of our ordinary shares on June 30, 2018 was $31.5 million, or $1.01 per share. Net tangible book value per share is equal to the amount of consolidated total assets, less intangible assets, goodwill and consolidated total liabilities, divided by number of ordinary shares outstanding.

 

After giving effect to the assumed sale by us and the Participating Stockholders of an aggregate of 2,666,667 ordinary shares in this offering (assuming 2,001,005 shares are sold by the Participating Stockholders) at an assumed public offering price of $3.75 per ordinary share, and after deducting the underwriting discount and estimated offering expenses payable by us and the Participating Stockholders, our as adjusted net tangible book value as of June 30, 2018 would have been $33.0 million, or $1.03 per ordinary share.

 

This represents an immediate increase in net tangible book value of $0.01 per share to existing stockholders and an immediate dilution of $2.73 per share to new investors purchasing ordinary shares in this offering. The following table illustrates this per share dilution:

 

Assumed public offering price per share   $ 3.75  
Net tangible book value per share as of June 30, 2018   $ 1.01  
As adjusted net tangible book value per share as of June 30, 2018 after giving effect to this offering   $ 1.03  
Dilution per share to investors participating in this offering   $ 2.72  

 

Each $0.50 increase (decrease) in the assumed public offering price of $3.75 per ordinary share would increase (decrease) our as adjusted net tangible book value after this offering by $0.3 million, or $0.01 per share, and the dilution per share to new investors by $0.01 per share, assuming that the number of ordinary shares offered by us and the Participating Stockholders, as set forth above, remains the same and after deducting the underwriting discount and estimated offering expenses payable by us and the Participating Stockholders. We may also increase or decrease the number of ordinary shares we are offering from the number of ordinary shares set forth above. An increase (decrease) of 500,000 ordinary shares in the number of ordinary shares offered by us and the Participating Stockholders from the number of ordinary shares set forth above would increase (decrease) our as adjusted net tangible book value after this offering by $1.7 million, or $0.04 per share, and the dilution per share to new investors by $0.04 per share, assuming that the public offering price remains the same and after deducting the underwriting discount and estimated offering expenses payable by us and the Participating Stockholders. The information discussed above is illustrative only and will adjust based on the actual public offering price, the actual number of ordinary shares that we offer in this offering, the actual number of shares sold by the Participating Stockholders in this offering, and other terms of this offering determined at pricing.

 

The number of ordinary shares reflected in the discussion and table above is based on 31,307,522 ordinary shares issued and 31,303,350 outstanding as of June 30, 2018 and excludes certain shares (See “Capitalization”).

 

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SELECTED CONSOLIDATED FINANCIAL DATA

 

The selected consolidated statements of operations data for the years ended December 31, 2015, 2016 and 2017, and the selected consolidated balance sheet data as of December 31, 2016 and 2017, have been derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated statements of operations data for the three and six months ended June 30, 2017 and 2018, and the selected consolidated balance sheet data as of June 30, 2017 and 2018, have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read the consolidated financial and other data set forth below in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

 

Statement of Operations:

 

   

Year Ended

December 31,

   

Three Months Ended

June 30,

   

Six Months Ended

June 30,

 
    2015     2016     2017     2017     2018     2017     2018  
    (US$ in thousands)  
Net revenues:                                          
Software     22,468       14,912       11,212       3,499       1,624       6,583       3,880  
Hardware     32,647       70,536       111,021       11,122       47,018       32,801       95,136  
MVNO     16,007       29,309       30,118       6,987       7,220       12,919       14,729  
Others     3,950       5,829       1,956       521       477       1,036       850  
                                                         
Total net revenues     75,072       120,586       154,307       22,129       56,339       53,339       114,595  
                                                         
Cost of revenues                                                        
Software     (12,699 )     (7,491 )     (7,247 )     (1,612 )     (668 )     (3,942 )     (1,437 )
Hardware     (26,101 )     (57,452 )     (96,247 )     (10,008 )     (42,535 )     (29,246 )     (85,934 )
MVNO     (16,225 )     (28,784 )     (22,836 )     (4,533 )     (5,247 )     (9,820 )     (10,308 )
Others     (2,980 )     (1,709 )     (811 )     (288 )     (180 )     (488 )     (351 )
Total cost of revenues     (58,005 )     (95,436 )     (127,141 )     (16,441 )     (48,630 )     (43,496 )     (98,030 )
                                                         
Total gross profit     17,067       25,150       27,166       5,688       7,709       9.843       16,565  
                                                         
Operating expenses:                                                        
Sales and marketing expenses     (7,359 )     (5,874 )     (7,952 )     (1,646 )     (1,665 )     (2,985 )     (3,347 )
General and administrative expenses     (4,883 )     (10,042 )     (20,753 )     (2,599 )     (2,260 )     (4,157 )     (5,356 )
Research and development expenses     (7,206 )     (5,742 )     (6,443 )     (1,184 )     (1,452 )     (1,476 )     (2,341 )
  Changes in the fair value of warrant liabilities     -       (12 )     (200 )     -       -       (161 )     -  
                                                         
Total operating expenses     (19,448 )     (21,670 )     (35,348 )     (5,429 )     (5,377 )     (8,779 )     (11,044 )
                                                         
Other operating income     3,094       1,760       272       1       -       267       -  
                                                         
Operating income (loss)     713       5,240       (7,910 )     260       2,332       1,331       5,521  
                                                         
Interest income     61       65       14       8       2       10       8  
Interest expense     (156 )     (797 )     (1,877 )     (524 )     (1,117 )     (1,143 )     (1,362 )

   

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    Year Ended
December 31,
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2015     2016     2017     2017     2018     2017     2018  
    (US$ in thousands)  
Other income     208       114       633       51       14       354       53  
Other expense     (35 )     (59 )     (121 )     (158 )     (2 )     (276 )     (47 )
Foreign exchange gain (loss)     855       692       (779 )     (156 )     633       (333 )     259  
                                                         
Profit (loss) before income taxes     1,646       5,255       (10,040 )     (519 )     1,862       (57 )     4,432  
Income tax expense     (851 )     (2,659 )     (2,319 )     (446 )     146       (890 )     (1,037 )
Net income (loss)     795       2,596       (12,359 )     (965 )     2,008       (947 )     3,395  

 

    Year Ended
December 31,
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2015     2016     2017     2017     2018     2017     2018  
    (US$ in thousands)  
Less: net (loss) income attributable to noncontrolling interests     (1,316 )     (632 )     210       197       178       119       366  
Net income (loss) attributable to Borqs Technologies, Inc.     2,111       3,228       (12,569 )     (1,162 )     1,830       (1,066 )     3,029  
Add: accretion to redemption value of convertible redeemable preferred shares     (2,417 )     (976 )     (6,956 )     (150 )     -       (448 )     -  
Allocation to holders of Preferred Shares           (2,252 )                           -       -  
Net loss attributable to ordinary shareholders     (306 )           (19,525 )     (1,312 )     1,830       (1,514 )     3,029  
                                                         
(Loss) earnings per share:                                                        
Basic     (0.07 )     0.00       (1.52 )     (0.31 )     0.07       (0.36 )     0.11  
Diluted     (0.07 )     0.00       (1.52 )     (0.31 )     0.07       (0.36 )     0.11  
                                                         
Shares used in (loss) earnings per share computation:                                                        
Basic     4,224,090       4,224,725       12,842,671       4,259,898       26,830,514       4,243,964       26,613,800  
Diluted     4,224,090       4,224,725       12,842,671       4,259,898       27,675,005       4,243,964       27,585,851  
Net income (loss)     795       2,596       (12,359 )     (965 )     2,008       (947 )     3,395  
Other comprehensive (loss) income, net of tax of nil:                                                        
Foreign currency translation adjustments, net of tax of nil     (1,491 )     (1,575 )     2,207       546       (2,397 )     851       (1,005 )
Other comprehensive (loss) income, net of tax of nil     (1,491 )     (1,575 )     2,207       546       (2,397 )     851       (1,005 )
Comprehensive (loss) income     (696 )     1,021       (10,152 )     (419 )     (389 )     (96 )     2,390  
Less: comprehensive (loss) income attributable to noncontrolling interest     (1,519 )     (730 )     298       197       100       119       348  
Comprehensive income (loss) attributable to the Borqs Technologies, Inc.     823       1,751       (10,450 )     (616 )     (489 )     (215 )     2,042  

   

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Balance Sheet:

 

    December 31,     June 30,  
    2016     2017     2018  
    (US$ in thousands)  
Balance Sheet Data                  
Current assets     58,079       119,531       88,797  
Total assets     78,030       148,732       133,627  
Current liabilities     50,487       92,748       62,235  
Total liabilities     64,519       101,727       80,838  
Shareholders’ (deficit) equity     (55,351 )     47,005       52,789  
Total liabilities and shareholders’ equity     78,030       148,732       133,627  

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

References in this prospectus to “we,” “us” or the “Company” refer to Borqs Technologies, Inc. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this prospectus. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

 

Special Note Regarding Forward-Looking Statements

 

This prospectus includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this prospectus including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of this prospectus. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov . Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

 

Overview

 

Borqs Technologies, Inc. (“we”, “the Company” or “Borqs”) focuses on software, development services and products providing customizable, differentiated and scalable Android-based smart connected devices and cloud service solutions. We are a leading provider of commercial grade Android platform software for mobile chipset manufacturers, mobile device OEMs and mobile operators, as well as complete product solutions of mobile connected devices for enterprise and consumer applications.

 

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Pursuant to the Company’s acquisition of Borqs International Holding Corp (“Borqs International”) by way of merger, which completed on August 18, 2017, Borqs International became a wholly-owned subsidiary of the Company, with the Company adopting the business of Borqs International and its consolidated subsidiaries going forward and reporting the historical consolidated financial statements of Borqs International on future SEC filings as those of the Company, which was renamed Borqs Technologies, Inc.

 

Our Connected Solutions BU works closely with chipset partners to develop new connected devices. Borqs developed the reference Android software platform and hardware platform for Intel and Qualcomm phones and tablets. In recent years, we have been awarded significant business contracts from Intel and Qualcomm, leading global chipset manufacturers. We provide Connected Solutions customers with customized, integrated, commercial grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare software platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The BorqsWare Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things (“IoT”) devices. The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end services for their devices. Our activities with Intel have reduced over the last two years due to Intel’s strategy to exit the mobile industry, and there are no material agreements with Intel on which we are substantially dependent. For the year 2017, Intel was no longer a customer of the Company. However, our activities with Qualcomm have increased over the last two years, including developmental work on chipsets for mobile devices and wearable products.

 

Our MVNO BU provides a full range 2G/3G/4G voice and data services for general consumer usage and IoT devices, as well as traditional telecom services such as voice conferencing, and acts as a sales and promotion channel for the products developed by the Connected Solutions BU.

 

The Connected Solutions BU represented 73.4%, 70.9% and 79.2% of our net revenues in the years ended December 31, 2015, 2016 and 2017, respectively. In the years ended December 31, 2015, 2016 and 2017, Borqs generated 85%, 93% and 86%, respectively, of its net revenues from customers headquartered outside of China and 15%, 7% and 14%, respectively, of its net revenues from customers headquartered within China. As of June 30, 2018, Borqs had collaborated with six mobile chipset manufacturers and 29 mobile device OEMs to commercially launch Android based connected devices in 11 countries, and sales of connected devices with the BorqsWare software platform solutions are embedded in more than 14 million units worldwide.

 

We have dedicated significant resources to research and development, and has research and development centers in Beijing, China and Bangalore, India. As of June 30, 2018, 350 of our 509 employees were technical professionals dedicated to platform research and development and product specific customization.

 

On January 8, 2018, we entered into a letter of intent to acquire a 60% equity interest in Shanghai KADI Technologies Co., Ltd (“KADI”), a Chinese company that develops software and hardware solutions for electric vehicle control modules, such as charging, battery management and vehicle controls. We are currently negotiating a definitive agreement to acquire such equity interest for an aggregate of $11.7 million in cash to be paid to KADI and ordinary shares with an agreed-upon value of $3.3 million to be issued to selling shareholders of KADI based on achievement of net income targets for the years 2018, 2019 and 2020. For 2018, we had anticipated to provide $7.7 million to KADI to service the Espirit supply contract, of which approximately $4 million is anticipated to be used for capital expenditures, and $3.7 million is anticipated to be used for working capital needs. We are in discussions with KADI to negotiate a modified payment schedule in light of the fact that the proceeds raised in this offering are insufficient to fund the acquisition of KADI.

 

KADI is not a customer or a supplier of Borqs. In accordance with the letter of intent, we have made four scheduled cash advances to KADI totaling $600,000 which will be deducted from our initial cash payments to KADI under the definitive agreement being negotiated. If this transaction is not consummated within nine months after signing of the letter of intent, the advance payments will be converted into shares representing five percent of the outstanding capital stock of KADI. There are no termination fees or penalties under the letter of intent.

 

We have achieved significant growth since inception in 2007. Net revenues increased from $75.1 million in 2015 to $120.6 million in 2016 and $154.3 million to 2017. We recorded net income of $0.8 million and $2.6 million in the years 2015 and 2016, respectively. For the year ended December 31, 2017, we had a net loss of $12.4 million, which included non-cash merger related costs of $14.5 million. We recorded a net income of $2.0 million in the three months ended June 30, 2018 and a net income of $3.4 million in the six months ended June 30, 2018, as compared with a net loss of $965, 000 in the three months ended June 30, 2017 and a net loss of $947,000 in the six months ended June 30, 2017.

 

Key Factors Affecting Results of Operations

 

The Connected Solutions BU represented 73.4%, 70.9% and 79.2% of our net revenues for the years ended December 31, 2015, 2016 and 2017, respectively. For the years ended December 31, 2015, 2016 and 2017, we generated 85%, 93% and 86% of our net revenues from customers headquartered outside of China and 15%, 7% and 14% of our net revenues from customers headquartered within China. As of June 30, 2018, we had collaborated with six mobile chipset manufacturers and 29 mobile device OEMs to commercially launch Android based connected devices in 11 countries, and sales of connected devices with the BorqsWare software platform solutions are embedded in more than 14 million units worldwide.

 

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Revenue mix impacts our overall gross profit and gross margin. In particular:

 

Connected Solutions BU . Revenue from product sales is the largest component of Connected Solutions BU revenue. Product sales gross margin is primarily affected by competition cost of components and intellectual property royalties. Gross margin for engineering design fees and software royalties tends to be higher because the associated cost of revenues is less and pricing is less subject to competitive pressure. In addition, because product sales and software royalties are generally calculated on a per-unit basis, our revenue will vary depending upon the volume of product sales. Engineering design fees are generally not related to volume of product sales.

 

Connected Solutions BU net revenues and gross profits are affected by general factors in the highly competitive mobile industry, such as shifts in consumer preferences and customer demands, technological innovations, competing mobile operating systems, and pricing trends. Results are also affected by developments in the Android platform and software market specifically, such as Google’s continued support of the Android platform, continued availability of a free and open source software license for that platform, continued deployment of the Android platform, and continued outsourcing of software development to third party providers. Unfavorable changes in any of these factors could affect market demand for our solutions and materially adversely affect our revenues and results of operations.

 

Revenues and gross profit in the Connected Solutions BU are also affected by Company-specific factors, including:

 

  We rely on a limited number of customers for a significant portion of our net revenues, particularly our relationship with a customer that is a prominent mobile chipset manufacturer. We also rely on this mobile chipset manufacturer from a strategic viewpoint, since products that we develop for this customer may also be scaled to other mobile device OEM customers. We devote a significant portion of our research and development resources to this effort. Our results of operations would be significantly harmed if our collaboration with this customer was to decline or its Android-related product development efforts were not successful.
     
  Our ability to grow our net revenues depends on our ability to expand our customer base, both in terms of number of customers and geographic concentration, and increase the number of projects we undertake for existing and new customers. Our ability to do so depends on the success of our products and services and those of our customers, and on our marketing and sales performance.
     
  Our ability to maintain our position as one of the largest independent Android platform software company will require us to continue to strengthen our technology expertise and capabilities by focusing our research and development to maintain technology leadership and offer advanced Android platform software and service solutions on our customers’ demanding timelines. In addition, our ability to grow our revenues will largely depend on how quickly we and our customers can roll out new products and services.
     
  Competing successfully in the Android platform and software market requires us to maintain a competitive pricing structure, including labor costs and operating expenses. Competition for software engineers is intense, particularly in mainland China and in India.

  

MVNO BU . Gross margin of the MVNO BU is affected by the wholesale rates obtained from the incumbent operator, as well as the competition in the market. Over time, we expect wholesale rates generally decline due to competition and newer technologies (e.g. 4G, 4.5G, and 4.75G).

 

MVNO BU revenues and gross profit are affected by general factors in the mobile telecom industry in China, such as the voice/data pricing trends offered by other MVNOs and incumbent operators. We enter into profit sharing arrangements with franchisees, under which franchisees receive a percentage of profits on sales of bundled services as they are used by the consumers. Profit sharing amounts are recognized as selling expenses, and limited discounts provided by franchisees to consumers are recognized as reductions of revenue in accordance with ASC 605-50. Competitive factors in voice/data pricing could affect the demand for our MVNO services and affect our mobile subscriber growth, which could materially and adversely affect our revenues and result of operations. MVNO BU revenues and gross profit are also directly affected by Company-specific factors, including:

 

  The bulk wholesale rates for voice and data service. We rely on China Unicom, the incumbent operator, to provide us with attractive and competitive bulk wholesale rates of voice-per-minute and MB-of-data to compete with our competitors.
     
  The Chinese government policy on MVNO services. We rely on China’s government to continue to grant us a license to operate the MVNO services.

 

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The aggregate amount of cash and cash equivalent and restricted cash are not materially affected by currency fluctuations because the majority of our revenues are denominated in U.S. Dollars based on contracts made in Hong Kong and the Cayman Islands. Financings from sales of equity and working capital loans are denominated in U.S. Dollars and executed in Hong Kong and the Cayman Islands, and repayments have been made in U.S. Dollars outside of China, thus not requiring approval from the PRC State Administration of Foreign Exchange. The MVNO business, and small amounts of Connected Solutions BU activities within China, generate revenue in Renminbi. Personnel and personnel-related expenses are primarily paid in Renminbi, and costs of components used in Connected Solutions BU hardware revenues are primarily paid in U.S. Dollars. As of June 30, 2018, we held total $1.3 million cash on a consolidated basis.

 

Results of Operations

 

The following table sets forth a summary of the Company’s consolidated results of operations for the periods indicated. This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere or incorporated by reference in this prospectus. The operating results in any period are not necessarily indicative of results that may be expected for any future period.

 

Comparisons of Years Ended December 31, 2015, 2016 and 2017

 

    For the Year Ended December 31,  
Consolidated Statement of Operations Data:   2015     2016     2017  
    (US$ in thousands)  
Net revenues     75,072       120,586       154,307  
Cost of revenues     (58,005 )     (95,436 )     (127,141 )
Gross profit     17,067       25,150       27,166  
                         
Operating expenses     (19,448 )     (21,670 )     (35,348 )
Other operating income     3,094       1,760       272  
Operating income (loss)     713       5,240       (7,910 )
                         
Other income (expense)     933       15       (2,130 )
Profit (loss) before income taxes     1,646       5,255       (10,040 )
                         
Income tax expense     (851 )     (2,659 )     (2,319 )
Net income (loss)     795       2,596       (12,359 )
                         
Less: net (loss) income attributable to noncontrolling interests     (1,316 )     (632 )     210  
Net income (loss) attributable to Borqs Technologies, Inc.     2,111       3,228       (12,569 )

 

Comparisons of Three and Six Months Ended June 30, 2017 and 2018

 

    For Three Months Ended
June 30,
    For Six Months Ended
June 30,
 
Consolidated Statement of Operations Data:   2017     2018     2017     2018  
    (US$ in thousands)  
Net revenues     22,129       56,339       53,339       114,595  
Cost of revenues     (16,441 )     (48,630 )     (43,496 )     (98,030 )
Gross profit     5,688       7,709       9,843       16,565  
                                 
Operating expenses     (5,429 )     (5,377 )     (8,779 )     (11,044 )
Other operating income     1       -       267       -  
Operating income     260       2,332       1,331       5,521  
                                 
Other expenses     (779 )     (470 )     (1,388 )     (1,089 )
(Loss) profit before income taxes     (519 )     1,862       (57 )     4,432  
                                 
Income tax (expense) benefit     (446 )     146       (890 )     (1,037 )
Net (loss) income     (965 )     2,008       (947 )     3,395  
                                 
Less: net income attribute to noncontrolling interests     197       178       119       366  
Net (loss) income attribute to Borqs Technologies, Inc.     (1,162 )     1,830       (1,066 )     3,029  
                                 
Accretion to redemption value of Convertible Redeemable Preferred Shares     (150 )     -       (448 )     -  
Net (loss) income attributable to ordinary shareholders     (1,312 )     1,830       (1,514 )     3,029  

 

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We experienced a net profit of $0.8 million in 2015 and a net profit of $2.6 million in 2016. For 2017, we had a net loss of $12.4 million before deduction for noncontrolling interests, which included non-cash merger related costs of $14.5 million. 

 

We had a net income of $2 million and a net loss of $965,000 for the three months ended June 30, 2017 and 2018, respectively. We had a net income of $3.4 million and a net loss of $947,000 for the six months ended June 30, 2018 and 2017, respectively.

 

We had significant increases in the delivery of connected products for worldwide customers in the first and second quarters of 2018.

 

Net Revenues

 

Our net revenues represent our gross revenues, less business taxes and other deductions. Connected Solutions BU net revenues consist of engineering design fees, software royalties and product sales. MVNO BU net revenues consist primarily of monthly recurring revenue.

 

For 2015, Connected Solutions BU net revenues was $55.1 million and MVNO BU net revenues was $19.9 million.

 

For 2016, Connected Solutions BU net revenues was $85.4 million and MVNO BU net revenues was $35.1 million, compared to $55.1 million and $20.0 million in 2015, respectively. Connected Solutions BU net revenues increased 55.0% from 2015 to 2016. MVNO BU net revenue increased 76.1% from 2015 to 2016.

 

For 2017, Connected Solutions BU net revenues was $122.2 million, an increase of 43.0% over 2016, and MVNO BU net revenues was $32.1 million, a decrease of 8.7% from 2016.

 

The following table presents the percentage of total net revenues from Connected Solutions BU and the MVNO BU, respectively, for the years indicated.

 

    For the year ended December 31,  
    2015     2016     2017  
    $     %     $     %     $     %  
    ($ in thousands)  
Connected Solutions BU     55,115       73.4 %     85,448       70.9 %     122,233       79.2 %
MVNO BU     19,957       26.6 %     35,138       29.1 %     32,074       20.8 %
Net revenues     75,072       100.0 %     120,586       100.0 %     154,307       100.0 %

 

For the three months ended June 30, 2018, Connected Solutions BU net revenues were $48.6 million and MVNO BU net revenues were $7.7 million, compared to $14.6 million and $7.5 million, respectively, for the same period in 2017. Connected Solutions BU net revenues increased 232.7% for the three months ended June 30, 2018 from the same period in 2017. MVNO BU net revenues increased 2.5% for the three months ended June 30, 2018 from the same period in 2017. Total net revenues increased 154.6% for the second quarter of 2018 from the corresponding period in 2017.

 

For the six months ended June 30, 2018, Connected Solution BU net revenues were $99.0 million and MVNO BU net revenues were $15.6 million, compared to $39.4 million and $14.0 million, respectively, for the same period in 2017. This represented increase in Connected Solutions BU net revenues of 151% and MVNO BU of 12% in the first six months of 2018 over the same period in 2017.

 

    For Three Months Ended June 30,  
    2017     2018  
    US$     US$     %  
    (US$ in thousands)  
Connected Solutions BU     14,621       48,642       232.7 %
MVNO BU     7,508       7,697       2.5 %
Net revenues     22,129       56,339       154.6 %

 

Within the MVNO BU, the net revenues for the MVNO operation itself, including traditional telephony activities, increased to $7.7 million in the second quarter of 2018 from $7.5 million for the same period in 2017. The Company designed a new security check and activation system that simplified the sales procedure. Using this new activation system within our MVNO services, we were able to overcome the effect from tightened security measures for SIM card activation.

 

Net Revenues — Connected Solutions BU — Years ended December 31, 2015, 2016 and 2017

 

Connected Solutions BU net revenues consist of engineering design fees, software royalties and product sales. MVNO BU net revenues consist primarily of monthly recurring revenue.

 

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BorqsWare software platform solutions are based on the Company’s core proprietary software and include base chipset software supporting various radio network chipsets and application processors, commercial grade software to differentiate the Android platform for our customers and mobile operator required services. BorqsWare software platform solutions are embedded directly into connected devices. We generate revenues from our BorqsWare software platform solutions by charging our customers a product fee for project-based design contracts and/or a service fee for research and development services on a time and material basis, depending upon the nature of the contracts we entered into with our customers. In addition, we charge usage-based royalties in a majority of our project-based software contracts, which royalties are determined based on the customer’s volume of sales of products in which a mobile chipset or connected device with BorqsWare software platform solutions embedded.

 

As discussed more fully under “— Critical Accounting Policies and Estimates — Revenue Recognition — Project-Based Software Contracts,” the Company’s project-based software contracts include post-contract support, or PCS, where the customer has the right to receive unspecified upgrades/enhancements on a when-and-if available basis. Since we are unable to establish vendor-specific objective evidence of fair value of post contract services, or PCS, revenues from project-based software contracts are recognized on a straight-line basis over the longest expected delivery period of undelivered elements of the arrangement, which is typically the PCS period. Project-based software contracts that include PCS, which have a typical PCS period of 12 months, range from six to 36 months. As a result of this revenue recognition method, some portion of the net revenues we report in each period is recognition of deferred revenues from contracts entered into in prior periods and for which the research and development and engineering work has already been completed. In addition, a majority of the project-based software contracts provide for usage-based royalties. We recognize royalties upon the receipt of quarterly usage reports provided by customers.

 

The following table sets forth our net revenues, as well as the components of such revenues, for the periods indicated, both in absolute amount and as a percentage of total net revenues:

 

    For the year ended December 31,  
    2015     2016     2017  
    $     %     $     %     $     %  
    ($ in thousands)  
Software     22,468       40.8 %     14,912       17.5 %     11,212       9.2 %
Hardware     32,647       59.2 %     70,536       82.5 %     111,021       90.8 %
Connected Solutions BU net revenues     55,115       100.0 %     85,448       100.0 %     122,233       100 %

 

Software

 

Software net revenues were $22.5 million, $14.9 million and $11.2 million in 2015, 2016 and 2017, respectively, representing 40.8%, 17.5% and 9.2% of Connected Solutions BU net revenues. The $7.6 million decrease in 2016 over 2015 mainly reflected decreases in software engineering activities completed for customers in 2015 as well as the recognition of PCS delivered during 2016 for projects completed in 2015. We account for software engineering contracts applying the completed contract method, recognizing the entire software project fixed fees ratably over the PCS service periods. PCS service periods are generally 12 months, with ranges from six months to three years, and commences upon completion of customer acceptance of the completed software projects. The $3.7 million decline in software net revenues in 2017 from 2016 was mainly attributable to an overall decrease in software engineering project sales.

 

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Hardware

 

Hardware net revenues were $32.6 million, $70.5 million and $111.0 million in 2015, 2016 and 2017, respectively, representing 59.2%, 82.5% and 90.8% of Connected Solutions BU net revenues. The $37.9 million increase in 2016 and the $40.5 million increase in 2017 reflected the increased volume of sales of products in those periods, particularly in tablets, ruggedized handsets, and high speed data smartphones and home entertainment remote controls.

 

All hardware sales were contracted and made to order, and our sales were final without taking returns. Small percentages of replacement units and parts were provided to customers and those costs were included in cost of revenues. We provide engineering design work as specified by our customers, and production begins after the customer accepts the design. We are responsible for procurement of all components, materials and tooling, and for selection of third-party factories for product assembly. Revenue is recognized when products are shipped to the customer. We are not engaged in the marketing and distribution of the hardware products.

 

Customer Concentration

 

We were initially focused on research and development efforts for providing BorqsWare software platform solutions to mobile device OEMs. We have since leveraged our deep technology expertise to provide BorqsWare software platform solutions to mobile chipset manufacturers and mobile operators. The following table sets forth net revenues by type of customer, both in absolute amount and as a percentage of net revenues for the periods presented:

 

    For the year ended December 31,  
    2015     2016     2017  
    $     %     $     %     $     %  
    ($ in thousands)  
Mobile device OEMs     38,622       70.1 %     70,536       82.5 %     111,021       90.8 %
Mobile Chipset Vendors     14,491       26.3 %     14,912       17.5 %     11,212       9.2 %
Mobile Operators     2,002       3.6 %     -       0.0 %     -       0.0 %
Connected Solutions BU Net Revenues     55,115       100.0 %     85,448       100.0 %     122,233       100 %

 

We expect our net revenues from mobile device OEMs to continue to grow as we develop more connected devices, especially IoT products.

 

Supplier Concentration

 

For our Connected Solutions BU, we rely on several suppliers for components and materials, and for our MVNO BU, we rely solely on China Unicom for supply of voice calling minutes, texting and data related services. The following table sets forth our purchases from the key suppliers for good and services, both in absolute amount and as a percentage of our direct costs for the periods presented:

 

    For the year ended December 31,  
    2015     2016     2017  
    $     %     $     %     $     %  
    ($ in thousands)  
                                                 
China Unicom     13,745       23.7 %     25,937       27.2 %     17,088       13.4 %
Quanta Computer Inc.     18,489       31.9 %     23,480       24.6 %     12,848       10.1 %
Crave International Holdings     -       0.0 %     -       0.0 %     57,005       44.9 %
China Great Wall Computer (Shenzhen) Co. Ltd     -       0.0 %     14,202       14.9 %     -       0.0 %
SBCK Corp     -       0.0 %     11,325       11.9 %     -       0.0 %
Shenzhen Haihong Tianyuan Microelectronics Co. Ltd     4,021       6.9 %     -       0.0 %     -       0.0 %
Total purchases from key suppliers, and as percentage of direct costs     36,255       62.5 %     74,944       78.6 %     86,941       68.4 %

 

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Other than in the case of Reliance which requires us to fill their orders using components from Qualcomm, we purchase from suppliers on a non-exclusive basis. We are not bound by any minimum purchase commitments or other obligations to our suppliers and are able to source products and services at the most competitive prices available from various suppliers on an as needed basis. The above figures for Crave International Holdings included the value of Qualcomm components.

 

Geographic Concentration

 

The following table sets forth our net revenues from customers based on location of the customer’s headquarters, both in absolute amount and as a percentage of net revenues. These figures do not take into account the geographic location of end-users of customer products:

 

    For the year ended December 31,  
    2015     2016     2017  
    $     %     $     %     $     %  
    ($ in thousands)  
China     8,485       15.4 %     6,076       7.1 %     17,687       14.5 %
India     7,949       14.4 %     25,126       29.4 %     70,421       57.6 %
United States     14,978       27.2 %     34,526       40.4 %     23,312       19.1 %
Rest of the world     23,703       43.0 %     19,720       23.1 %     10,813       8.8 %
Net revenues     55,115       100.0 %     85,448       100.0 %     122,233       100.0 %

 

The Company net revenues from customers with headquarters in the United States are attributed to its ongoing collaboration with a prominent mobile chipset vendor and other mobile device OEMs. From 2015 to 2017, revenues from customers with headquarters in China declined slightly, and we engaged a significant new customer in India during the second half of 2016 and this customer continued to place orders with us in 2017.

 

Net Revenues — Connected Solutions BU — Three and Six Months Ended June 30, 2017 and 2018

 

The following table sets forth the Connected Solutions BU net revenues, as well as the components of such revenues, for the periods indicated, in absolute amount and as a percentage of total net revenues:

 

    For Three Months Ended June 30,  
    2017     2018  
    US$     %     US$     %  
    (US$ in thousands)  
Software     3,499       23.9 %     1,624       3.3 %
Hardware     11,122       76.1 %     47,018       96.7 %
Connected Solutions BU net revenues     14,621       100 %     48,642       100 %

 

Software

 

Software net revenues were $3.5 million and $1.6 million for the three months ended June 30, 2017 and 2018, respectively, representing 23.9% and 3.3% of Connected Solutions BU net revenues in those periods. For the six months ended June 30, 2017 and 2018, software net revenues were $6.6 million and $3.9 million, respectively.

 

The decrease primarily reflected the exit by one of the Company’s major chip manufacturer clients from the Android based product platform.

 

Hardware

 

Hardware net revenues were $11.1 million and $47.0 million for the three months ended June 30, 2017 and 2018, respectively, representing 76.1% and 96.7% of Connected Solutions BU net revenues in those periods. For the six months ended June 30, 2017 and 2018, hardware revenues were $32.8 million and $95.1 million, respectively, representing 83.3% and 96.1% of Connected Solutions BU net revenues in those periods.

 

The 322.7% increase in hardware net revenues in the second quarter of 2018 (which increase accounts for the aggregate of 232.7% increase in overall Connected Solutions BU net revenues) primarily reflects an increase in hardware product orders from the emerging markets in Asia.

 

All hardware sales were made to order in writing. Small percentages of replacement units and parts were provided to customers and those costs were included in cost of revenues. We provide engineering design work as specified by our customers, and production begins after the customer accepts the design. We are responsible for procurement of all components, materials and tooling, and for the selection of third-party factories for product assembly. Revenue is recognized when products are shipped to the customer, and payment is generally made within 30 to 60 days after shipment. We are not engaged in the marketing and distribution of the hardware products.

 

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Net Revenues — MVNO BU

 

The MVNO BU provides a full range of 2G/3G/4G mobile communication services to consumers, as well as some traditional commercial telephony services. In 2014, the MVNO BU entered into a business agreement with China Unicom, the incumbent mainland China mobile network operator to obtain bulk access to network services at wholesale rates in 2014. The MVNO BU has its own brand in mainland China, “Yuantel.” MVNO BU net revenues, consisting of “MVNO” and “Other” revenues are entirely from mainland China. “Other” revenues are primarily related to traditional commercial telephony services, such as conference call services.

 

    For the year ended December 31,  
    2015     2016     2017  
    $     %     $     %     $     %  
    ($ in thousands)  
MVNO     16,007       80.2 %     29,309       83.4 %     30,118       93.9 %
Other     3,950       19.8 %     5,829       16.6 %     1,956       6.1 %
MVNO BU net revenues     19,957       100.0 %     35,138       100.0 %     32,074       100 %

 

We started the MVNO services in late 2014 and experienced significant growth in our MVNO BU net revenues from 2015 to 2016, reflecting increasing sales of bundled services, the minor decrease of net revenue in 2017 as we expect sales of MVNO services to growth at a modest rate in future periods while traditional commercial services revenues will remain stable.

 

    For Three Months Ended
June 30,
 
    2017     2018  
    US$     US$  
    (US$ in thousands)  
MVNO     6,987       7,220  
Other     521       477  
MVNO BU net revenues     7,508       7,697  

 

We expect sales of MVNO services to increase at a modest rate in future periods while traditional commercial services revenues will remain stable. As discussed above, governmental policies requiring heightened security checks for authentication of PRC identification cards at the point of sales of SIM cards continue to have an impact on our subscription activities.

 

For the six months ended June 30, 2017 and 2018, MVNO BU net revenues were $14.0 and $15.6 million, respectively.

 

Cost of Revenues

 

Cost of Connected Solutions BU revenues primarily consists of personnel and personnel-related costs associated with engineering projects paid for by customers, and costs of hardware components used to manufacture products. Cost of MVNO BU revenues primarily consists of wholesale traffic fees, paid to the incumbent operator, based on traffic consumed by subscribers to the MVNO network. The incumbent operator also charges us a minimum wholesale tariff based on the number of mobile phone numbers issued to the Company.

 

The following table sets forth cost of revenues, both in absolute amount and as a percentage of total cost of revenues, for Connected Solutions BU revenue and MVNO BU revenue:

 

    For the year ended December 31,  
    2015     2016     2017  
    $     %     $     %     $     %  
    ($ in thousands)  
Connected Solutions BU     38,800       66.9 %     64,943       68.0 %     103,494       81.4 %
MVNO BU     19,205       33.1 %     30,493       32.0 %     23,647       18.6 %
Total cost of revenues     58,005       100.0 %     95,436       100.0 %     127,141       100.0 %

 

Connected Solutions BU cost of revenues increased from $38.8 million in 2015 to $64.9 million in 2016 and $103.5 million in 2017. These increases were attributable to the similar trend of increases in our volume of hardware connected products sales during these years.

 

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Cost of MVNO BU revenues increased from $19.2 million in 2015 to $30.5 million in 2016 and decrease to $23.6 million in 2017, generally in line with the expansion of the MVNO BU over that period from the initiation of the MVNO BU in the second half of 2014. As MVNO BU revenue increases, the cost of revenue of the MVNO BU generally increases as well. MVNO BU revenue decreased to $23.6 million in 2017 due to increased security requirements at the point of sales of signing up new mobile customers as stipulated by the Ministry of Industry and Information Technology (“MIIT”) of China.

 

    For Three Months Ended
June 30,
 
    2017     2018  
    US$     US$  
    (US$ in thousands)  
Connected Solutions BU     11,620       43,203  
MVNO BU     4,821       5,427  
Total cost of revenue     16,441       48,630  

 

Connected Solutions BU costs of revenues were $11.6 million and $43.2 million for the three months ended June 30, 2017 and 2018, respectively. These increases were generally in line with the associated revenues. For the six months ended June 30, 2017 and 2018, Connected Solution BU costs of revenues were $33.2 million and $87.4 million, respectively.

 

MVNO BU cost of revenues was $4.8 million and $5.4 million for the three months ended June 30, 2017 and 2018, respectively. MVNO BU costs of revenues were generally proportional to MVNO BU revenues. For the six months ended June 30, 2017 and 2018, MVNO BU cost of revenues were $10.3 million and $10.7 million, respectively.

 

Gross Profit and Gross Margin

 

Gross profit represents net revenues less cost of revenues. Gross margin represents gross profit as a percentage of revenues.

 

Our gross profits were $17.1 million in 2015, $25.2 million in 2016 and $27.2 million in 2017, with the breakdown between the Connected Solutions BU and MVNO BU as follows:

 

    For the year ended December 31,  
    2015     2016     2017  
    $     %     $     %     $     %  
    (Gross Profit in thousands, Gross Margin in %)  
Connected Solutions BU     16,315       29.6 %     20,505       24.0 %     18,739       15.3 %
MVNO BU     752       3.8 %     4,645       13.2 %     8,427       26.3 %
Total     17,067       22.7 %     25,150       20.9 %     27,166       17.6 %

 

Connected Solutions BU gross margin was 29.6%, 24.0% and 15.3% for 2015, 2016 and 2017, respectively, while MVNO BU gross margin was 3.8%, 13.2% and 26.3% for 2015, 2016 and 2017, respectively. MVNO BU gross margin was on an upward trend through 2017 as the MVNO business gradually gained economic scale after its launch in late 2014.

 

Connected Solutions BU gross profits include gross profits from software projects and gross profits from hardware projects. As shown in the following table, software gross profits remained relatively stable from 2015 through 2017, while hardware gross profits increased as customers increasingly demanded a comprehensive solution including software design through final commercial product.

 

    For the year ended December 31,  
    2015     2016     2017  
    $     %     $     %     $     %  
    (Gross Profit in thousands, Gross Margin in %)  
Software     9,769       43.5 %     7,421       49.8 %     3,965       35.4 %
Hardware     6,546       20.1 %     13,084       18.5 %     14,774       13.3 %
Total     16,315       29.7 %     20,505       24.0 %     18,739       15.3 %

 

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Software projects are further categorized as design, royalty and service projects, reflecting the nature of the work:

 

  Design projects consist primarily of non-recurring engineering fees for which we provide customized work according to our clients’ required functionalities and needs;

 

  Royalty projects consist of per unit royalties based on customer usage of our previously completed software products; and

 

  Service projects where our engineers perform engineering services following the instructions of the customers, charging them hourly fees on full time equivalent basis.

 

Our gross profits were $5.7 million and $7.7 million for the three months ended June 30, 2017 and 2018, respectively. The breakdown between the Connected Solutions BU and MVNO BU gross profit and gross margin was as follows:

 

    For Three Months Ended June 30,  
    2017     2018  
    US$     %     US$     %  
    (Gross Profit in thousands, Gross Margin in %)  
Connected Solutions BU     3,001       20.5 %     5.439       11.2 %
MVNO BU     2,687       35.8 %     2,270       29.5 %
Total     5,688       25.7 %     7,709       13.7 %

 

Connected Solutions BU gross margins were 20.5% and 11.2% for the three months ended June 30, 2017 and 2018, respectively, while MVNO BU gross margins were 35.8% and 29.5% for the three months ended June 30, 2017 and 2018, respectively. Despite significant volume increase in our Connected Solutions BU activities in the second quarter of 2018, its gross margin decreased because large orders from customers usually demanded more competitive pricing and also due to component shortages during the period, causing increase in component prices while the selling price of the products were fixed; the MVNO BU gross margin decreased as governmental policies requiring heightened security checks for authentication of PRC identification cards at the point of sales of SIM cards continued to have an impact on our subscription activities and also due to a temporary lack of beauty numbers (e.g. phone numbers with multiple digits of “8”) which carry a high margin. The Company mitigated some of the adverse regulatory impact by designing a new security check and activation system that simplified the sales procedure.

 

Our overall gross margin decreased from 25.7% to 13.7% in the second quarter of 2018 from a year ago.

 

For the six month periods ended June 30, 2017 and 2018, Connected Solution BU gross margins were 15.7% and 11.8%, respectively; and MVNO BU gross margins were 26.1% and 31.6%, respectively.

 

Our overall gross margin decreased from 18.5% to 14.5% for the six months ended June 30, 2018 from a year ago.

 

Connected Solutions BU gross profit include gross profit from software projects and gross profit from hardware projects, as shown in the following table:

 

    For Three Months Ended
June 30,
 
    2017     2018  
    US$     US$  
    (Gross Profit in thousands)  
Software     1,887       956  
Hardware     1,114       4,483  
Total     3,001       5,439  

 

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Operating Expenses

 

Our operating expenses principally consist of research and development expenses, selling and marketing expenses, and general and administrative expenses. The following table sets forth operating expenses for the periods indicated, both in absolute amount and as a percentage of net revenues:

 

    For the year ended December 31,  
    2015     2016     2017  
    $     As % of Revenue     $     As % of Revenue     $     As % of Revenue  
    ($ in thousands)  
Research and development expenses     (7,206 )     9.6 %     (5,742 )     4.8 %     (6,443 )     4.2 %
Sales and marketing expenses     (7,359 )     9.8 %     (5,874 )     4.9 %     (7,952 )     5.2 %
General and administrative expenses     (4,883 )     6.5 %     (10,042 )     8.3 %     (20,753 )     13.4 %
Changes in fair value of warrant liabilities     -       0.0 %     (12 )     0.0 %     (200 )     0.1 %
Total     (19,448 )     25.9 %     (21,670 )     18.0 %     (35,348 )     22.9 %

 

    For Three Months Ended
June 30,
 
    2017     2018  
    US$     US$  
    ($ in thousands)  
Research and development expenses     1,184       1,452  
Sales and marketing expenses     1,646       1,665  
General and administrative expenses     2,599       2,260  
Changes in the fair value of warrant liability     -       -  
Total     5,429       5,377  

 

Research and Development Expenses

 

Research and development expenses include payroll, employee benefits and other headcount-related expenses associated with the development of the BorqsWare software platform, as well as outsourcing and third party service expenses. Research and development expenses also include rent, depreciation and other expenses for platform development and other projects that are not customer-specific.

 

Research and development expenses increased to $1.5 million for the three months ended June 30, 2018 from $1.2 million in the same period in 2017. A significant portion of our design activities were directly expensed as cost of revenue when our hardware project revenue was recognized. Research and development expenses for the six months ended June 30, 2017 and 2018 were $1.5 million and $2.3 million, respectively.

 

Selling and Marketing Expenses

 

Selling and marketing expenses include payroll, employee benefits and other expenses relating to our sales and marketing personnel, travel, rent and other expenses relating to our marketing activities, including entertainment and advertising. For the MVNO BU, we pay our franchisees commission to sell products, which are recognized as selling and marketing expenses.

 

Selling and marketing expenses decreased from 2015 to 2016 mainly because of the franchisees commission of the MVNO BU. In 2016 and 2017, selling and marketing expenses increased from 4.9% to 5.2% of net revenues due to higher revenue from hardware customers. We expect our selling and marketing expenses to increase in absolute terms as we expand our sales and marketing efforts.

 

Selling and marketing expenses decreased by $0.02 million to $1.67 million for the three months ended June 30, 2018, from $1.65 million from the same period in 2017. The decrease was primarily due to our MVNO’s commission sharing structure. Selling and marketing expenses for the six months ended June 30, 2017 and 2018 were $3.0 million and $3.3 million, respectively.

 

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General and Administrative Expenses

 

Our general and administrative expenses include payroll, employee benefits, professional fees, rent, travel and other administrative costs.

 

General and administrative expenses increased from 2015 to 2016 due to expenses to support the huge growth in MVNO BU. In 2016 and 2017, general and administrative expenses slightly decreased due to expenses associated with decreased headcount to support the MVNO BU, and professional fees. From 2016 to 2017, these expenses increased from 8.3% to 13.4% of net revenues. We expect our general and administrative expenses to increase in absolute terms now that we are a public company and as we continue to grow, but to decrease over time as a percentage of net revenues as net revenues increase.

 

Despite the recognition of a $1 million attorney fee due to the arbitration case with Samsung as described in Note 16 of the Accompanying Notes to the Financial Statement for the quarter ended June 30, 2018, our general and administrative expenses were still lower at $2.3 million as compared to $2.6 million for the same quarter last year. The reduction in general and administrative expenses was primarily due to the reduction in headcount. General and administrative expenses for the six months ended June 30, 2017 and 2018 were $4.2 million and $5.4 million, respectively.

 

Other Operating Income

 

We received subsidies from local government authorities as financial support for certain technology development projects. These subsidies are classified as “Other operating income”. We recognized $3.1 million, $1.8 million, and $0.3 million of other operating income in 2015, 2016 and 2017, respectively.

 

Subsidies are recorded as a liability when received and recognized as other operating income when the related projects are completed and the subsidies are not subject to future return. Under the requirements of the government subsidies, we are obligated to make progress on the related technology development projects, based on the timetable established by the government authorities, and to appropriately allocate the government subsidies for various purposes.

 

We recognized $1,000 and nil for the three months ended June 30, 2017 and 2018, respectively. Other operating income for the six months ended June 30, 2017 and 2018 were $267,000 mill and nil, respectively.

 

Income Tax Expense

 

Our effective tax rate was 52%, 51% and -23% for 2015, 2016 and 2017, respectively. The fluctuation from 2016 to 2017 was primarily due to the fact that the loss experienced by certain of our subsidiaries in 2015 and 2016 could not be used to offset gains in other subsidiaries within the same jurisdiction. 

 

For the three months ended June 30, 2018, we had tax benefit amounts of $146,000. Our actual tax rates have been higher than the statutory rates because losses experienced by certain of our subsidiaries could not be used to offset gains in other subsidiaries within the same jurisdiction. For the six months ended June 30, 2017 and 2018, we recorded $0.9 million and $1.0 million in income tax expenses, respectively.

 

Transaction-related Expenses

 

Advisory, financing, integration and other transaction costs directly related to our acquisition of Borqs International by way of merger totaled $15.3 million, including $8.8 million in share-based compensation expense related to ordinary shares issued to the financial advisors. Share-based compensation charges related to the Borqs International stock option plan were also reported in the three months ended September 30, 2017 because that plan did not allow for exercising of options until Borqs International became a public traded entity. When our acquisition of Borqs International by way of merger was completed, all vested options under the Borqs International stock option plan were valued and expensed at the closing price per share of our ordinary shares on The Nasdaq Stock Market on the day of the merger.

 

Liquidity and Capital Resources

 

Cash used in operating activities for the year ended December 31, 2017 was $15.0 million and primarily consisted of net loss of $12.4 million but adding back non-cash items including non-recurring share-based compensation due to historical option charges and merger related share-based expenses of $14.7 million and amortization of intangible assets of $3.9 million, together with depreciation of property and equipment of $0.7 million. Cash used in operating assets and liabilities included cash used by increase in restricted cash of $2.3 million, increase in accounts receivable of $37.5 million, increase in prepaid expenses of $12.1 million, decrease in deferred revenue of $5.1 million, and increase in inventory of $4.3 million. Cash was provided by the increase in accounts payable of $27.0 million, increase of $5.2 million in accrued expenses, increase in advance from customers of $3.6 million, and increase in deferred income tax benefit of $0.9 million.

 

Cash used in investing activities for the year ended December 31, 2017 was $8.1 million, which included $7.2 million used in software engineering costs that were capitalized.

 

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Cash provided by financing activities for the year ended December 31, 2017 was $31.9 million, which included short-term borrowings of $10.5 million, less repayment of short-term borrowings of $4.8 million, increase in long-term borrowings of $2.0 million, less repayment of long-term borrowings of $2.6 million, plus the issuance of Series E convertible redeemable preferred shares and Series E-1 convertible preferred shares of $9.0 million and cash received from the merger with Pacific Special Acquisition Corp. of $18.0 million.

 

Cash generated from operating activities for the six months ended June 30, 2018 was $1.55 million.

 

Cash used in investing activities for the six months ended June 30, 2018 was $2.55 million which was mainly used in the development of software assets for both our Connected Solutions BU and MVNO BU in the amount of $3.87 million and repayment from a third-party loan brought in $1.47 million.

 

Cash used in financing activities for the six months ended June 30, 2018 was $10.1 million which included prepayment for repurchase of shares of $10.1 million, obtained long-term borrowings of $3.0 million, repayment of long-term borrowings of $2.0 million, obtained short-term borrowings of $1.1 million, and repayment of short-term borrowings of $2.1 million.

 

Our subsidiary Borqs Hong Kong entered into a loan facility for working capital purposes with SSVB on August 31, 2015, as amended, for a revolving loan facility in the maximum amount of $6 million, with a term loan sublimit of $1 million, at 3 month LIBOR plus 3.70% with a maturity date of August 31, 2018 (the “Borqs HK Loan”).   The obligations of Borqs Hong Kong under the Borqs HK Loan are guaranteed by Borqs International, the direct parent company of Borqs Hong Kong, up to a maximum of $6 million (the “BIH Guaranty”). Effective August 31, 2018, we entered into agreements with SSVB to extend the maturity date of the Borqs HK Loan to February 28, 2019. In connection with the extension, interest rate on the Borqs HK Loan increased from 3-month LIBOR plus 3.70% to 1-month LIBOR plus 4% (the “HK Interest Rate”). The penalty interest rate under the Borqs HK Loan for late payments and misappropriation of loan proceeds is the HK Interest Rate plus 5%. Additionally, in the event that the Company conducts a private placement prior to the maturity date, we agreed to pay a success fee to SSVB, which amount shall be between RMB 470,000 and RMB 700,000 (based on the size of the equity raise).

 

Our subsidiary Borqs Beijing entered into a loan facility for working capital purposes with SSVB on July 20, 2016, as amended, for a revolving loan facility in the maximum amount of RMB 25,000,000 at The People’s Bank of China base interest rate plus 1.65% with a maturity date of August 31, 2018 (the “Borqs Beijing Loan”, together with the Borqs HK Loan, the “SSVB Loans”).  The Borqs Beijing Loan is secured by the accounts receivables of Borqs Beijing pursuant to a Pledge Agreement, dated July 20, 2016, in favor of SSVB until all outstanding indebtedness under the Beijing Loan Agreement is repaid. Effective August 31, 2018, we entered into agreements with SSVB to extend the maturity date of the Borqs Beijing Loan to February 28, 2019. In connection with the extension, the facility amount under the Borqs Beijing Loan decreased from RMB 25 million to RMB 18 million, and the interest rate increased from The People’s Bank of China (“PBOC”) base rate plus 1.65% to the PBOC base rate plus 3.65% (the Beijing Interest Rate). The penalty interest rates under the Borqs Beijing Loan for late payments and misappropriation of loan proceeds is the Beijing Interest Rate plus 50% and the Beijing Interest Rate plus 100%, respectively. Additionally, in the event that the Company conducts a private placement prior to the maturity date, the Company shall pay a success fee to SSVB, which amount shall be between RMB 230,000 and RMB 300,000 (based on the size of the equity raise).

 

In addition to the BIH Guaranty provided by Borqs International, on August 31, 2018, the Company entered into guarantee agreements with SSVB to guarantee up to $7.2 million of the obligations of Borqs Hong Kong and to guarantee up to RMB21.6 million of the obligations of Borqs Beijing under the SSVB Loans. As of the date of this prospectus, approximately $8.5 million remains outstanding under the SSVB Loans. 

 

On November 20, 2017, we entered into a procurement and sales service agreement (the “Procurement Agreement”) with HHMC Microelectronic Co., Limited (“HHMC”) pursuant to which HHMC would make advances to Borqs International up to a maximum of $5,000,000 to purchase components from third party vendors. For each procurement transaction, Borqs International must make a deposit with the third party vendor equal to 5% of the purchase price for the components. Each advance is subject to a fee of 0.1% per day based on the total amount advanced by HHMC. Advances must be repaid within 90 days of being made available by HHMC, after which the overdue amounts are subject to a penalty of 0.1% per day on the amount outstanding. If the repayment of an advance is overdue by more than 10 days, HHMC has the right to take possession of goods purchased on behalf of Borqs International and apply proceeds from the sale thereof to pay off outstanding advances owed to HHMC. If sale proceeds are insufficient to satisfy all outstanding advances, then any remaining advances outstanding are due and payable within 5 days’ notice from HHMC. All of Borqs International’s obligations under the Procurement Agreement are guaranteed by the Company. The Procurement Agreement had an initial maturity term of three months, which was subsequently extended to May 28, 2018. As of the date of this prospectus, $2.24 million was repaid to HHMC with $2.76 million remaining outstanding under the Procurement Agreement. We are currently in discussions with HHMC for another extension.

 

We entered into a loan agreement with Partners For Growth V, L.P. (“PFG5”) effective April 30, 2018, for a term loan in the maximum amount of $3 million at an interest rate of 8.0% per annum with a maturity date of April 30, 2021 (the “PFG5 Loan”). On May 16, 2018, after payment of a $45,000 commitment fee to PFG5, $2,955,000 was made available to us for general corporate purposes.  PFG5’s rights under the PFG5 Loan are pari passu with the rights of Partners For Growth IV, L.P. (“PFG4”), a related party of PFG5, under the existing Loan and Security Agreement, dated August 26, 2016, by and between Borqs Hong Kong Limited and PFG4, as amended (the “PFG4 Loan”), which remains in full force and effect according to its terms. Except for increased thresholds with respect to the financial covenants described below, the terms of the PFG5 Loan are substantially similar to those of the PFG4 Loan. Our financial covenants under the PFG5 Loan include the covenants to meet or exceed (i) quarterly revenues (as required to be classified as such under U.S. GAAP) of $32,500,000 and (ii) a three month trailing EBITDA target of $2,000,000, with compliance for each covenant determined as of the last day of each calendar quarter for revenues and each calendar month for EBITDA.

 

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Pursuant to a subordination agreement, effective April 30, 2018, by and between PFG5, Borqs Hong Kong and SSVB, and a subordination agreement, dated August 26, 2016, by and between PFG4, Borqs Hong Kong and SSVB, all of the indebtedness and obligations of Borqs Hong Kong owed to PFG5 and PFG4 are subordinate to the obligations of Borqs Hong Kong owing to SSVB under the SSVB Loans.

 

We have in the past breached certain financial covenants under our loan agreements with SPD Silicon Valley Bank Co., Ltd. (“SSVB”) and PFG4. Specifically, we failed to meet a monthly quick ratio threshold, under U.S. GAAP basis, for several months in the second, third and fourth quarters of 2017 under the loan agreement with SSVB and a minimum 3-month trailing EBITDA target under the PFG4 loan agreement as of the third quarter of 2017.  Such breach could result in acceleration of the repayment according to the contract term. Therefore, the outstanding balance of $3,032 million was reclassified as current liability as of June 30, 2018. We have not been notified by either lender that they seek to accelerate the loan payments because of such breaches and neither lender has expressly waived such breaches and any resulting defaults.  We are currently negotiating with both lenders to make adjustments to the specific financial covenants to more appropriately reflect the business nature of the Company in 2018 and going forward, particularly allowing for the inclusion of inventories while removing certain non-cash stock based compensation in deriving the covenant ratios.  In the event the lenders choose not to make adjustments to the covenant ratios and consider the occurrence of these breaches as events of default under our current loan agreements, the lenders may elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit to us.

 

We believe that our current cash level and anticipated cash flows from operations will not be sufficient to meet anticipated cash needs for at least the next 12 months, and this Registration Statement is being filed to conduct a public offering of our ordinary shares in the coming months to raise funds to finance our potential acquisition of KADI as well as for general working capital needs. Whether or not the intended public fundraise is successful, we may privately sell additional equity securities, debt securities or borrow from banks and other financial institutions.

 

In recent periods, our accounts receivable turnover days has have generally fallen in the range of 60 to 90 days. There were no related party accounts receivable as of June 30, 2018.

 

Cash transfers from our subsidiaries inside China to our subsidiaries outside of China are subject to PRC government control of foreign exchange. Restrictions on the availability of foreign currency may affect the ability of our subsidiaries inside China to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their obligations. See “Risk Factors — Risks Related to Doing Business in China — Our subsidiaries in China are subject to restrictions on making dividends and other payments to it or any other affiliated company” and “Restrictions on foreign currency may limit our ability to receive and use our revenue effectively.”

 

Critical Accounting Policies

 

The Company prepares its financial statements in accordance with U.S. GAAP, which requires it to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the end of each fiscal period and the reported amounts of revenues and expenses during each fiscal period. The Company continually evaluates these judgments and estimates based on its own historical experience, knowledge and assessment of current business and other conditions, and expectations regarding the future based on available information and assumptions that it believes to be reasonable, which together form the basis for making judgments that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of the Company’s accounting policies require a higher degree of judgment than others in their application.

 

The selection of critical accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results to changes in conditions and assumptions are factors that should be considered when reviewing the Company’s financial statements. The Company believes the following accounting policies involve the most significant judgments and estimates used in the preparation of its financial statements.

 

Revenue Recognition

 

The Company recognizes revenue when persuasive evidence of an arrangement exists, as evidenced by signed contracts, delivery has occurred, the sales price is fixed or determinable and collection is reasonably assured.

 

Project-based Contracts

 

The Company accounts for revenue from project-based software contracts as “Software” revenue. The Company’s project-based contracts are generally considered multiple element arrangements since they include perpetual software licenses, development services, such as customization, modification, implementation and integration, and post-contract support where customers have the right to receive unspecified upgrades and enhancements on a when-and-if-available basis. Pursuant to ACS 985-605, Revenue Recognition: Software (“ASC 985-605”) , given the project-based software contracts require significant customization that are generally completed within one year from the contract dates, the Company accounts for the contracts in conformity with the relevant guidance in ASC 605-35, Revenue Recognition: Contract Accounting , applying the complete contract method.

 

The Company is unable to establish vendor specific objective evidence of the fair value of post-contract support, and support is the only undelivered element upon completion of software projects, so revenue is recognized ratably over the longest expected delivery period of undelivered elements of the arrangement, which is typically the support term, which ranges from six to 36 months but is generally 12 months, beginning at the completion of final acceptance test. Costs incurred to complete the software projects are deferred to match revenue recognition.

 

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When the Company is entitled to receive on-going usage-based royalties determined based on sales of chips or mobile devices, the royalties are recognized according to the customers’ usage reports, generally on a quarterly basis.

 

Service Contracts

 

The Company provides research and development services to certain customer to develop software where fees are charged on a time and material basis and the Company is not responsible for the outcome of such development projects. The revenue is recognized as the “Software” revenue as the services are delivered.

 

Connected Devices Sales Contracts

 

The Company accounts for revenue from sales of connected devices as “Hardware” revenue. Revenue is recognized when sale of each final hardware product to the customers are delivered.

 

Warranty is provided to all connected device customers as an integral part of the product sales. The Company has determined that the likelihood of claims arising from warranties is remote, based on historical experience. The basis for the warranty accrual is reviewed periodically based on actual experience.

 

MVNO Subscriber Usage Payment

 

The Company’s MVNO subscribers pay a fee based on the actual minutes of voice call made, megabytes of data consumed, number of SMS/MMS sent and supplementary services (e.g. caller-ID display) subscribed. These are considered as “MVNO” revenue. The Company is the principal in providing the bundled voice and data services to Chinese consumers, thus revenue is recognized on a gross basis. Revenue is recognized when the services are actually used.

 

Traditional Telecom Services

 

The Company provides traditional telecom services such as voice conferencing services and 400 toll free services. These are considered as “Others” revenue and are recognized based on the actual consumption by customers.

 

Income Taxes

 

We follow the liability method in accounting for income taxes in accordance with ASC topic 740 (“ASC 740”). Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. We record a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.

 

We adopted ASC 740 to account for uncertainty in income taxes. ASC 740 clarifies the accounting for uncertainty in income taxes by prescribing the recognition threshold a tax position is required to meet before being recognized in the consolidated financial statements. We have elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of “interest expense” and “other expenses,” respectively, in the consolidated statements of comprehensive loss.

 

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Uncertainties exist with respect to the application of the EIT Law and its implementation rules to the Company’s operations, specifically with respect to tax residency status. The EIT Law specifies that legal entities organized outside of the PRC will be considered residents for PRC income tax purposes if their “de facto management bodies” are located within the PRC. The EIT Law’s implementation rules define the term “de facto management bodies” as establishments that carry out substantial and overall management and control over the manufacturing and business operations, personnel, accounting, properties, etc. of an enterprise. On April 22, 2009, the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, was issued. Circular 82 provides certain specific criteria for determining whether the “de facto management body” of a Chinese-controlled offshore-incorporated enterprise is located in China. Further the Administrative Measures of Enterprise Income Tax of Chinese controlled Offshore Incorporated Resident Enterprises (Trial), or Bulletin No. 45, took effect on September 1, 2011, and provides more guidance on the implementation of Circular 82.

 

According to Circular 82, a Chinese-controlled offshore-incorporated enterprise will be regarded as a PRC tax resident by virtue of having a “de facto management body” in China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions set forth in Circular 82 are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals and board and shareholder resolutions are located or maintained in the PRC; and (iv) at least 50.0% of voting board members or senior executives habitually reside in the PRC. In addition, Bulletin No. 45 provides clarification in resident status determination, post-determination administration and competent tax authorities. It also specifies that when provided with a copy of Chinese tax resident determination certificate from a resident Chinese-controlled offshore- incorporated enterprise, the payer should not withhold 10% income tax when paying certain Chinese-sourced income, such as dividends, interest and royalties to the Chinese-controlled offshore-incorporated enterprise.

 

Although both the circular and the bulletin only apply to offshore enterprises controlled by PRC enterprises and not those by PRC or foreign individuals, the determination criteria set forth in the circular and administration clarification made in the bulletin may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax residency status of offshore enterprises and the administration measures should be implemented, regardless of whether they are controlled by PRC enterprises or PRC individuals.

 

Despite the uncertainties resulting from limited PRC tax guidance on the issue, the Company does not believe that its legal entities organized outside of the PRC are tax residents under the EIT Law. If one or more of its legal entities organized outside of the PRC were characterized as PRC tax residents, the Company’s results of operations would be materially and adversely affected.

 

Recent Accounting Pronouncements

 

Refer to Note 2, Summary of Significant Accounting Policies - Recent accounting pronouncements, of the notes to our consolidated financial statements included in this prospectus for information regarding the effect of newly adopted accounting pronouncements on our financial statements.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity or capital resources that are material to investors. 

 

Related Party Transactions

 

(a) Related parties

 

Names of related parties   Relationship
Intel Capital Corporation (“Intel”) and its affiliates   A substantial shareholder of the Group but exited from the mobile chipset activities.
Qualcomm Global Trading PTE, Ltd. (“Qualcomm”) and its affiliates   A substantial shareholder of the Group*

 

* Upon consummation of the Merger, the entity ceased to be a substantial shareholder of the Group

 

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(b) Other than disclosed elsewhere, The Group had the following significant related party transactions for the years ended December 31, 2015, 2016 and 2017:

 

    For the years ended December 31,  
    2015     2016     2017  
    (US$ in thousands)  
Software services provided to:                        
Intel Corporation     6,204       271       -
Intel (China) Co., Ltd.     5       9       -
Intel Asia-Pacific Research and Development Ltd.     328       119       -
Intel (China) Research Center Co., Ltd.     -       57       -
                         
Hardware sold to:                        
Intel Corporation     55       -       -  

 

(c) The Group had the following related party balances as of December 31, 2016 and 2017:

 

    As of December 31,  
    2016     2017  
    (US$ in thousands)  
Accounts receivable from related parties:                
Current:                
Intel Corporation     481       -  
Intel (China) Co., Ltd.     -       -  
Intel Asia-Pacific Research and Development Ltd.     9       -  

 

All balances with the related parties as of December 31, 2016 and 2017 were unsecured, interest-free and have no fixed terms of repayment.

 

(d) Other than disclosed elsewhere, the Group had the following significant related party transactions for the six months ended June 30, 2017 and 2018:

 

    Six Months Ended June 30,  
    2017     2018  
    (US$ in thousands)  
Software services provided to:            
Intel (China) Co., Ltd.     9       -  
Intel Asia-Pacific Research and Development Ltd.     65       -  
Intel (China) Research Center Co., Ltd.     8       -  
Qualcomm India Private Limited     3,967       *  
                 
Hardware sold to:                
Qualcomm India Private Ltd     12       *  
                 
Purchased from:                
Qualcomm Incorporated     398       *  
Qualcomm CDMA Technologies Asia Pacific PTE Ltd.     1,732       *  
Qualcomm Technologies, Inc.     75       *  

 

Quantitative and Qualitative Disclosures about Market Risk

 

Credit Risk

 

The Company is subject to the risk of loss arising from the credit risk related to the possible inability of its customers to pay for the products and services that it sells to them. The Company attempts to limit its credit risk by monitoring the creditworthiness of the Company’s customers to whom it extends credit and establishing credit limits in accordance with its credit policy. The Company performs credit evaluations on substantially all customers requesting credit and will not extend credit to customers for whom it has substantial concerns and will deal with those customers on a cash basis. The Company offers billing terms that allow certain customers to remit payment during a period of time ranging from 60 days to 3 months.

 

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The Company typically has limited risk from a concentration of credit risk as usually no individual customer represents greater than 20% of the outstanding accounts receivable balance.

 

Our accounts receivable with the following customer accounted for greater than 20% of our total outstanding accounts receivable for the years indicated:

 

  2017 Reliance Retail Limited  47%

 

Liquidity Risk

 

The Company is also exposed to liquidity risk, which is risk that it is unable to provide sufficient capital resources and liquidity to meet its commitments and business needs. Liquidity risk is controlled by the application of financial position analysis and monitoring procedures. When necessary, the Company will turn to other financial institutions and the owners to obtain short-term funding to meet the liquidity shortage.

 

Interest Rate Risk

 

The Company does not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. The Company has not been exposed nor does it anticipate being exposed to material risks due to changes in interest rates. A hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on the Company’s consolidated financial statements.

 

Foreign Currency Risk

 

Approximately half of our revenues and costs are denominated in Renminbi, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China (“PBOC”) or other authorized financial institutions at exchange rates quoted by PBOC. Approval of foreign currency payments by the PBOC or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and signed contracts. The value of Renminbi is subject to changes in central government policies and to international economic and political developments affecting supply and demand in the foreign exchange markets.

 

A hypothetical 10% change in foreign exchange rates during any of the preceding periods presented would have had an insignificant effect on our consolidated financial statements.

 

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BUSINESS

 

Overview

 

Borqs Technologies, Inc. (“we”, “the Company” or “Borqs”) is a global leader in software, development services and products providing customizable, differentiated and scalable Android-based smart connected devices and cloud service solutions. We are a leading provider of commercial grade Android platform software for mobile chipset manufacturers, mobile device OEMs and mobile operators, as well as complete product solutions of mobile connected devices for enterprise and consumer applications.

 

Our Connected Solutions BU works closely with chipset partners to develop new connected devices. Borqs developed the reference Android software platform and hardware platform for Intel and Qualcomm phones and tablets. In recent years, we have been awarded significant business contracts from Intel and Qualcomm, leading global chipset manufacturers. We provide Connected Solutions customers with customized, integrated, commercial grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare software platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The BorqsWare Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things (“IoT”) devices. The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end services for their devices. Our activities with Intel have reduced over the last two years due to Intel’s strategy to exit the mobile industry, and there are no material agreements with Intel on which we are substantially dependent. For the year 2017, Intel was no longer a customer of the Company. However, our activities with Qualcomm have increased over the last two years, including developmental work on chipsets for mobile devices and wearable products.

 

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The following customers accounted for 10% or more of our total revenues for the years indicated, and they are not related to each other:

 

2017     Reliance Retail Limited       41.4 %
      Alpha Network, Limited       13.1 %
                 
2016     Reliance Retail Limited       16.6 %
      Alpha Network, Limited       14.6 %
                 
2015     Alpha Network, Limited       25.7 %
      Qualcomm India Private Limited       10.0 %

 

Our MVNO BU provides a full range 2G/3G/4G voice and data services for general consumer usage and IoT devices, as well as traditional telecom services such as voice conferencing, and acts as a sales and promotion channel for the products developed by the Connected Solutions BU.

 

The Connected Solutions BU represented 73.4%, 70.9% and 79.2% of our net revenues in the years ended December 31, 2015, 2016 and 2017, respectively. In the years ended December 31, 2015, 2016 and 2017, Borqs generated 85%, 93% and 86%, respectively, of its net revenues from customers headquartered outside of China and 15%, 7% and 14%, respectively, of its net revenues from customers headquartered within China. As of June 30, 2018, Borqs had collaborated with 6 mobile chipset manufacturers and 29 mobile device OEMs to commercially launch Android based connected devices in 11 countries, and sales of connected devices with the BorqsWare software platform solutions are embedded in more than 10 million units worldwide.

 

Borqs has dedicated significant resources to research and development, and has research and development centers in Beijing, China and Bangalore, India. As of June 30, 2018, 350 of our 509 employees were technical professionals dedicated to platform research and development and product specific customization.

 

Borqs has achieved significant growth since inception in 2007. Net revenues increased from $75.1 million in 2015 to $120.6 million in 2016, to $154.3 million in 2017. We recorded net income of $0.8 million and $2.6 million in the years 2015 and 2016 respectively. For 2017, we had a net loss of $12.4 million which included non-cash merger related costs of $14.5 million; excluding such non-cash merger related costs would result in non-GAAP adjusted net income of $2.1 million for the year 2017 as compared to a net income of $2.6 million for 2016. We recorded a net income of $2.0 million in the three months ended June 30, 2018 and a net income of $3.4 million in the six months ended June 30, 2018, as compared with a net loss of $965,000 in the three months ended June 30, 2017 and a net loss of $947,000 in the six months ended June 30, 2017.

   

Recent Developments

 

Potential acquisition of Shanghai KADI Technologies Co., Ltd.  On January 8, 2018, we entered into a letter of intent to acquire a 60% equity interest in Shanghai KADI Technologies Co., Ltd (“KADI”), a Chinese company that develops software and hardware solutions for electric vehicle control modules, such as charging, battery management and vehicle controls. Pursuant to the letter of intent, and as is being negotiated in a definitive agreement, at the closing of the transaction we intend to pay $11.7 million in cash to KADI and $3.3 million in our ordinary shares to the selling shareholders. KADI is not a customer or supplier of Borqs. In accordance with the letter of intent, we have made four scheduled cash advances to KADI totaling $600,000 which will be deducted from our initial cash payments to KADI under the definitive agreement being negotiated. If the transaction is not consummated within nine months after the signing of the letter of intent, the advance payments will be converted into shares representing five percent of the outstanding capital stock of KADI. Upon the completion of our acquisition of 60% of KADI, we have an exclusive option, valid until December 31, 2021, to purchase the remaining 40% of KADI at a 9% premium to the consideration paid for the first 60%. There are no termination fees or penalties under the letter of intent. Assuming the parties reach a definitive agreement and proceed to closing, part of the proceeds from the offering as contemplated herewith will be used to fund the acquisition of KADI. See “Use of Proceeds.”

 

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KADI has worked with the leading automotive companies in China, including Chery, Dong Feng Motors, Geely Auto and Shenzhen Pin Chuan Electric Energy Co. Its founder, Dr. Hu Lin, has nearly 20 years of professional experience working with companies in the automotive industry, including Volkswagen and Delphi.

 

KADI has been awarded a RMB320 million (US$50 million) multi-year supply contract for its core electric control modules from Shenzhen Espirit Technology Co., Ltd. (“Espirit”), which is a key automotive contractor in China. Borqs believes that KADI’s products will complement Borqs’ existing automobile in-vehicle-infotainment (IVI) solutions, in terms of sales and distribution, and research and development. Borqs anticipates that the experience of its software engineers will enhance KADI’s capabilities while Borqs’ supply chain management team will ensure efficient delivery of hardware products. Approximately $7.7 million will be needed from us in 2018 to service the Espirit supply contract, of which approximately $4 million is anticipated to be used for capital expenditures, and $3.7 million is anticipated to be used for working capital needs.

 

Repurchase of Shares from Zhengqi. On January 10, 2018, we entered into a stock repurchase agreement (“Stock Repurchase Agreement”) with Zhengqi, pursuant to which we agreed to repurchase 966,136 of our ordinary shares that were originally issued and sold to Zhengqi on August 18, 2017, at an aggregate purchase price of approximately $10 million, or $10.40 per share. In addition, Zhengqi forfeited all of its rights to 1,278,776 held in escrow. The Stock Repurchase Agreement provides that those shares will be treated in the following manner: transfer 51,151 shares (4% of the total) to the indemnity escrow account; and deliver 1,227,625 shares to the former Borqs International shareholders based on their respective proportionate interests in the merger consideration. The Company and Zhengqi are working satisfy certain conditions and make necessary arrangements before completing the repurchase. As of August 3, 2018, the 1,278,776 escrow shares were forfeited and released from escrow and the Company had obtained the consent of its existing lenders with respect to the transaction, and the return and cancellation of the 966,136 shares remain in process. We anticipate closing the transaction in 2018. Proceeds from this offering will not be used to repurchase the shares from Zhengqi.

 

Investment in Shenzhen Crave Communication Co., Ltd. On January 18, 2018, we entered into an agreement with Shenzhen Crave Communication Co., Ltd (“Crave”) and Colmei Technology International Ltd. (“Colmei”), along with the shareholders of Crave and Colmei (“CC Selling Shareholders”), pursuant to which we agreed to acquire 13.8% of the outstanding shares of Crave and 13.8% of the outstanding shares of Colmei from the CC Selling Shareholders. The transaction closed on March 22, 2018, and under the agreement, the purchase consideration consists of ordinary shares and cash. At the closing, we issued 473,717 ordinary shares to the order of the CC Selling Shareholders and agreed to pay cash in the amount of $10.0 million to be paid to the CC Selling Shareholders over a period of 36 months. As our experience in negotiations with ODM customers often leads to questions over quality and delivery schedule issues, our investment in Crave and Colmei helps to address such issues because the Company is now in a better position to provide assurances to customers as we have prioritized scheduling over using the manufacturing facilities. In addition, subject to Board approval, we agreed to issue 183,342 additional shares to the CC Selling Shareholders if the aggregate value of the ordinary shares initially issued at the closing to the CC Selling Shareholders under this agreement was less than $3.0 million on August 18, 2018 (the “Calculation Date”). We are currently in discussions with the CC Selling Shareholders to extend the Calculation Date to a mutually agreed date. No proceeds from this offering will be used to pay any of the $10.0 million cash consideration to the CC Selling Shareholders.

 

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Crave is a manufacturer of mobile terminal devices located in Shenzhen China. With multiple high speed SMT lines, assembly lines and packaging lines, its annual capacity reaches over 10 million units in its Shenzhen facility. Crave exports final products for customers in South America, India, Indonesia, the Philippines and Vietnam. Colmei, which is under common ownership with Crave, is a sales entity located in Hong Kong that has established relationships with international banks to facilitate transactions with its global clients. Prior to this investment, we have contracted Crave and Colmei for multiple projects related to manufacturing our products, including a large variety of phone models and releases.

 

Our investment into Crave and Colmei create synergies, including (i) assurance of production capacity since they are capable in delivering over 10 million units of products annually, (ii) access to larger credit facilities for supply chain financing for purchases of components, (iii) ownership (although partial) of manufacturing plant increases the likelihood of winning more customer contracts, (iv) leveraging their large purchasing power, which is more than 10 times of Borqs’ in terms of number of units, which leads to savings from the suppliers of components and materials.

 

Colmei and Crave are controlled by two PRC nationals, and as of March 22, 2018, we currently own 13.8% of each of Crave and Colmei, which we do not believe results in the Company’s significant influence in either Crave or Colmei. However, in our role as a contract manufacturer, Crave is one of our material suppliers from which we source necessary components for our customers, and we believe our investments in Colmei and Crave provide us with access to acceptable financing terms, competitive component pricing and prioritized production capacity. Due to Crave’s large manufacturing volume, it is able to negotiate favorable component pricing. In addition, Colmei has the ability to obtain supply chain financing for the Company in order to procure large projects.

 

Award of MVNO License to Yuantel Telecom . On July 23, 2018, the Ministry of Industry and Information Technology of China awarded the official commercial MVNO license to Yuantel Telecom, our subsidiary that runs our mobile virtual network operator or MVNO business.  The license is valid from July 12, 2018 to July 12, 2023.

 

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Corporate Organizational Chart

 

The following diagram illustrates our current corporate structure and the place of formation, ownership interest and affiliation of each of our material subsidiaries, consolidated VIEs and the subsidiaries of the VIEs.

 

 

 

Borqs Material Subsidiaries and Consolidated Affiliated Entities

 

The following is a summary of our material subsidiaries and consolidated affiliated entities:

 

Borqs Beijing, a wholly foreign owned enterprise established under the laws of the PRC in 2007, is our primary operating entity and 100% owned by Borqs Hong Kong Limited;

  

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Borqs Hong Kong Limited (“Borqs Hong Kong”), a limited company established under the laws of Hong Kong in 2007, engages in the software and services business and is 100% owned by Borqs International Holding Corp.;

 

Borqs Software Solutions Private Limited (“Borqs Software Solutions”), a private limited company established under the laws of India in 2009, engages in the R&D for software and is 99.99% owned by Borqs International Holding Corp. and 0.01% owned by Borqs Hong Kong;

 

Borqs Korea (“Borqs Korea”), a company established under the laws of South Korea in 2012, engages in the R&D of software and is 100% owned by Borqs Hong Kong;

 

Beijing Borqs Software Technology Co, Ltd. (“Borqs Software”), a company established under the laws of the PRC in 2008, engages in government subsidized software development and engineering projects as well as other software and services business and is 100% owned by Beijing Big Cloud Century Technology Limited (“BC-Tech”), which is 100% owned by Borqs Beijing;

 

Beijing Borqs Wireless Technology Co, Ltd. (“Borqs Wireless”), a company established under the laws of the PRC in 2013, engages in software development and engineering projects as well as other software and services business and is 100% owned by BC-Tech, which is 100% owned by Borqs Beijing;

 

 Beijing Big Cloud Century Network Technology Co., Ltd. (“BC-NW”), a company established under the laws of the PRC in 2014, is the variable interest entity through which Borqs Beijing controls Yuantel Telecom, the entity which operates the MVNO business,

 

Yuantel (Beijing) Telecommunications Technology Co., Ltd. (“Yuantel Telecom”), a company established under the laws of the PRC in 2004, engages in MVNO services and is 95% owned by Yuantel (Beijing) Investment Management Co., Ltd., which is 79% owned by BC-NW, which is 100% beneficially owned and controlled by Borqs Beijing through contractual control agreements; and

 

Beijing Tongbaohuida Technology Co., Ltd. (“Tongbaohuida”), a company established under the laws of the PRC in 2012 and is 100% owned by Yuantel Telecom. Tongbaohuida has been inactive for the years 2016 and 2017.

 

BUs

 

We have two BUs, Connected Solutions and MVNO. The Connected Solutions BU develops wireless smart connected devices and cloud solutions. The MVNO BU operates a mobile virtual network in China that provides a full range of 2G/3G/4G mobile communication services at the consumer level and some traditional commercial telephony services.

 

Borqs provides Connected Solutions customers with customized, integrated, commercial grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare software platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The BorqsWare Client Software platform consists of three major components: the latest commercial grade Android software that works with particular mobile chipsets, functionality enhancements of the open source Android software and mobile operator required services. Based on the BorqsWare Client Software platform, customers may require Borqs to provide further customization based on their specific market needs. The BorqsWare Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things (“IoT”) devices. The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end services for their devices. The BorqsWare Server Software provides software necessary for upgrades, charging and various APIs that enhance the customers’ services. Based on BorqsWare Server Software service platform, customers may require us to provide further customization based on their specific needs.

 

The MVNO BU provides a full range 2G/3G/4G voice and data services for general consumer usage and IoT devices, as well as traditional telecom services such as voice conferencing. The MVNO BU also acts as a sales and promotion channel for the products developed by the Connected Solutions BU. Borqs believes that a key component of the sales of connected devices going forward is the bundling of those devices with a voice/data plan through its MVNO BU. The MVNO BU launched operations in the fourth quarter of 2014. The MVNO BU provides services throughout China. Borqs had more than two million registered subscribers at the end of 2015, approximately 4.5 million at the end of 2016, and approximately 5.37 million at the end of 2017.

 

The MVNO BU provides bundled voice and data services to Chinese consumers, serving as the principal in doing so and recognizing revenue on a gross basis. As sales of bundled services are mostly pre-paid by the consumers, cash received in advance of voice and data consumption are recognized as deferred revenue. Revenue is recognized when the services are actually used. Pre-paid bundled services do not expire. Sales of the bundles are mostly made through agents and franchisees. Bundled services sold to agents are discounted and not refundable to Borqs; and such discounts are recorded as reductions of revenue. We enter into profit sharing arrangements with franchisees under which bundled services may be returned if not sold to the consumers. The franchisees receive certain percentages of profits made by Borqs on the sales of the bundled services as they are used by the consumers. We account for profit sharing with franchisees as selling expenses in the consolidated statements of operations. Pursuant to the Company’s policy, the amount of discounts that may be provided by the franchisees to consumers is capped at 5%, based on which, we recognized the maximum amount of discounts that may be provided by the franchisees as reductions of revenue.

 

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Solutions

 

 

 

The Connected Solutions BU helps customers design, develop and realize the commercialization of their connected devices. The MVNO BU helps customers deploy their devices in China with 2G/3G/4G cellular connectivity with flexible voice/data plan.

 

Ideation & Design —  Based on customer requirements on the type of connected device the customer want to have, we can help customers design the product ID and user interface. We have the design engineering to provide 2D/3D rendering. The Company can provide physical mockup with different color, material and finishes, so the customer can hold and “feel” the mockup before finalizing the product ID.

 

Software IP Development —  IoT devices are often highly customized and require special software to display the data (e.g. circular watch display and user interface), to reduce the power consumption (e.g., a small battery in a wearable device), to perform specific functions (e.g., push-to-talk) and to connect to the network (e.g., 3G/4G connection). The Company has developed a large number of software libraries that can be reused for various connected devices.

 

Product Realization —  Some customers have limited hardware design capabilities. The Company has a strong hardware research and development team to help customers to design the hardware, including the PCBA design and mechanical design. The Company can also provide turn-key services to help customer to handle the manufacturing logistics (including supply chain and EMS management) in order to manufacture the product. The Company has the experiences and resources to manage the factory supply chain, quality control and other manufacturing logistics.

 

Deployment —  A number of connected devices require cellular 2G/3G/4G connectivity to connect to the network to access the backend cloud services. If a customer intends to deploy their connected devices in China, the customer can acquire SIM cards with flexible voice/data plans from our MVNO to have the cellular connectivity.

 

Cloud Services and Support —  The MVNO can help customers to provision and manage their subscribers database, handle the payment and re-charging and as well as provide data analytics of the subscribers for their usage traffic models.

 

Our Connected Solutions BU works closely with chipset partners to develop new connected devices. Borqs developed the reference Android software platform and hardware platform for Intel and Qualcomm phones and tablets. We provide Connected Solutions customers with customized, integrated, commercial grade Android platform software and service solutions to address vertical market segment needs through the targeted BorqsWare software platform solutions. The BorqsWare software platform consists of BorqsWare Client Software and BorqsWare Server Software. The BorqsWare Client Software platform has been used in Android phones, tablets, watches and various Internet-of-things (“IoT”) devices. The BorqsWare Server Software platform consists of back-end server software that allows customers to develop their own mobile end-to-end services for their devices.

 

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The Connected Solutions BU has a global customer base covering the core parts of the Android platform value chain, including mobile chipset manufacturers, mobile device OEMs and mobile operators. As of June 30, 2018, Borqs has collaborated with six mobile chipset manufacturers and 29 mobile device OEMs to commercially launch Android based connected devices in 11 countries, and sales of connected devices with the BorqsWare software platform solutions are embedded in more than 10 million units worldwide.

 

Our MVNO BU provides a full range 2G/3G/4G voice and data services for general consumer usage and IoT devices, as well as traditional telecom services such as voice conferencing, and acts as a sales and promotion channel for the products developed by the Connected Solutions BU.

 

Customers

 

The Company’s primary customers are mobile chipset manufacturers, mobile device OEMs and mobile operators. In 2017, Reliance Retail Limited and Alpha Network Limited accounted for approximately 41% and 13% of our revenues, respectively. In 2016, Reliance Retail Limited and Alpha Network Limited accounted for approximately 17% and 15% of our revenues, respectively. In 2015, Alpha Network Limited and Qualcomm India Private Limited accounted for approximately 26% and 10% of our revenues, respectively. The majority of the Company’s customers are located outside of China.

 

The Connected Solutions BU designs chipsets and related software for mobile connected devices. The Company outsources manufacturing of connected devices to third-party factories, buying key components for devices and consigning them to the factories to manufacture and assemble. The Company serves as a contract manufacturer of the products for Reliance, using Colmei Technology International Ltd. (“Colmei”) and its affiliate Shenzhen Crave Communication Co., Ltd. (“Crave”) to source necessary components. Due to Crave’s large manufacturing volume, it is able to negotiate favorable component pricing. The Connected Solutions BU benefits from Crave’s and Colmei’s component purchasing power and business referred to the Company by Crave and Colmei. The Company sells the final products to its customers, which are responsible for marketing and retail distribution.

 

The MVNO BU serves all the domestic China market. Operating under the brand name Yuantel, the MVNO BU leverages the network coverage China Unicom, which is China’s incumbent mobile operator. Subscribers purchase prepaid services, and are charged by the amount of data consumed, minutes of voice calls made, number of text messages sent, and other value-added services (such as caller ID display) used. As needed, subscribers may refresh the mobile phone SIM card, on a pay-as-you-go basis. Each month, we pay China Unicom for the total amount of traffic (MB of data, minutes of voice call made, etc.) actually consumed by subscribers.

 

The Company uses MVNO franchisees and agents as distribution channels. Those franchisees sell our prepaid services to their subscribers, on SIM cards. The Company compensates franchisees under a profit-sharing arrangement that is based on gross margin on franchisee sales of our services to subscribers. Agents sell our services on behalf of the Company and pay us a discount price for those services.

 

Research and Development

 

The Company has dedicated significant resources to research and development, with research and development centers in Beijing, China and Bangalore, India. As of June 30, 2018, 350 of our 509 employees were technical professionals dedicated to platform research and development and product specific customization. Technical professionals have diverse backgrounds and experience gained through employment with leading mobile chipset designers and manufacturers, mobile device OEMs, internet content providers and other software and hardware enterprises.

 

The Company’s research and development centers work together to develop core proprietary software, and each center focuses on project specific implementation related to specific hardware platforms and customer specifications. The Company technical professionals are divided into two core groups, one focused on our Android+ software platform solutions, and one focused on our Android+ service platform solutions. Each group is further divided into sub-groups for platform development, system engineering and architecture, low-level software development, high-level application development, program management, system testing and verification and software configuration management.

 

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Our current research and development efforts are focused on developing the BorqsWare software and service platform solutions to improve and enhance the following aspects of the Android platform:

 

  stability and reliability;

 

  performance and power management;

 

  Android platform integration with various kinds of chipsets;

 

  usability, input mechanism and display mechanism;

 

  security and anti-hacking of applications;

 

  in-country localization;

 

  automated cross applications software testing;

 

  4G radio network specific functionality, such as FDD-LTE and TD-LTE; and

 

  mobile operator end-to-end services; and integration of mobile Internet services with traditional telecommunication services, such as integration of instant messaging with short messaging.

 

A typical research and development project is staffed with members of the sales team, a research and development team comprised of a project manager, a platform development team, a customer development team and a system testing team, as well as finance personnel. At the beginning of a project, a member of the sales team will work with a project manager to simultaneously track research and development and commercial milestones. The project manager is responsible for ensuring the research and development milestones are achieved in a timely manner, including system testing, and a member of the sales team is responsible for tracking sales milestones. Finance personnel review each invoice and determine the appropriate accounting treatment under U.S. Generally Accepted Accounting Principles (“U.S. GAAP”). A typical research and development project takes between six to nine months to complete. In general, a significant portion of each research and development project consists of existing Android platform software and service solutions, while incorporating necessary customizations for a particular customer.

 

Intellectual Property

 

The Company regards patents, copyrights, trademarks, software registrations, trade secrets and similar intellectual property as critical to its success. The Company relies on a combination of trademark, copyright, patent, software registration and trade secret laws, and enters into confidentiality agreements with employees and relevant third parties to protect our intellectual property rights. All employees enter into agreements requiring them to keep confidential all proprietary and other information relating to customers, methods, technologies, business practices and trade secrets.

 

The Company has been granted 130 patents in China and seven patents in the United States, and as of the date hereof it has 34 pending patent applications in China and one pending patent applications in the United States. The Company also has 100 software copyrights and 55 trademarks registered and 11 pending trademarks in China. In addition, the Company has registered its domain name with various domain name registration services.

 

Competition

 

The Company believes that the marketplace for connected devices and MVNO solutions is highly fragmented, but that few are capable of providing an end-to-end solution with software, hardware, product realization and bundling with a SIM card with voice/data plan (via a MVNO or mobile operator).

 

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The market for connected devices and MVNO solutions is rapidly evolving, and in the future the Company may not be able to compete successfully against current and potential competitors. The Company expects competition to intensify as new competitors enter the market, and as existing competitors attempt to diversify and expand their software and service solutions offerings across the Android platform. The primary competitors for the Company include traditional hardware-centric OEMs and software development companies.

 

  The traditional OEMs are strong in hardware design and own factories, but they are very weak in software development as well as not familiar with operator and mobile chipset requirement;

 

  The large software development companies have sizable software teams and global coverage, but they are very weak in hardware design and manufacturing expertise;

 

  Some of the Company’s competitors have significantly greater financial, technical, marketing, sales and other resources and significantly greater name recognition than we have.

 

Some of the companies that operate in the software and services solutions market may have significantly greater financial, technical, marketing, sales and other resources and significantly greater name recognition than we have.

 

Competitive Strengths

 

We believe the following factors differentiate us from our competitors and contribute to our success:

 

Strategic relationships with leading chipset vendors.

 

The Company works closely with leading chipset vendors in their software development, including software for their latest state-of-the-art chipsets. The Company develops connected device products and solutions based on these chipsets. These relationships enable the Company to develop a competitive product portfolio.

 

Strong software capabilities across core parts of the Android platform value chain drive a full suite of BorqsWare software and services platform solutions and a significant time to market advantage for customers.

 

The Company has focused on building its innovative technology platform to serve customers across the core parts of the Android platform value chain. We believe the Company was first to develop commercial grade software to support video telephony for Android. In collaboration with China Mobile, the Company developed the base chipset software to deploy Android-based mobile devices to support China Mobile’s TD-SCDMA network.

 

Global customer base and extensive industry relationships .

 

The Company had more than 50 customers as of December 31, 2017, including some of the world’s leading companies in the mobile industry. Its diversified customer base includes mobile chipset manufacturers, mobile device OEMs and mobile operators. Through 2017, the Company has collaborated with more than six mobile chipset manufacturers (including Intel, Qualcomm, Marvell) and 29 connected device OEMs (including LGE, Micromax, Acer, Motorola and Vizio) to commercially launch Android-based devices in 11 countries, and more than 10 million mobile devices sold worldwide have BorqsWare software platform solutions embedded. Our products have been deployed by more than 10 service providers (including AT&T, China Mobile, Claro, Orange, Reliance Jio, Sprint, Verizon) on four continents.

 

Significant resources dedicated to research and development; Patents .

 

The Company dedicated significant financial and human resources to research and development needed to build a full suite of connected device software and service platform solutions to address evolving customer needs across the core parts of the Android platform value chain.

 

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Government Regulation

 

The Company’s operations are subject to extensive and complex state, provincial and local laws, rules and regulations. The PRC government restricts or imposes conditions on foreign investment in telecommunication business. Borqs International Holding Corp and its PRC subsidiaries are considered foreign persons or foreign-invested enterprises under PRC foreign investment related laws. As a result, they are subject to PRC legal restrictions on or conditions for foreign ownership of telecommunication business. Due to these restrictions, the Company conducts its MVNO business in China through BC-NW, its variable interest entity and the subsidiaries of BC-NW. As all the registered shareholders of BC-NW are PRC citizens and all other shareholders of the subsidiaries of BC-NW are also PRC citizens or PRC domestic enterprises, BC-NW and its subsidiaries are therefore considered as PRC domestic enterprises under PRC law. The “registered shareholders” of BC-NW refer to those shareholders who have pledged their equity interest in BC-NW to Borqs Beijing Ltd., or WFOE, and entered into exclusive option agreements with WFOE as part of the contractual arrangements. The Company’s contractual arrangements with BC-NW and the registered shareholders of BC-NW allow it to have the power to direct the activities of BC-NW and its subsidiaries that most significantly impact their economic performance.

 

The Company’s operations were also subject to trial licenses granted by the MIIT under the mobile virtual network trial program initiated by the MIIT in 2013 to implement the Chinese State Council’s encouragement of private investments in various industries, including telecommunication industry. The trial program and all trial licenses issued thereunder, including those of the Company, were originally set to expire as of December 31, 2015. According to the trial program policies issued by the MIIT, the MIIT will work on formalizing commercial policies regarding the operation of MVNO based on the development of the trial program. On December 28, 2015, the MIIT issued a notice stating that while the government is “diligently researching and determining the formal commercial policies regarding the operation of MVNO, the temporary licenses issued continue to allow MVNO enterprises to operate, and the base telecommunication enterprises shall continue to provide cooperation, support and maintenance services”, as translated from the MIIT’s notice. All MVNOs in China, including the Company, will continue to operate and provide mobile communication services for subscribers based on the trial licenses.

 

The MIIT issued a Notice on the Official Commercial Use of Mobile Communication Resale Business (the “Official Notice”) on April 28, 2018, which took effect on May 1, 2018. The Official Notice requires an enterprise that has obtained a trial license, or the Pilot Enterprise to execute commercial contracts with a basic telecommunications company and apply for the telecommunications business license to replace the trial license. The Pilot Enterprise is allowed to continue to carry out its MVNO business during such application period. According to the Official Notice, the Pilot Enterprise will be ordered to terminate its MVNO business under certain circumstances, including (1) termination of cooperation between the Pilot Enterprise and the basic telecommunications enterprise resulting in Pilot Enterprise’s failure to operate its business; (2) failure to obtain the telecommunications business license within 2 years of the date of promulgation of the Official Notice; (3) occurrence of serious telecommunication fraud cases or malignant group accidents due to the Pilot Enterprise’s malpractice. In addition, the Official Notice requires the MVNO enterprise to establish network security management systems, deploy corresponding management personnel, implement the real-name registration for telephone users, protect users’ personal information, effectively implement the prevention and crackdown of communication information fraud, and standardize its user service agreements and financial management systems. In July 2018, we obtained the official MVNO license from the MIIT which will expire on July 12, 2023. However, uncertainties exist with respect to the interpretation and implementation of the newly issued Official Notice, and thus we cannot assure you that we will be able to maintain the MVNO license.

 

Employees 

 

As of June 30, 2018, we had 509 employees. None of our employees are represented by a labor union. Most of the Company’s employees are located in China, and a large percentage of its research and development personnel are located in India.

 

The Company pays most of employees a base salary and performance-based bonuses, including annual incentive bonuses and project-based bonuses. It pays commissions to sales personnel. Employees are also eligible to participate in the Company’s stock incentive program.

 

The Company is required under PRC laws and regulations to participate in a government-mandated, defined benefit plan for its full time employees, pursuant to which we provide social welfare benefits, such as pension, medical care, unemployment insurance, work-related injury insurance, maternity insurance and employee housing fund. The Company employees are not covered by any collective bargaining agreement. The Company believes it has good relations with its employees.

 

The Company uses a variety of methods to recruit technical professionals to ensure that it has sufficient research and development and other expertise on an ongoing basis, including the company website, an external online recruiting website, targeted technical forums, campus recruitment at leading technical universities and institutions, job fairs and internal referrals from current employees.

 

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The Company offers training programs to its employees covering professional training such as training related to customer service and product management and technical training such as training related to telephony and project management. The Company holds periodic workshops to enhance the leadership skills of management personnel.

 

Legal Proceedings

 

To the knowledge of our management, there is no material litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.

 

Description of Properties

 

The Company’s principal executive offices are located in Beijing, China, where the Company leases approximately 3,600 square meters of office space. The Company also occupies leased facilities of 4,400 square meters for other offices and research and development facilities in India. The following table sets forth the location, approximate size and primary use and expiration date of all the Company’s materially important physical facilities as of December 31, 2017. Extension beyond the expiration of both leases will be up to negotiation with the property owners.

 

Locations   Approximate Size   Primary Uses   Lease Expiration Date
Beijing, China   3600 sq. meters   Principal executive office and research and development   May 31, 2020
Bangalore, India   4400 sq. meters   Research and development   December 9, 2020
Total   8000 sq. meters        

 

Segments

 

We operate in two reportable segments, which are mobile virtual network operator services (“MVNO” or “Yuantel”), and Connected Solutions. See Note 2, Segment Reporting, of our notes to consolidated financial statements.

 

Geographic Concentration

 

The following table sets forth the Company’s connected solutions net revenues from customers, in absolute amount and as a percentage of net revenues, based on location of the customer’s headquarters. Our MVNO BU net revenues, which were $20.0 million, $35.1 million and $32.1 million in 2015, 2016 and 2017, respectively, were related to customers in China. These figures do not take into account the geographic location of end-users of customer products:

 

    For the year ended December 31,  
    2015     2016     2017  
    $     %     $     %     $     %  
    ($ in thousands)  
China     8,485       15.4 %     6,076       7.1 %     17,687       14.5 %
India     7,949       14.4 %     25,126       29.4 %     70,421       57.6 %
United States     14,978       27.2 %     34,526       40.4 %     23,312       9.1 %
Rest of the World     23,703       43.0 %     19,720       23.1 %     10,813       8.8 %
Net Revenues     55,115       100.0 %     85,448       100.0 %     122,233       100 %

 

The Company’s connected solutions net revenues from customers with headquarters in the United States are attributed to its ongoing collaboration with a prominent mobile chipset vendor and other mobile device OEMs. From 2015 to 2017, revenues from customers with headquarters in China declined slightly, and we engaged a significant new customer in India during the second half of 2016 and this customer continued to place orders with us in 2017.

 

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Business Description of KADI

 

Organization . KADI was incorporated in the Shanghai Jiading District of China on February 5, 2006 by two Chinese individuals. It was formed for the purpose of developing core electric control modules with imbedded software and integrated power assembly systems for electric vehicles, or new energy vehicles as they are called in China. KADI currently has 16 full-time employees, almost entirely engineers. The founders of KADI are veterans of the Chinese automotive industry with deep rooted experience in world-renowned auto companies’ operations in China, including Volkswagen and Delphi.

 

The Technologists.

 

Dr. Hu Lin , Founder and CEO of KADI. He has nearly 20 years of experience in the automotive electronic controls sector. From 2006 to 2013, Dr. Lin served as Executive Director of Electronic Controls, China Division of Delphi Automotive Group. Prior to that, he was a Director of R&D in Shanghai Volkswagen from 2002 to 2006. He is also the Secretary of the China Automotive Electronic Basic Software Development and Industrialization Alliance (CASA), and a member of the National Information Security Standardization Technology Committee. Dr. Lin received his doctoral degree in Electronic Information System from Zhejiang University, China.

 

Dr. Zhijie Pan , Technology Consultant to KADI. Dr. Pan has over 20 years of experience in the automotive industry. He is the Director of the Intelligent Vehicle Research Center of Zhejiang University, and is the recipient of multiple awards including the China Automotive Industry Science and Technology First Prize Award, China Quality Evaluation Association Science and Technology Innovation Award, National Federation of Science and Technology Progress Award and the Zhejiang Science and Technology First Prize Award. He has published more than 90 papers in domestic and foreign journals including IEEE, SAE and JSAE. He also holds more than 100 patents and is a frequent keynote speaker at international academic and technical forums. Dr. Pan is an expert in computer science and automotive interdisciplinary research, intelligent electric car chassis control technology, intelligent driving, unmanned systems, intelligent city, intelligent traffic control and internet data cloud processing. Dr. Pan received his doctoral degree in Automotive Engineering from Shanghai Jiao Tong University.

 

The Products and IP . KADI’s products include direct current boost function (“DCDC”), on-board charger system (“OBC”), and vehicle main control unit (“VCU”). KADI owns the intellectual property of the core technologies used in its current products without the need for licensed 3rd party IP, including the technologies for: i) Vehicle Controller Product Platform Strategies for passenger cars and commercial vehicles, ii) Auxiliary Power Unit (“APU”) product technology roadmap, and iii) Vehicle Controller Product Platform Strategy Batch Loading.

 

Relationship with Customers. 

 

KADI works closely with China’s leading automotive giants, including Geely Auto, Chery, Dong Feng Motors (“DFM”), and Shenzhen Pin Chuan Electric Energy Co. (“VAST”). KADI has several on-going R&D projects with China domestic manufacturers, including:

 

DFM — commercial vehicle DF45E controller development;

 

Chery — electric vehicle controller platform; and

 

VAST — supply contract for 800w DCDC.

 

Supply Contract from Espirit.  KADI has secured a RMB320 million supply contract with, Shenzhen Espirit Technology Co., Ltd. (“Espirit”), one of the key automotive contractors in China for the delivery of EV control modules with imbedded software from 2018 through 2020. Such modules are to be used in electric delivery vehicles with a daily range of 100 kilometers. The term of the supply contract is from September 19, 2017 to June 30, 2020 with automatic renewal for a one-year term unless either party provides 30 day advance notice of non-renewal. Espirit does not have any right of cancellation, with or without penalty, under the supply contract.

 

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Espirit is an engineering company founded in September 2012 with the core of its technology team members from BYD. Its main product is the motor controller for electric vehicles. Espirit’s customers for logistical vehicles include, among others, Shanxi Tongjia, Fujian NLM motor, Victory Auto, Kawei Auto, and Chongqing Hengtong. These clients of Espirit will be using the modules produced by KADI.

 

Espirit is a contractor for BYD, and has a significant market share of the electric control technology for the logistical vehicles market in China. Once KADI demonstrates the ability to deliver the products, additional contracts can be expected. KADI’s control modules has passed stringent testing and evaluation by Espirit. Within Espirit’s motor controller system, the modules contracted to KADI to produce under the supply contract are:

 

  DC to DC Converter (“DCDC”) 1.5kw module: 65,000 sets

 

  DCDC 1.5kw module complete set: 15,000 sets

 

  Vehicle Control Unit (“VCU”): 65,000 sets

 

  On Board Charger (“OBC”) 3.3kw module: 60,000 sets

 

  OBC 6.6kw module: 62,000 sets

 

  Battery Management System: 30,000 sets

 

The products are to be delivered within China in the years of 2018, 2019 and 2020 with the delivery dates to be determined by particular purchase orders (“PO”). There is no latest delivery date as stipulated in the supply contract, but will be stated in each PO. There are no minimum quantities to be purchased by Espirit but recent monthly forecast updates indicate that all of the quantities of the DCDC, VCU and OBC as listed in the supply contract will be ordered and need to be delivered over the next two years. The value of the supply contract totals approximately US$50 million at the current Rmb-US$ exchange rate. Unit prices cannot be altered unless by mutual agreement between KADI and Espirit; and payments by Espirit shall be made in 90 days after delivery of products by KADI. Approximately $7.7 million will be needed from us in 2018 to service the Espirit supply contract, of which approximately $4 million is anticipated to be used for capital expenditures, and $3.7 million is anticipated to be used for working capital needs. We are in discussions with KADI to negotiate a modified payment schedule in connection with the planned acquisition in light of the fact that the proceeds raised in this offering are insufficient to fund the KADI acquisition.

 

On April 28, 2018, KADI received clearance from Dong Feng Motor Group for KADI to start production and delivery starting in May 2018 of its electric vehicle control modules for its Super Dragon Electric Bus Program (“DFM Bus Program”), which tested samples from KADI over the prior 6-month period.  KADI’s control module designed for the DFM Bus Program is a 3.0 KW DCDC converter that converts from a high voltage of 540V to a low 24V for use in steering control, air conditioning and other bus operations.   Such products represent approximately 10% of the Espirit supply contract.

 

KADI estimates the gross margin of its products will average 31% based on the average prices of the components and direct engineering costs in March 2018. There is no arrangement with Espirit that pricing is based on a cost-plus structure. Although we do not anticipate substantial fluctuations in such market-determined costs, there is no assurance that such costs will not change and that the gross margin of 31% can be maintained.

 

Rationale for the Acquisition of Controlling Stake in KADI.  KADI is an engineering company focused on the development of certain software imbedded control modules for the EV industry in China. After years of R&D, KADI has demonstrated its technology and has been awarded with a supply contract by Espirit, one of the key automotive contractors in China, for its core products in the amount of approximately US$50 million to be delivered in the years 2018, 2019 and 2020. The modules will be used in logistical/delivery vehicles for inner-city use with a daily range of 100 kilometers. The favorable conditions for Borqs to make this acquisition and the synergy between Borqs and KADI include:

 

  KADI’s immediate need for working capital in the procurement of the hardware components and investment into equipment and facilities can be provided in part by funds raised by Borqs in this offering;

 

  Borqs has a seasoned team in supply-chain management to ensure successful delivery of the hardware products;

 

  Borqs’ expertise in imbedded software within hardware products will contribute to KADI’s continuous need to upgrade its software components;

 

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  Borqs has five years of experience, and on-going contracts, supplying software to Chinese auto makers including Geely for In-Vehicle-Infotainment systems;

 

  The gross margin at current prices of the KADI EV control modules is estimated at 31%, significantly higher than the blended gross margin of Borqs for its current connected solutions and MVNO activities;

 

  The supply of the EV control modules is not seasonal and will help in reducing the seasonality of Borqs’ revenues; and

 

  Increase in diversification of Borqs’ customer base.

 

MANAGEMENT

 

Directors and Executive Officers

 

The table below identifies our current directors and executive officers:

 

Name   Age   Position   Class
Board of Directors            
Pat Sek Yuen Chan   53   Founder, Chairman of the Board, Chief Executive Officer and President   III
Honghui Deng   49   Director   I
Yaqi Feng   35   Director   III
Bill Huang   55   Director   I
Jason Zexian Shen   64   Director   II
Eric Tao   40   Director   III
Joseph Wai Leung Wong   62   Director   II
             
Executive Officers            
Bob Xiao Bo Li, Ph.D.   56   Founder, Executive Vice President of Corporate Affairs and China Sales    
Anthony K. Chan   63   Chief Financial Officer, Executive Vice President of Corporate Finance    
Simon Sun   51   Executive Vice President and Co-General Manager of Connected Solutions BU    
Hareesh Ramanna   57   Executive Vice President and Co-General Manager of Connected Solutions BU    
George Thangadurai   55   Executive Vice President and President of International Business    
Gene Wuu, Ph.D.   62   Executive Vice President and General Manager of MVNO BU    

 

The principal occupation and business experience of our executive officers and directors is as follows:

 

Pat Sek Yuen Chan,  53, is the Chairman of our board of directors, as well as our Chief Executive Officer and President. He was the founder and Chairman of the board of directors of Borqs International, and since 2007 he served as Borqs International’s Chief Executive Officer and President. Mr. Chan has over 20 years of experience in the mobile network communications sector. Prior to founding Borqs, Mr. Chan served as Senior Vice President and General Manager of the infrastructure BU of UTStarcom Inc., a telecommunications equipment company, from 2000 to 2007. Earlier, Mr. Chan was an engineering manager in Motorola responsible for the development of the GPRS switching. Mr. Chan is an established entrepreneur and has received many awards, including the “High-Caliber Talent from Overseas Award” from the PRC government, and “2012 Beijing Entrepreneur of the Year” from Silicon Dragon. Mr. Chan received his bachelor’s degree in computer science from the University of Toronto and his master’s degree in computer science from the University of British Columbia.

 

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Honghui Deng,  49, has served as one of our directors since October 2015. Dr. Deng started his education professional career in 1990 as a lecturer in Chongqing University in China. Dr. Deng has been serving as the independent director at 500.com, Ltd. (WBAI.NYSE) since May, 2011. Dr. Deng was the founder and served as the Chief Executive Officer of HHD Consulting Service LLC from 2003 to 2008. He has been serving as a fellow at the Innovation Creativity Capital Institute (IC2) of the University of Texas at Austin since 2010. Dr. Deng also has been teaching as an EMBA/MBA professor at Peking University Guanghua School of Management since 2005. He has been working as an assistant professor at the School of Business of University of Nevada, Las Vegas since 2003. From 1993 to 1997, he worked as an official in the Ministry of Education of China. Dr. Deng has extensive consulting experiences for business firms on long-term strategy, finance and management. He received a Bachelor’s Degree in Electronic Engineering and Business Administration from the School of Electronic Engineering of Chongqing University in 1990 and 1994, and a Ph.D. Degree in Business Administration from Red McCombs School of Business, University of Texas at Austin in 2003.

 

Yaqi Feng,  35, served as one of our directors since July 2015, and was our Chief Operating Officer and Secretary from July 2015 until August 2017. Ms. Feng has been working as the Executive Director of the Global Business Department in Pacific Securities Co., Ltd. since 2013, where she is responsible for Chinese companies’ overseas IPOs, cross border M&A transactions, and global investment management. From 2012 to 2013, she worked as the Managing Director of Regeneration Capital Group LLC in New York, where she was responsible for IPOs and listing projects for emerging market companies, business development, project due diligence as well as transaction management. From 2010 to 2012, Ms. Feng worked as a VP for Griffin Financial Group, a mid-sized investment bank; in this capacity she was responsible for public offerings, private placements, deal structuring, financial modeling as well as institutional sales. She also served as a manager for Asian Legend Asset Management Inc. a private equity firm based in China and New York that specialized in China related projects, from 2009 to 2010. Ms. Feng worked as an associate in the New York office of the Jun He law firm from 2007 to 2008. Ms. Feng received an LL.M from Boston University School of Law and an LL.B from the School of International Law, China University of Political Science and Law in Beijing, China, where she also earned a B.A. in Business.

 

Bill Huang , 55, is the founder and Chief Executive Officer of CloudMinds Inc., a provider of cloud connected smart machines and robotics solutions, since 2015. Mr. Huang has over 30 years of experience in the mobile network communication industry. From 2007 to 2015, Mr. Huang was the General Manager and head of research and development for China Mobile Research Institute where he led China Mobile in many key innovative projects, including OPhone, BigCloud, TD-LTE, C-RAN, PTN, MCPA, and labs.chinamobile.com. He served as Senior Vice President and Chief Technology Officer of UTStarcom Inc., a telecommunications equipment company, from 1994 to 2006, and was responsible for innovations such as MSAN, “Xiao Ling Tong” PAS, IP-DSLAM, Wacos mSwitch, GE-PON, and MediaSwitch. Mr. Huang received his Bachelor’s degree in Electronic Engineering from the Huazhong University of Science and Technology and his Master’s degree in Electronic Engineering and Computer Science from the University of Illinois at Chicago.

 

Jason Zexian Shen,  64, served as one of our directors since July 2015. Mr. Shen started his own business in 2012 to open Jason Z. Shen CPA Firm, a local CPA accounting firm in the State of New York. From 2007 to 2012, Mr. Shen worked in the AIG Corporate Comptrollers in New York as a senior accountant. He worked in Alliance Building Services from 2006 to 2007. He was the accounting manager in Gandhi Engineering, Inc. from 1994 to 2001, and the accounting manager in Berger Lehman Associates, PC from 2001 to 2006. Mr. Shen has worked as the accounting manager in the New China News Agency Hong Kong Office (Now Liaison Office of the Central People’s Government in Hong Kong from 1982 to 1991. Mr. Shen graduated from Peking University with the Bachelor’s Degree in Economy in 1982 and Master’s Degree in Accounting from Binghamton University in 1993. He is the Certified Public Accountant licensed in the State of New York.

 

Eric Tao, Ph.D. , 40, is a founding member of Keytone Ventures and since 2008 a partner of this leading venture capital firm in China focusing in technology investments. He has over 10 years of technology venture investment experience and five years of venture operations experience. His active investments include Borqs, Garena, Kuyun Interactive, Zebra, Wisjoy, InnoSpark, LP Amina, Lattice Power, China Eastern Clean Energy, Zhongte Logistics and Vega Interactive; while past investments included Greatwall Software, AMEC, TechFaith (NASDAQ: CNTF) and InvenSense (NASDAQ: INVN). Previously Dr. Tao worked as a founding member of the KPCB China Fund, covering mostly mobile internet and technology investments, and as an investment manager at Qualcomm Ventures, covering strategic investments globally. Dr. Tao was the co-founder and served as Vice President of Business Development of Clean Coal Energy in Silicon Valley. Dr. Tao received his B.S. degree from Tsinghua University, M.S. and Ph.D. degrees in engineering from Stanford University. He holds three international patents and two U.S. patents.

 

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Joseph Wai Leung Wong , 62, has served as one of our directors since August 2017, and was a member of the Borqs International board of directors from 2012 to 2017. Mr. Wong has over 29 years of experience in cross border investments and business operations. Mr. Wong was Executive Director of Credit Agricole (Suisse) Hong Kong from 2006 to 2012. From 1988 to 2006, Mr. Wong was a partner in the Tax Department of Deloitte Touche Tohmatsu Hong Kong, serving high net worth clients on cross border investment tax planning, and advising on initial public offerings in Hong Kong. Mr. Wong is a member of the Cordlife Group Limited board of directors, where he is also Chairman of the Audit Committee and a member of the Remuneration Committee Mr. Wong received his Bachelor’s degree from the University of Calgary in Alberta, Canada, and is a member of Hong Kong Independent Non-Executive Director Association.

 

Bob Li, 56, is the founder of Borqs and has served as its Executive Vice President, Corporate Affairs and China Sales since the founding of the company in 2007. Dr. Li has over 20 years of experience in research and development and management in the wireless communications, semiconductor and mobile internet industries. He was the Co-founder and served as Executive Vice President and Chief Technology Officer of Cellon International, a handset design company, from Oct 1999 to June 2007. Dr. Li received his bachelor’s degree from National University of Defense Technology, his master’s degree from University of Electronic Science and Technology of China, both in electrical engineering, and his Ph.D. in electrical and computer engineering from MacMaster University.

 

Anthony Chan, 63, is Borqs’s Chief Financial Officer and Executive Vice President, Corporate Finance and joined the company in April 2015. Mr. Chan has over 30 years of experience in U.S. and China cross border investments and business operations. From July 2013 until March 2015, Mr. Chan served as the President of Asia Sourcing for Portables Unlimited in New York, a distributor of T-Mobile USA. From March 2009 until July 2013, he served as the CFO for Tianjin Tong Guang Digital Broadcasting Co. Ltd, a mobile communications products company. For the 20 years prior to that, he was involved in multiple investment and technology transfer projects between China, the U.S and Europe, in the areas of communication products, chemical fibers, textile machinery and medical equipment. Mr. Chan received both his bachelor’s and MBA degrees from the University of California at Berkeley.

 

Simon Sun, 51, is the Executive Vice President, Co-General Manager of Borqs’s Connected Solutions BU and has served the company since November 2013. Mr. Sun has over 20 years of experience in research and development and product engineering in the mobile industry. He served as the Co-Founder and Chief Executive Officer of Nollec Wireless, Ltd., a mobile handset design house, from July 2007 to October 2013. He was the VP of engineering for CEC Wireless, another mobile handset design house in China from September 2006 to June 2007. Mr. Sun received his bachelor’s degree in Industrial Engineering from Tianjin University of China.

 

Hareesh Ramanna, 57, is our Executive Vice President, Co-General Manager of Connected Solutions BU, Managing Director of India Operations and Head of Software Development, and has served our company since July 2009. Mr. Ramanna has over 20 years of experience in the mobile industry. Prior to joining us, he served as a Senior Director and Head of Mobile Devices Software in Global Software Group, Motorola India Electronic Limited from May 1992 to November 2008. Mr. Ramanna received his bachelor’s degree in Electronics and Communication from National Institute of Engineering in 1983, Post-Graduation Certification from Indian Institute of Science and an advanced leadership Certification from McGill University in collaboration with Lancaster University of UK and Indian Institute of Management in Bangalore.

 

George Thangadurai, 55, is our Executive Vice President, President of International Business and has served our company since November 2014. Previously, Mr. Thangadurai worked for Intel more than two decades in various senior technical and management roles including GM of Strategy & Product Management for the Mobile PC business and GM of Client Services business. He was part of the founding team that established the Center for Development for Telematics (C-DOT) in India. Mr. Thangadurai received his MSEE in Computer Engineering from the University of Rhode Island, USA, his B.E. degree in Electronics and Communication from Madurai University, India and has 7 issued patents and 3 research publications.

 

Gene Wuu, 62, is our Executive Vice President, General Manager of our MVNO BU and has served our company since the beginning of 2009 when he was our Vice President of Product Management. Prior to joining us, he served as a Senior Vice President and Chief Technology Officer of UTStarcom, a telecommunications equipment company, from 2003 to 2009. He had overseen the product and business development of UTStarcom core network during the growing period of the company. Before his tenure at UTStarcom, Dr. Wuu had worked for Telcordia Technologies (formerly Bellcore, now Ericson) and the Bell system for 17 years focusing on Core network and OSS products Dr. Wuu received his bachelor’s degree in electronics engineering from the National Taiwan Institute of Technology in 1980 and his Ph.D. in computer science from the State University of New York at Stony Brook.

 

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Classified Board of Directors

 

In accordance with our memorandum and articles of association, our Board is divided into three classes, with the number of directors in each class to be as nearly equal as possible. Our existing Class I directors will serve until our 2018 annual general meeting, our existing Class II directors will serve until our 2019 annual general meeting, and our existing Class III directors will serve until our 2020 annual general meeting. Commencing at our 2018 annual general meeting, and at each following annual general meeting, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third annual general meeting following their election.

 

Director Independence

 

Nasdaq listing standards require that a majority of our Board be independent. An “independent director” is a person, other than an officer or employee of the company or its subsidiaries, who has no relationship which in the opinion of the company’s board of directors would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our Board has determined that Mr. Wong, Mr. Shen, Dr. Deng, Mr. Tao and Mr. Huang are “independent directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors will hold regularly scheduled meetings at which only independent directors are present.

 

Leadership Structure and Risk Oversight

 

The Board does not have a lead independent director. Pat Chan is our Chief Executive Officer and Chairman of the Board.

 

Committees of the Board of Directors

 

Audit Committee

 

The members of our Audit Committee are Mr. Huang, Mr. Shen and Mr. Wong (chairman of the committee), each of whom is an independent director. Each member of the Audit Committee is financially literate and our Board determined Mr. Wong qualifies as our “audit committee financial expert,” as such term is defined in Item 401(h) of Regulation S-K. Our Audit Committee charter details the responsibilities of the Audit Committee, including:

 

  the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;

 

  pre-approving all audit and non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;

 

  reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;

 

  setting clear hiring policies for employees or former employees of the independent auditors;

 

  setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

 

  obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within, the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;

 

  reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and

 

  reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

 

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Compensation Committee

 

The members of our Compensation Committee are Mr. Huang, Mr. Shen (chairman of the committee), and Mr. Wong, each of whom is an independent director. Our Compensation Committee charter details the principal functions of the Compensation Committee, including:

 

  reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer’s based on such evaluation in executive session at which the Chief Executive Officer is not present;

 

  reviewing and approving the compensation of all of our other executive officers;

 

  reviewing our executive compensation policies and plans;

 

  implementing and administering our incentive compensation equity-based remuneration plans;

 

  assisting management in complying with our proxy statement and annual report disclosure requirements;

 

  approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;

 

  producing a report on executive compensation to be included in our annual proxy statement; and

 

  reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

 

The charter also provides that the Compensation Committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the Compensation Committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.

 

Compensation Committee Interlocks and Insider Participation

 

As of the date of this prospectus, no officer or employee serves as a member of the Compensation Committee. None of our executive officers serves as a member of the Board or Compensation Committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.

 

Code of Ethics

 

Our Code of Business Conduct and Ethics for Employees and Directors (“Code of Ethics”) applies to all of our employees, including our chief executive officer, chief financial officer and principal accounting officer. Our Code of Ethics is available on our corporate website,  www.borqs.com . If we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to satisfy the requirements under Item 5.05 of Form 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Ethics that apply to our principal executive officer, principal financial officer and principal accounting officer by posting the required information on our website.

 

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Involvement in Certain Legal Proceedings

 

No executive officer or director of ours has been involved in the last ten years in any of the following:

 

  Any bankruptcy petition filed by or against any business or property of such person, or of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

 

  Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

  Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

 

  Being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

 

  Being the subject of or a party to any judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended or vacated relating to an alleged violation of any federal or state securities or commodities law or regulation, or any law or regulation respecting financial institutions or insurance companies, including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail, fraud, wire fraud or fraud in connection with any business entity; or

 

  Being the subject of or a party to any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act, any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

EXECUTIVE COMPENSATION

 

This section discusses the material components of the 2017 executive compensation program for our named executive officers, who are identified in the Summary Compensation Table below.

 

Summary of Cash and Certain Other Compensation

 

The Company has opted to comply with the executive compensation disclosure rules applicable to emerging growth companies. The scaled down disclosure rules are those applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act, which require compensation disclosure for the Company’s principal executive officer and its two most highly compensated executive officers other than the principal executive officer whose total compensation for 2017 exceeded $100,000. Pat Chan is our principal executive officer. During 2017, the two most highly compensated executive officers other than Mr. Chan whose total compensation exceeded $100,000 were Bob Li, EVP Corporate Affairs and China Sales, and Anthony Chan, Chief Financial Officer. Pat Chan, Bob Li, and Anthony Chan are referred to in this prospectus as our named executive officers.

 

The following table provides information regarding the compensation awarded to, or earned by, the named executive officers for the past two fiscal years.

 

Summary Compensation Table

 

Name and principal position   Fiscal
Year
  Salary
(US$)
    Bonus
(US$)
    Stock awards (US$)     Option awards (US$)     Non-equity incentive plan compensation (US$)     Nonqualified deferred compensation earnings
(US$)
    All other compensation (US$)     Total
(US$)
 
Pat Sek Yuen Chan,   2017     366,459       70,345             813,092                       —       1,249,896  
Chief Executive Officer   2016     306,776                                                     306,776  
                                                                     
Bob Xiao Bo Li, EVP   2017     256,433       1,202                                     257,635  
Corporate Affairs & China Sales   2016     255,760                                                     255,760  
                                                                     
Anthony K. Chan   2017     218,000       35,844             536,581                         790,425  
Chief Financial Officer   2016     150,000                                                     150,000  

 

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2017 Outstanding Equity Awards at Year-End Table

 

The following table provides information regarding each unexercised stock option held by the named executive officers as of December 31, 2017.

 

Name   Grant date  

Vesting Start date (1)

  Number of securities underlying unexercised options vested
(#)
    Number of securities underlying unexercised options unvested (#)    

Options exercise
price
(US$) (2)

    Option Expiration date
Pat Sek Yuen Chan   10/24/2009   10/24/2009     47,234           $ 2.230     12/3/2019
    7/23/2011   7/23/2011     30,060           $ 2.920     7/23/2021
    5/26/2012   5/26/2012     1,719           $ 2.920     5/26/2022
    4/27/2013   4/27/2013     3,211           $ 4.860     4/27/2023
    5/30/2015   5/30/2015     1,281       702     $ 4.860     5/30/2025
    2/12/2017   1/1/2017     212,555       70,851     $ 7.180     1/1/2027
Bob Xiao Bo Li   10/24/2009   10/24/2009     28,340           $ 2.230     12/3/2019
    7/23/2011   7/23/2011     30,239           $ 2.920     7/23/2021
    5/26/2012   5/26/2012     675           $ 2.920     5/26/2022
    4/27/2013   4/27/2013     1,818           $ 4.860     4/27/2023
    8/16/2014   5/24/2014     779           $ 4.860     8/16/2024
    5/30/2015   5/30/2015     503       276     $ 4.860     5/30/2025
Anthony K. Chan   2/12/2017   1/1/2017     129,894       59,043     $ 7.180     1/1/2027

 

 

* As adjusted for merger on August 18, 2017.

 

(1) Except as otherwise described in these footnotes, 25% of the options vest on the first anniversary of the vesting start date and 1/48 of the options shall vest each month thereafter over the next three years.

 

(2) Exercise price represents the exercise price of the options granted, as determined by the Board, on the grant date. See the accompanying notes to the audited financial statements — critical accounting policies and estimates, and stock-based compensation, for a discussion of the valuation of the Company’s options and ordinary shares.

 

Employment Agreements and Other Arrangements with Named Executive Officers

 

Under our employment agreement with Pat Sek Yuen Chan, Mr. Chan serves as our President and Chief Executive Officer at a base salary of $303,143, In the event Mr. Chan’s employment is terminated upon the occurrence of a merger with another company that has been in a loss position for three years or declared bankruptcy, dissolved or liquidated, or if changes in the law result in the company or Mr. Chan unable to legally perform the contract, the Company will pay Mr. Chan an appropriate subsidy and compensation pursuant to the terms of the arrangement and in accordance with the provisions of relevant Chinese laws and regulations. Mr. Chan also agreed not to hold any appointment for any other entity that has a competitive relationship with the Company during, and for one year following the termination of, his employment arrangement with us.

 

Under our employment agreement with Anthony Chan, Mr. Chan serves as our Chief Financial Officer and receives monthly compensation in the amount of $21,000 per month, subject to periodic review and adjustment. The term of Mr. Chan’s employment agreement is two years unless both parties mutually agree to extend the term. We may terminate the agreement without any reason by giving Mr. Chan not less than two months’ prior notice in writing or salary in lieu thereof. We may also terminate this agreement without any notice period or termination payment under limited circumstances set forth in Mr. Chan’s employment agreement.

 

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Under our employment agreement with Bob Li, Mr. Li serves as Senior Vice President for Commercial Affairs at a base salary of $252,486, subject to review and adjustment. The contract will be terminated upon expiration of the term, if it is terminated in the probationary period, by mutual agreement or in the case of investigation of Mr. Chan for criminal liability. We may also voluntarily terminate the agreement in certain circumstance, as described in the agreement. In the event Mr. Chan’s employment is terminated upon the occurrence of a merger with another company, when the company has been in a loss position for three years, when the company has declared bankruptcy, dissolution or liquidation, or if changes in the law result in the company or Mr. Chan unable to legally perform the contract, the Company will pay Mr. Li an appropriate subsidy and compensation pursuant to the terms of the arrangement and in accordance with the provisions of relevant Chinese laws and regulations.

 

Borqs Technologies, Inc. 2017 Equity Incentive Plan

 

In connection with our acquisition of Borqs International by way of merger, we assumed the obligations under outstanding stock options issued under the Borqs International 2007 Global Share Plan (“2007 Plan”), as adjusted to give effect to the merger. Those outstanding options to purchase shares of Borqs International were converted into options to purchase 2,825,273 of our ordinary shares, with exercise prices ranging from $2.12 to $9.10 per share.

 

Effective August 18, 2017, we adopted the Borqs Technologies, Inc. 2017 Equity Incentive Plan (“Incentive Plan”), with five million ordinary shares issuable pursuant to equity awards under the plan. The number of ordinary shares reserved for issuance under the Incentive Plan will increase automatically on January 1 of each of 2018 through 2027 by a number of shares that is equal to 5% of the aggregate number of outstanding ordinary shares as of the immediately preceding December 31. Our Board may reduce the size of this increase in any particular year. Outstanding awards under the 2007 Plan were assumed under the Incentive Plan as of our acquisition of Borqs International by way of merger on August 18, 2017. At December 31, 2017, 2,825,273 shares were issuable pursuant to options outstanding under the Incentive Plan, with a weighted average exercise price of $5.07 per share.

 

In addition, the following shares will be available for grant and issuance under our Incentive Plan:

 

  shares subject to options or share appreciation rights granted under our Incentive Plan that cease to be subject to the option or stock appreciation right for any reason other than exercise of the option or share appreciation right;

 

  shares subject to awards granted under our Incentive Plan that are subsequently forfeited or repurchased by us at the original issue price;

 

  shares subject to awards granted under our Incentive Plan that otherwise terminate without shares being issued;

 

  shares surrendered, cancelled or exchanged for cash or a different award (or combination thereof).

 

Shares that otherwise become available for grant and issuance because of the provisions above will not include shares subject to awards that initially became available due to our substitution of outstanding awards granted by another company in an acquisition of that company or otherwise.

 

Eligibility.  The Incentive Plan provides for the grant of incentive stock options to our employees and any parent and subsidiary corporations’ employees and for the grant of nonqualified share options, restricted shares, restricted share units, share appreciation rights, share bonuses and performance awards to our employees, directors and consultants and our parent and subsidiary corporations employees and consultants. No more than 5,000,000 shares may be issued as incentive stock options under the Incentive Plan. In addition, no participant in the Incentive Plan may receive awards for more than 2,000,000 shares in any calendar year, except that new employees are eligible to be granted up to a maximum of award of 4,000,000 shares.

 

Administration.  The Incentive Plan is administered by the Board or by our Compensation Committee; in this plan description we refer to the Board or Compensation Committee as the plan administrator. The plan administrator determines the terms of all awards.

 

Types of Awards.  The Incentive Plan allows for the grant of options, restricted shares, restricted share units, share appreciation rights, share bonuses and performance awards.

 

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Award Agreements.  All awards under the Incentive Plan are evidenced by an award agreement which shall set forth the number of shares subject to the award and the terms and conditions of the award, which shall be consistent with the Incentive Plan.

 

Term of Awards.  The term of awards granted under the Incentive Plan is ten years.

 

Vesting Schedule and Price.  The plan administrator has the sole discretion in setting the vesting period and, if applicable, exercise schedule of an award, determining that an award may not vest for a specified period after it is granted and accelerating the vesting period of an award. The plan administrator determines the exercise or purchase price of each award, to the extent applicable.

 

Transferability.  Unless the plan administrator provides otherwise, the Incentive Plan does not allow for the transfer of awards other than by will or the laws of descent and distribution. Unless otherwise permitted by the plan administrator, options may be exercised during the lifetime of the optionee only by the optionee or the optionee’s guardian or legal representative.

 

Changes in Capitalization.  In the event there is a specified type of change in our capital structure without our receipt of consideration, such as a share split, or if required by applicable law, appropriate adjustments will be made to the share maximums and exercise prices, as applicable, of outstanding awards under the Incentive Plan.

 

Change in Control Transactions.  In the event of specified types of mergers or consolidations, a sale, lease, or other disposition of all or substantially all of our assets or a corporate transaction, outstanding awards under our Incentive Plan may be assumed or replaced by any surviving or acquiring corporation; the surviving or acquiring corporation may substitute similar awards for those outstanding under our Incentive Plan; outstanding awards may be settled for the full value of such outstanding award (whether or not then vested or exercisable) in cash, cash equivalents, or securities (or a combination thereof) of the successor entity with payment deferred until the date or dates the award would have become exercisable or vested; or outstanding awards may be terminated for no consideration. The plan administrator, may, on a discretionary basis, accelerate, in full or in part, the vesting and exercisability of the awards.

 

Governing Law and Compliance with Law.  The Incentive Plan and awards granted under it are governed by and construed in accordance with the laws of the British Virgin Islands. Shares will not be issued under an award unless the issuance is permitted by applicable law.

 

Amendment and Termination.  The Incentive Plan terminates ten years from the date it was approved by our shareholders, unless it is terminated earlier by our Board. Our Board may amend or terminate our Incentive Plan at any time. Our Board generally may amend our Incentive Plan, without shareholder approval unless required by applicable law.

 

2017 Director Compensation

 

During 2017, our nonemployee directors were entitled to receive cash compensation and an option to purchase ordinary shares. All nonemployee directors receive an annual fee of $30,000, and the chairperson of the Audit Committee receives an additional $18,000 per year and the chairperson of the Compensation Committee receives an additional $5,000 per year. Directors are entitled to be reimbursed for their reasonable expenses incurred in attending meetings of the Board and committees of the Board. The following table sets forth the compensation paid to each person who served as a member of our Board in 2017. Pat Chan, our Chief Executive Officer and Chairman of the Board, did not receive any additional compensation for his service as a director, and his compensation is detailed in the Summary Compensation Table and related disclosures.

 

2017 Director Compensation Table

 

Name   Fees
earned or paid in cash
($)
    Stock
awards
($)
    Option
awards
($)
    Non-equity incentive plan compensation
($)
    Nonqualified deferred compensation earnings
($)
    All other compensation
($)
    Total
($)
 
Pat Sek Yuen Chan                                          
Honghui Deng     30,000             82,410                         112,410  
Yaqi Feng     30,000             82,410                         112,410  
Bill Huang     30,000             82,410                         112,410  
Jason Zexian Shen     35,000             82,410                         117,410  
Eric Tao     30,000             82,410                         112,410  
Joseph Wai Leung
Wong
    48,000             82,410                         130,410  

 

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2017 Equity Awards for Directors

 

Our director compensation policy provides for annual grants of stock options to the nonemployee directors as follows:

 

  annual grant of an option to purchase 30,000 ordinary shares, commencing on October 15, 2017;

 

  options to vest 25% on the first anniversary of the grant date, and 1/48th each of the next 36 months thereafter; and

 

  exercise price equal to the closing price of the ordinary shares as traded on Nasdaq on the day immediately before the grant date.

 

  The following table provides options held by our nonemployee directors as of December 31, 2017.

 

Name   Grant
date
  Vesting
Start
date
  Number of securities underlying unexercised options vested
(#)
    Number of securities underlying unexercised options unvested (#)     Option exercise price
($)
    Option Expiration date
Honghui Deng   11/18/2017   10/15/2017           30,000     $ 5.30     10/15/2027
Yaqi Feng   11/18/2017   10/15/2017           30,000     $ 5.30     10/15/2027
Bill Huang   11/18/2017   10/15/2017           30,000     $ 5.30     10/15/2027
Jason Zexian Shen   11/18/2017   10/15/2017           30,000     $ 5.30     10/15/2027
Eric Tao   11/18/2017   10/15/2017           30,000     $ 5.30     10/15/2027
Joseph Wai Leung Wong   11/18/2017   10/15/2017           30,000     $ 5.30     10/15/2027

 

Limitation of Liability and Indemnification of Directors and Officers

 

Our memorandum and articles of association, the BVI Business Companies Act, (as amended), and the common law of the British Virgin Islands allow us to indemnify our officers and directors from certain liabilities. Our memorandum and articles of association provides that we may indemnify, hold harmless and exonerate against all direct and indirect costs, fees and expenses of any type or nature whatsoever, any person who (a) is or was a party or is threatened to be made a party to any proceeding by reason of the fact that such person is or was a director, officer, key employee, adviser of our company; or (b) is or was, at the request of our company, serving as a director of, or in any other capacity is or was acting for, another Enterprise.

 

We will only indemnify the individual in question if the relevant indemnitee acted honestly and in good faith with a view to the best interests of our company and, in the case of criminal proceedings, the indemnitee had no reasonable cause to believe that his conduct was unlawful. The decision of our directors as to whether an indemnitee acted honestly and in good faith and with a view to the best interests of our company and as to whether such indemnitee had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for the purposes of our charter, unless a question of law is involved.

 

The termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the relevant indemnitee did not act honestly and in good faith and with a view to the best interests of our company or that such indemnitee had reasonable cause to believe that his conduct was unlawful.

 

We may purchase and maintain insurance, purchase or furnish similar protection or make other arrangements including, but not limited to, providing a trust fund, letter of credit, or surety bond in relation to any indemnitee or who at our request is or was serving as a Director, officer or liquidator of, or in any other capacity is or was acting for, another Enterprise, against any liability asserted against the person and incurred by him in that capacity, whether or not we have or would have had the power to indemnify him against the liability as provided in our memorandum and articles of association.

 

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We have insurance policies under which, subject to the limitations of the policies, coverage is provided to our directors and officers against loss arising from claims made by reason of breach of fiduciary duty or other wrongful acts as a director or officer, including claims relating to public securities matters, and to us with respect to payments that may be made by us to these officers and directors pursuant to our indemnification obligations or otherwise as a matter of law.

 

We have entered into indemnification agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained in the BVI Companies Act, 2004 or our charter. These indemnification agreements require us, among other things, to indemnify our directors and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements also require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.

 

At present, we are not aware of any pending litigation or proceeding involving any person who is or was one of our directors, officers, employees or other agents or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, for which indemnification is sought, and we are not aware of any threatened litigation that may result in claims for indemnification.

 

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

 

In addition to the compensation arrangements, including employment, termination of employment and change of control arrangements and indemnification arrangements described in “Executive Compensation,” the following is a description of each transaction since January 1, 2015 and each currently proposed transaction in which:

 

  we have been or are to be a participant;

 

  the amount involved exceeds $120,000; and

 

  any of our directors, executive officers or holders of more than 5% of our capital stock, or any immediate family member of or person sharing the household with any of these individuals, had or will have a direct or indirect material interest.

 

Intel and Qualcomm

 

In the last three years, our Connected Solutions BU has worked closely with chipset partners, including Intel and Qualcomm, to develop new connected devices and commercially launch Android-based devices in 11 countries, and as of June 30, 2018, more than 10 million mobile devices sold worldwide have BorqsWare software platform solutions embedded. Intel and Qualcomm are, or previously were, shareholders of the Company in the last three years, and we developed the reference Android software platform and hardware platform for their phones and tablets. We provided software services and hardware to Intel in 2015 and 2016. See “Note 17 - Related Party Transactions” to our financial statements for the fiscal year ended December 31, 2017 included herein.

 

Repurchase of Shares from Zhengqi

 

On January 10, 2018, we entered into a stock repurchase agreement (“Stock Repurchase Agreement”) with Zhengqi, pursuant to which we agreed to repurchase 966,136 of our ordinary shares that were originally issued and sold to Zhengqi on August 18, 2017, at an aggregate purchase price of approximately $10 million, or $10.40 per share. In addition, Zhengqi forfeited all of its rights to 1,278,776 shares held in escrow and which shares would instead be treated as part of the merger consideration shares under the Merger Agreement (as defined below) pursuant to which the Company acquired Borqs International. The Stock Repurchase Agreement provides that those shares will be treated in the following manner: transfer 51,151 shares (4% of the total) into the indemnity escrow account; and deliver 1,227,625 shares to the former Borqs International shareholders based on their respective proportionate interests in the merger consideration (See “Pacific Related Person Transactions”). The Company is working with Zhengqi to satisfy certain conditions and make necessary arrangements before completing the repurchase. As of August 3, 2018, the 1,278,776 escrow shares were forfeited and released from escrow and the Company had obtained the consent of its existing lenders with respect to the transaction. The return and cancellation of the 966,136 shares remain in process. We anticipate closing the transaction in 2018. Proceeds from this offering will not be used to repurchase the shares from Zhengqi. The funds used in the repurchase were the same amount of funds provided by Zhengqi when the shares were sold to Zhengqi on August 18, 2017 under the Backstop and Subscription Agreement between the Company, Zhengqi and EarlyBirdCapital.

 

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Policies and Procedures for Related Person Transactions

 

Our Board adopted a written related person transactions policy that sets forth the policies and procedures for the review and approval or ratification of related person transactions. Our policy requires that a “related person” (as defined in paragraph (a) of Item 404 of Regulation S-K) must promptly disclose to our general counsel any “related person transaction” (defined as any transaction that is reportable by us under Item 404(a) of Regulation S-K in which we are or will be a participant and the amount involved exceeds $120,000 and in which any related person has or will have a direct or indirect material interest) and all material facts with respect thereto. The general counsel will promptly communicate such information to our Audit Committee or another independent body of our Board. No related person transaction will be entered into without the approval or ratification of our Audit Committee or another independent body of our Board. It is our policy that directors interested in a related person transaction will recuse themselves from any such vote. Our policy does not specify the standards to be applied by our Audit Committee or another independent body of our Board in determining whether or not to approve or ratify a related person transaction, although such determinations will be made in accordance with BVI law.

 

Pacific Related Person Transactions

 

In this section, reference to “Pacific” means “Pacific Special Acquisition Corp.,” the public company whose securities were traded on The Nasdaq Stock Market prior to our acquisition of Borqs International by way of merger.

 

In July 2015, Pacific issued an aggregate of 1,437,500 ordinary shares (“founder shares”) to its initial shareholders for an aggregate purchase price of $25,000 in cash, or approximately $0.017 per share. On or about August 3, 2015, Zhengqi transferred an aggregate of 410,000 ordinary shares to the members of Pacific’s board of directors (other than Mr. Shen, who purchased 30,000 ordinary shares directly from Pacific) and Pacific’s Chief Executive Officer and Chief Operating Officer. All of the founder shares were placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent, at the time of Pacific’s initial public offering (“IPO”).

 

Pacific’s initial shareholders have agreed not to transfer, assign or sell any of their founder shares (except to certain permitted transferees) until, (i) with respect to 50% of the founder shares, the earlier of (i) August 18, 2018 or (ii) the date on which the closing price of our ordinary shares equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after August 18, 2017, and (ii) with respect to the remaining 50% of the founder shares, upon August 18, 2018. one year after the date of the consummation of our initial business combination, or earlier, in either case, the transfer restrictions may be lifted earlier upon our consummation of, subsequent to our initial business combination, we consummated a subsequent liquidation, merger, stock exchange or other similar transaction that which results in all of our shareholders having the right to exchange their ordinary shares for cash, securities or other property. As of the date of this prospectus, such lock-up period has expired.

 

In a private placement that closed simultaneously with the closing of Pacific’s initial public offering, including the closing of the over-allotment option, Zhengqi purchased an aggregate of 497,671 units at a price of $10.40 per share.

 

Until August 18, 2017, Pacific’s Chairman made available to Pacific, through one of his affiliates, office space, utilities and secretarial and administrative services, as Pacific required from time to time. Pacific agreed to pay an affiliate of the Chairman $10,000 per month for these services. Pacific believes, based on rents and fees for similar services in the Shanghai area, that the fee charged by Pacific’s Chairman is at least as favorable as Pacific could have obtained from an unaffiliated person.

 

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Pacific paid each of Pacific’s independent directors an annual retainer of $30,000 (to be prorated for a partial term), payable in arrears commencing on October 20, 2016 and ending on August 18, 2017. Zhengqi paid Mr. Boris, one of Pacific’s directors, a $50,000 consulting fee as compensation for advisory services provided by Mr. Boris to Zhengqi prior to Pacific’s initial public offering in connection with selecting potential underwriters, attorneys, accountants and other necessary professionals for such offering. Additionally, on January 10, 2017, Pacific entered into an agreement (the “Director’s Agreement”) to pay Mr. Boris certain additional fees to act a special director to Pacific’s board of directors in Pacific’s efforts in closing our acquisition of Borqs International by way of merger. Such agreement became effective December 23, 2016 and continued until August 18, 2017. The Company paid Mr. Boris a cash fee of $50,000. In addition, as of December 23, 2016, Zhengqi sold Mr. Boris 80,000 ordinary shares at a purchase price of $0.017 per share provided that a portion of such shares were subject to forfeiture and were to be transferred to Mr. Boris following the consummation of our acquisition of Borqs International by way of merger.

 

Prior to Pacific’s IPO, Zhengqi advanced Pacific an aggregate of $90,917 and loaned Pacific $300,000 to cover expenses related to that offering. This advance and loan were repaid from the proceeds of Pacific’s IPO not placed in the trust account.

 

On November 9, 2016, Zhengqi loaned Pacific $500,000, to be used for expenses relating to investigating and selecting a target business and other working capital requirements. The convertible promissory note issued in connection therewith, as amended on February 9, 2017, was non-interest bearing, due and paid on August 18, 2017. The convertible promissory note was convertible, in whole or in part, at the election of Zhengqi, upon the consummation of an initial business combination, into units at a price of $10.00 per unit. The promissory note was repaid in full in cash on August 18, 2017.

 

Members of Pacific’s management advanced to Pacific an aggregate of $229,061 to cover expenses related to identifying targets for an initial business combination. The advances were non-interest bearing, unsecured, due and repaid on August 18, 2017.

 

In connection with Pacific’s April 18, 2017 meeting of shareholders Zhengqi loaned an aggregate of $612,000 to Pacific ($0.03 for each public share not redeemed for each month between April 20, 2017 until August 21, 2017). As a result, the pro rata portion of the funds available in the trust account for ordinary shares that were not redeemed increased from approximately $10.40 per share to approximately $10.52 per share. Zhengqi’s loan was repaid in full on August 18, 2017.

 

Pursuant to the terms of the Merger Agreement, as amended on May 10, 2017 and June 29, 2017 (the “Merger Agreement”), and in consideration of entering into the Backstop and Subscription Agreement described below, Zhengqi and its assignees, including EarlyBirdCapital, were entitled to receive 2,352,285 ordinary shares if Company performance targets were not achieved by June 30, 2018 (the “Escrowed Shares”); if those targets were achieved, those shares (to the extent earned) would be delivered to the former shareholders of Borqs International. These Escrowed Shares were issued on August 18, 2017 in the name of Zhengqi and deposited in escrow pursuant to an escrow agreement (“Escrow Agent”) with the Company’s transfer agent, Continental Stock Transfer & Trust Company, as escrow agent (the “Escrow Agent”), with Zhengqi and EarlyBirdCapital entitled to all voting rights and dividend rights (other than equity securities paid as dividends). Any portion of these shares that are earned by the former shareholders of Borqs International will be forfeited by Zhengqi and the Company will issue new equivalent shares to the former shareholders of Borqs International, with four percent of these shares deposited in escrow to support indemnification obligations under the Merger Agreement. In connection with our acquisition of Borqs International by way of merger, we amended our charter amended to require, for future acquisitions by the Company prior to September 30, 2018 having a value in excess of $60 million, the approval of at least two-thirds of the members of our then-serving board of directors, to grant Zhengqi information rights relating to such acquisitions, and, if requested by Zhengqi, to provide a fairness opinion in respect of such acquisitions.

 

On May 11, 2017, Pacific and Zhengqi entered into a Backstop and Subscription Agreement, pursuant to which Zhengqi agreed to purchase up to $24.0 million of our ordinary shares through (i) open market or privately negotiated transactions with third parties, (ii) a private placement at a price of $10.40 per share with consummation to occur concurrently with that of our acquisition of Borqs International by way of merger or (iii) a combination thereof, in order to ensure that there was at least $24.0 million in the trust account together with proceeds from any private placement to be conducted prior to the closing of our acquisition of Borqs International by way of merger. Zhengqi was entitled, at its sole election, to purchase additional ordinary shares in excess of such $24.0 million requirement, up to a total of $24.0 million purchased in total in connection with the Backstop and Subscription Agreement. On August 16, 2017, $750,000 of the obligations of Zhengqi to purchase Pacific ordinary shares in the private placement under the Backstop and Subscription Agreement were assigned to EarlyBirdCapital. In connection with our merger with Borqs International and as consideration for the Backstop and Subscription Agreement, Pacific sold 1,038,251 ordinary shares for an aggregate consideration of approximately $10.8 million; we plan to repurchase 966,136 of these ordinary shares, as described under “— Repurchase of Shares from Zhengqi.”

 

 In connection with our repurchase of 966,136 of our ordinary shares from Zhengqi, as of August 3, 2018, Zhengqi has forfeited 1,278,776 of the Escrowed Shares, which shares were distributed in accordance with the Stock Repurchase Agreement and Escrow Agreement.

 

Additionally, as the Company did not expect to have achieved certain performance targets by June 30, 2018 as required by the Merger Agreement, the parties agreed to release the remaining Escrowed Shares without undertaking the verification procedures outlined in the Merger Agreement and Escrow Agreement. Accordingly, as of August 3, 2018, the Escrow Agent delivered 1,073,059 of the remaining Escrowed Shares from the escrow account to Zhengqi and EarlyBirdCapital.

  

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Pursuant to a registration rights agreement entered into on October 14, 2015, Pacific’s initial shareholders and EarlyBirdCapital, and their permitted transferees, can demand that we register the offer and sale of ordinary shares that they acquired on or prior to our initial public offering. The holders of the majority of those founder shares are entitled to demand that we register these ordinary shares at any time commencing May 18, 2018. The holders of the private units (or underlying securities) are entitled to demand that the Company register these securities at any time after August 18, 2017. In addition, those holders have “piggy-back” registration rights on registration statements filed after August 18, 2017, including the registration statement for this offering. At the closing of our acquisition of Borqs International by way of merger, the Company, Zhengqi, EarlyBird Capital and certain other investors amended and restated the registration rights agreement to include similar registration rights with respect to ordinary shares issued as merger consideration in that merger, and the ordinary shares acquired by Zhengqi and EarlyBirdCapital in connection with the Backstop and Subscription Agreement.

 

Pursuant to a registration rights agreement entered into on August 18, 2017 in connection with our merger with Borqs International, the former holders of Borqs International shares and warrants, and their permitted transferees, can demand that we register the offer and sale of ordinary shares that they acquired on or prior to the merger, subject to certain transfer restrictions in the lock-up agreement and escrow arrangements entered into in connection with the merger. After May 18, 2018, the holders of the majority of those shares are entitled to demand and “piggy-back” registration rights, subject to certain exceptions and customary write-backs, provided that in all cases, we were not obligated to effect any such registration until August 18, 2018.  

 

PRINCIPAL SHAREHOLDERS AND PARTICIPATING STOCKHOLDERS

 

The following table presents information as to the beneficial ownership of our ordinary shares as of September 1, 2018, and as adjusted to reflect the sale of ordinary shares in this offering, by:

 

  each shareholder known by us to be the beneficial owner of more than 5% of our ordinary shares;
     
 

each of the Participating Stockholders;

 

  each of our directors;
     
  each of our named executive officers; and

 

  all of our directors and executive officers as a group.

 

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and thus represents voting or investment power with respect to our securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Ordinary shares subject to options that are currently exercisable or exercisable within 60 days of September 1, 2018 are deemed to be outstanding and to be beneficially owned by the person holding the options for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

 

Percentage ownership of our ordinary shares before this offering is based on 31,303,350 ordinary shares outstanding on June 30, 2018. Percentage ownership of our ordinary shares after this offering (assuming no exercise of the underwriters’ option to purchase additional shares) also assumes the foregoing as well as the sale of shares in this offering, before giving effect to shares withheld to satisfy the associated withholding tax obligations. Unless otherwise indicated, the address of each of the individuals and entities named below is c/o Borqs Technologies, Inc., Building B23-A, Universal Business Park No. 10, Jiuxianqiao Road, Chaoyang District, Beijing, 100015 China.

 

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    Number of Shares  
    Before this offering    

Offered

Hereby

    After this offering  
    Number of Shares     %     Number of Shares     Number of Shares     %  
Name and Address of Beneficial Owners of 5% or more (1)                              
                                         
Zhengqi International Holding Limited (11)(17)     3,431,074       11.0       1,464,938 (18)     1,966,136      
Intel Capital Corporation (5)     4,016,696       12.8       -       4,016,696          
Norwest Venture Partners (6)     3,533,482       11.3       -       3,533,482          
Asset Horizon International Limited (2)     3,470,821       11.1       -       3,470,821          
Keytone Ventures LP (3)     3,198,861       10.2       -       3,198,861          
GSR Entities (4)     2,747,607       8.8       -       2,747,607          
Ninepoint Capital LLC (17)     536,067       1.8       536,067 (18)     -       *  
                                         
Directors and Executive Officers                                        
Pat Sek Yuen Chan (7)(10)     1,022,140       3.2       -       1,022,140          
Honghui Deng (12)     60,000       *       -       60,000       *  
Yaqi Feng (12)     90,000       *       -       90,000       *  
Bill Huang (12)     30,000       *       -       30,000       *  
Jason Zexian Shen (12)     60,000       *       -       60,000       *  
Joseph Wai Leung Wong (12)     30,000       *       -       30,000       *  
Bob Li, Ph.D. (8)(10)     406,077       1.3       -       406,077          
Anthony K. Chan (9)(10)     173,779       *       -       173,779       *  
Eric Tao (12)     30,000       *       -       30,000       *  
Simon Sun (13)     3,225       *       -       3,225       *  
Hareesh Ramanna (14) (10)     205,351       *       -       205,351       *  
George Thangadurai (15)     129,894       *       -       129,894       *  
Gene Wuu, Ph.D. (16) (10)     96,917       *       -       96,917       *  
All directors and officers as a group (13 persons) (10)     2,368,383       7.6       2,001,005       2,368,383          

 

 

 

* Less than one percent
(1) Unless otherwise indicated, the business address of each of the individuals is Building B23-A, Universal Business Park, No.10 Jiuxianqiao Road, Chaoyang District, Beijing 100015, China.
(2) Fung Bik Wah is the sole director of Asset Horizon International Limited and is deemed as to have voting and dispositive control over shares held by of record by Asset Horizon International Limited. The business address of Asset Horizon International Limited is Unit C, 8/F, Jonsim Place, 228 Queen’s Road East, Hong Kong.
(3) The general partner of Keytone Ventures, L.P. is Keytone Capital Partners, L.P. (“Keytone Partners”), and Keytone Partners and Keytone Investment Group, Ltd. (“Keytone Ltd”), the general partner of Keytone Partners, may be deemed to have sole voting power, and Joe Zhou, the sole member and director of Keytone Ltd, may be deemed to have sole voting power with respect to such shares and disclaims beneficial ownership of such shares except to the extent of such individual’s proportionate pecuniary interest therein. The address of Keytone Ventures, L.P. is P.O. Box 309, Ugland House, Grand Cayman, KY-1104, Cayman Islands.
(4) Includes 2,451,709 ordinary shares issued to GSR Ventures II, L.P., 147,102 ordinary shares issued to GSR Associates II, L.P. and 2,842 ordinary shares issued to Banean Holdings Ltd. GSR Ventures II, L.P., GSR Associates II, L.P. and Banean Holdings Ltd. are collectively referred to as GSR Entities. The general partner of each of GSR Entities is GSR Partners II, L.P., whose general partner is GSR Partners II, Ltd., a company incorporated in the Cayman Islands, which is owned by Richard Lim, James Ding, Ryann Yap, Alexander Pan and Kevin Fong. Each of these individuals exercise shares voting and investment power over the shares held of record by GSR Ventures II, L.P. and GSR Associates II, L.P. and disclaims beneficial ownership of such shares except to the extent of such individual’s proportionate pecuniary interest therein. The business address of GSR Entities is Floor 4, Willow House, Cricket Square, Grand Cayman KY1-9010, Cayman Islands.
(5) Intel Corporation, a publicly-listed corporation, is the parent company of Intel Capital Corporation and is deemed as to have voting and dispositive control over shares held by Intel Capital Corporation. Wendell Brooks, Robert Swan and Susie Giordano may be deemed to share voting power and investment power with respect to the shares held by Intel Corporation and Intel Capital Corporation. Each individual listed herein disclaims beneficial ownership with respect to all such shares except to the extent of his or her pecuniary interest therein. The business address of Intel Corporation and Intel Capital Corporation is 2200 Mission College Blvd., M/S RNB 6-59, Santa Clara, CA 95054.
(6) The general partner of Norwest Venture Partners X, LP is Genesis VC Partners X, LLC. The managing member of Genesis VC Partners X, LLC is NVP Associates, LLC and Promod Haque, Jeffrey Crowe and Matthew Howard are the Co-CEOs of NVP Associates, LLC. Each of these individuals exercises shared voting and investment power over the shares held of record by Norwest Venture Partners X, LP and disclaims beneficial ownership of such shares except to the extent of such individual’s proportionate pecuniary interest therein. The business address of Norwest Venture Partners X, LP is 525 University Avenue, # 800, Palo Alto, CA 94301.

 

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(7) Includes 687,361 ordinary shares and 299,443 options that are or will be vested within 60 days from September 1, 2018, out of a total of 350,903 ordinary shares subject to options.
(8) Includes 335,626 ordinary shares and 51,332 options that are or will be vested within 60 days from September 1, 2018, out of a total of 51,446 ordinary shares subject to options.
(9) Includes 11,724 ordinary shares and 169,256 options that are or will be vested within 60 days from September 1, 2018, out of a total of 188,937 ordinary shares subject to options.
(10) Includes such shareholder’s pro rata portion of the 1,278,776 Escrowed Shares returned on August 3, 2018 to the Borqs shareholders immediately prior to the business combination on August 18, 2017.
(11) Includes 966,136 shares subject to repurchase. Zhengqi International Holding Limited, the Company’s former sponsor, is a wholly-owned indirect subsidiary of Pacific Securities Capital Management Co. Ltd., a company incorporated in the People’s Republic of China, which, in turn, is a wholly owned subsidiary of Pacific Securities Co. Ltd., a company incorporated in the People’s Republic of China (“Pacific Securities”). Jian Tu serves as a director and as Chairman of the Strategic Planning Committee of Pacific Securities, and Guoxiong Luo serves as Assistant Chairman and the Head of Global Business Department of Pacific Securities.
(12) Including 30,000 ordinary shares subject to options of which 7,500 options will be vested within 60 days from September 1, 2018.
(13) Including 33,688 options that are or will be vested within 60 days from September 1, 2018, out of a total of 34,716 ordinary shares subject to options.

(14)

 

Including 39,081 ordinary shares and 168,630 options that are or will be vested within 60 days from September 1, 2018, out of a total of 214,147 ordinary shares subject to options.
(15)  Including 135,798 options that are or will be vested within 60 days from September 1, 2018, out of a total of 141,702 ordinary shares subject to options.
(16)  Including 23,448 ordinary shares and 73,151 options that are or will be vested within 60 days from September 1, 2018, out of a total of 75,264 ordinary shares subject to options.
(17) Participating Stockholder in this offering.
(18)

Assumes an aggregate of $7,503,769 of shares are sold by the Participating Stockholders in this offering, with each Participating Stockholder selling its full pro rata portion, at an assumed purchase price of $3.75.

 

Change of Control

 

As a result of the issuance of the shares pursuant to our acquisition of Borqs International by way of merger and related transactions, a change in control of the Company occurred as of August 18, 2017. Except as described in this prospectus, no arrangements or understandings exist among present or former controlling shareholders with respect to the election of members of our Board and, to our knowledge, no other arrangements exist that might result in a change of control of the Company.

 

DESCRIPTION OF SECURITIES

 

We are a company incorporated in the British Virgin Islands as a BVI business company (company number 1880410) and our affairs are governed by our memorandum and articles of association, the BVI Business Companies Act (as amended) and the common law of the British Virgin Islands. We are authorized to issue an unlimited number of both ordinary shares of no par value and preferred shares of no par value. The following description summarizes certain terms of our shares as set out more particularly in our memorandum and articles of association. Because it is only a summary, it may not contain all the information that is important to you.

 

Ordinary Shares

 

As of June 30, 2018, there were 31,303,350 ordinary shares outstanding. Under the BVI Business Companies Act (as amended), the ordinary shares are deemed to be issued when the name of the shareholder is entered in our register of members. Our register of members is maintained by our transfer agent, Continental Stock Transfer & Trust Company. Our transfer agent has entered the name of Cede & Co. in our register of members as nominee for each of the respective public shareholders. If (a) information that is required to be entered in the register of members is omitted from the register or is inaccurately entered in the register, or (b) there is unreasonable delay in entering information in the register, a shareholder of the company, or any person who is aggrieved by the omission, inaccuracy or delay, may apply to the British Virgin Islands Courts for an order that the register be rectified, and the court may either refuse the application or order the rectification of the register, and may direct the company to pay all costs of the application and any damages the applicant may have sustained.

 

Any action required or permitted to be taken by our shareholders must be effected by a meeting of shareholders of our company, duly convened and held in accordance with our memorandum and articles of association. A resolution of our members may not be taken by a resolution consented to in writing.

 

At any general meeting of our shareholders, the chairman of the meeting is responsible for deciding in such manner as he or she considers appropriate whether any resolution proposed has been carried or not and the result of his decision shall be announced to the meeting and recorded in the minutes of the meeting. If the chairman has any doubt as to the outcome of the vote on a proposed resolution, the chairman shall cause a poll to be taken of all votes cast upon such resolution. If the chairman fails to take a poll then any member present in person or by proxy who disputes the announcement by the chairman of the result of any vote may immediately following such announcement demand that a poll be taken and the chairman shall cause a poll to be taken. If a poll is taken at any meeting, the result shall be announced to the meeting and recorded in the minutes of the meeting.

 

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A resolution of our shareholders shall be duly and validly passed if it is approved at a duly convened and constituted meeting of our shareholders by the affirmative vote of a majority of the votes of the shares entitled to vote thereon which were present at the meeting and were voted. Each ordinary share in our company confers upon the shareholder the right to one vote at any meeting of our shareholders or on any resolution of shareholders.

 

The rights and obligations attaching to our ordinary shares may only be varied by a resolution passed at a meeting by the holders of more than fifty percent (50%) of the ordinary shares present at a duly convened and constituted meeting of our shareholders holding ordinary shares which were present at the meeting. The other provisions of our memorandum and articles of association may be amended if approved by a resolution of our shareholders or by a resolution of our directors (save that no amendment may be made by a resolution of our directors (a) to restrict the rights or powers of our shareholders to amend the memorandum or articles, (b) to change the percentage of shareholders required to pass a resolution of shareholders to amend the memorandum or articles, (c) in circumstances where the memorandum or articles cannot be amended by our shareholders, or (d) to change clauses 7, 8 or 11 of our memorandum (or any of the defined terms used in any such clause or regulation).

 

In accordance with our memorandum and articles of association, our Board is divided into three classes, with the number of directors in each class to be as nearly equal as possible. Our existing Class I directors will serve until our 2018 annual general meeting, our existing Class II directors will serve until our 2019 annual general meeting, and our existing Class III directors will serve until our 2020 annual general meeting. Commencing at our 2018 annual general meeting, and at each following annual general meeting, directors elected to succeed those directors whose terms expire shall be elected for a term of office to expire at the third annual general meeting following their election. There is no cumulative voting with respect to the election of directors, with the result that the holders of more than 50% of the votes of the shares entitled to vote at any general meeting of our members at which the election of directors is voted upon can elect all of the directors (and the holders of more than 50% of the votes of the shares entitled to vote at any general meeting of our members at which the removal of our directors is voted upon can remove a director with or without cause).

 

Our shareholders are entitled to receive ratable dividends when, as and if declared by the Board. Under the laws of the British Virgin Islands, and as provided in our memorandum and articles of association, our directors may authorize a distribution (including any interim dividend that the directors consider to be justified by the profits of our company) only if, immediately after the distribution, the value of our assets will exceed our liabilities, and we will be able to pay our debts as and when they fall due. In the event of a liquidation or winding up of the company, our shareholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of shares, if any, having preference over the ordinary shares. Our shareholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the ordinary shares, except that we will provide our shareholders with the redemption rights set forth above.

 

Preferred Shares

 

Our memorandum and articles of association authorizes the creation and issuance without shareholder approval of an unlimited number of preferred shares divided into five classes, Class A through Class E each with such further designation, rights and preferences as may be determined by a resolution of our Board to amend the memorandum and articles of association to create such designations, rights and preferences. We have five classes of preferred shares to give us flexibility as to the terms on which each Class is issued. Unlike Delaware law, all shares of a single class must be issued with the same rights and obligations. Accordingly, starting with five classes of preferred shares will allow us to issue shares at different times on different terms. Accordingly, our Board is empowered, without shareholder approval, to issue preferred shares with dividend, liquidation, redemption, voting or other rights, which could adversely affect the voting power or other rights of the holders of ordinary shares. These preferred shares could be utilized as a method of discouraging, delaying or preventing a change in control of us.

 

No preferred shares are currently issued or outstanding. Although we do not currently intend to issue any preferred shares, we may do so in the future.

 

The rights attached to any class of preferred shares in issue, may only be amended by a resolution passed at a meeting by the holders of more than fifty percent (50%) of the preferred shares of that same class present at a duly convened and constituted meeting of our members holding preferred shares in such class which were present at the meeting and voted, unless otherwise provided by the terms of issue of such class. If our preferred shareholders want us to hold a meeting of preferred shareholders (or of a class of preferred shareholders), they may requisition the directors to hold one upon the written request of preferred shareholders entitled to exercise at least 30 percent of the voting rights in respect of the matter for which the meeting is requested. Under British Virgin Islands law, we may not increase the required percentage to call a meeting above 30 percent.

 

Under the BVI Business Companies Act (as amended) there are no provisions which specifically prevent the issuance of preferred shares or any such other “poison pill” measures. Our memorandum and articles of association also do not contain any express prohibitions on the issuance of any preferred shares. Therefore, the directors, without the approval of the holders of ordinary shares, may issue preferred shares that have characteristics that may be deemed anti-takeover. Additionally, such a designation of shares may be used in connection with plans that are poison pill plans. However, under the BVI Business Companies Act (as amended), a director in the exercise of his powers and performance of his duties is required to act honestly and in good faith in what the director believes to be the best interests of the company, and a director is also required to exercise his powers as a director for a proper purpose.

 

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Warrants

 

As of June 30, 2018, we had outstanding 6,281,875 warrants to purchase ordinary shares, which warrants were registered in connection with our initial public offering. Each public warrant entitles the registered holder to purchase one half of one ordinary share at a price of $12.00 per full share, subject to adjustment as discussed below. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares. This means that only an even number of warrants may be exercised at any given time by a warrant holder. However, no public warrants will be exercisable for cash unless we have an effective and current registration statement covering the ordinary shares issuable upon exercise of the warrants and a current prospectus relating to such ordinary shares. Notwithstanding the foregoing, if a registration statement covering the ordinary shares issuable upon exercise of the public warrants is not effective within 90 days from August 18, 2017, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. If an exemption from registration is not available, holders will not be able to exercise their warrants on a cashless basis. The warrants will expire on the fifth anniversary of the consummation of the acquisition of Borqs International by way of merger at 5:00 p.m., New York City time.

 

As of June 30, 2018, we had outstanding 417,166 assumed warrants to purchase ordinary shares that are not yet registered. These private warrants are identical to the public warrants except that such private warrants are not registered and will be exercisable for cash (even if a registration statement covering the ordinary shares issuable upon exercise of such warrants is not effective) or on a cashless basis, at the holder’s option, and will not be redeemable by us, in each case so long as they are still held by the initial purchasers or their affiliates. Warrants issued to the former holders of Borqs International warrants entitle each warrant holder to purchase ordinary shares at a price of $5.36 per share, and are exercisable for cash or on a cashless basis, at the holder’s option. The holders of these replacement warrants entered into Lock-up Agreements identical to the Lock-up Agreements executed by former shareholders of Borqs International and became party to the Registration Rights Agreement along with the former shareholders of Borqs International.

 

We may call the warrants for redemption (excluding the private warrants and the Replacement Warrants, which may not be called for redemption, but including any outstanding warrants issued upon exercise of the unit purchase option issued to EarlyBirdCapital and/or its designees), in whole and not in part, at a price of $0.01 per warrant:

 

  at any time while the warrants are exercisable,

 

  upon not less than 30 days’ prior written notice of redemption to each warrant holder,

 

  if, and only if, the reported last sale price of the ordinary shares equals or exceeds $18.00 per share, for any 20 trading days within a 30 trading day period ending on the third business day prior to the notice of redemption to warrant holders, and

 

  if, and only if, there is a current registration statement in effect with respect to the ordinary shares underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption.

 

The right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a warrant will have no further rights except to receive the redemption price for such holder’s warrant upon surrender of such warrant.

 

The redemption criteria for our warrants have been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as a result of our redemption call, the redemption will not cause the share price to drop below the exercise price of the warrants.

 

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If we call the warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the warrants for that number of ordinary shares equal to the quotient obtained by dividing (x) the product of the number of ordinary shares underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the ordinary shares for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Whether we will exercise our option to require all holders to exercise their warrants on a “cashless basis” will depend on a variety of factors including the price of our ordinary shares at the time the warrants are called for redemption, our cash needs at such time and concerns regarding dilutive share issuances.

 

The warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval, by written consent or vote, of the holders of a majority of the then outstanding warrants in order to make any change that adversely affects the interests of the registered holders.

 

The exercise price and number of ordinary shares issuable on exercise of the warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuances of ordinary shares at a price below their respective exercise prices.

 

The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of ordinary shares and any voting rights until they exercise their warrants and receive ordinary shares. After the issuance of ordinary shares upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by shareholders.

 

Except as described above, no public warrants will be exercisable and we will not be obligated to issue ordinary shares unless at the time a holder seeks to exercise such warrant, a prospectus relating to the ordinary shares issuable upon exercise of the warrants is current and the ordinary shares have been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Under the terms of the warrant agreement, we have agreed to use our best efforts to meet these conditions and to maintain a current prospectus relating to the ordinary shares issuable upon exercise of the warrants until the expiration of the warrants. However, we cannot assure you that we will be able to do so and, if we do not maintain a current prospectus relating to the ordinary shares issuable upon exercise of the warrants, holders will be unable to exercise their warrants and we will not be required to settle any such warrant exercise. If the prospectus relating to the ordinary shares issuable upon the exercise of the warrants is not current or if the ordinary shares is not qualified or exempt from qualification in the jurisdictions in which the holders of the warrants reside, we will not be required to net cash settle or cash settle the warrant exercise, the warrants may have no value, the market for the warrants may be limited and the warrants may expire worthless.

 

Warrant holders may elect to be subject to a restriction on the exercise of their warrants such that an electing warrant holder would not be able to exercise their warrants to the extent that, after giving effect to such exercise, such holder would beneficially own in excess of 9.8% of the ordinary shares outstanding.

 

No fractional shares will be issued upon exercise of warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round up or down to the nearest whole number the number of ordinary shares to be issued to the warrant holder.

 

In connection with our acquisition of Borqs International by way of merger, holders of issued and outstanding warrants to purchase shares of Borqs International received replacement warrants to purchase an aggregate of 344,559 of our ordinary shares, the terms and conditions of which are as described above.

 

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Purchase Option

 

We have sold to EarlyBirdCapital (and/or its designees) an option to purchase up to 440,000 ordinary shares and 400,000 warrants to purchase 200,000 full shares.

 

The purchase option may be exercised for cash or on a cashless basis, at the holder’s option, at any time prior to October 14, 2020. Holders of the purchase option have demand registration rights until October 14, 2020 and “piggy back” registration rights until October 14, 2022. We will bear all fees and expenses attendant to registering the securities issuable upon exercise of the purchase option, other than underwriting commissions, which will be paid for by the holders themselves. The exercise price and number of units issuable upon exercise of the purchase option may be adjusted in circumstances such as in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation. However, the purchase option will not be adjusted for issuances of ordinary shares at a prices below its exercise price. We will have no obligation to net cash settle the exercise of the purchase option or the rights or warrants underlying the purchase option. The holder of the purchase option will not be entitled to exercise the purchase option or the warrants underlying the purchase option unless a registration statement covering the securities underlying the purchase option is effective or an exemption from registration is available. If the holder is unable to exercise the purchase option or underlying warrants, the purchase option or warrants, as applicable, will expire worthless.

 

Dividends

 

We have not paid any cash dividends on our ordinary shares to date.

 

Stock Exchange Listing

 

Our ordinary shares are listed on The Nasdaq Capital Market under the symbol “BRQS.”

 

Transfer Agent and Registrar

 

The transfer agent and registrar for our ordinary shares is Continental Stock Transfer & Trust Company. The transfer agent’s address is One State Street, 30th Floor, New York, NY 10004, and its telephone number is (212) 509-4000.

 

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TAXATION

 

The following discussion of British Virgin Islands, PRC and United States federal income tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change. This discussion does not deal with all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state, local and other tax laws.

 

British Virgin Islands Taxation

 

The Company and all dividends, interest, rents, royalties, compensation and other amounts paid by the Company to persons who are not resident in the BVI and any capital gains realized with respect to any shares, debt obligations, or other securities of the Company by persons who are not resident in the BVI are exempt from all provisions of the Income Tax Ordinance in the BVI.

 

No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not resident in the BVI with respect to any shares, debt obligation or other securities of the Company.

 

All instruments relating to transfers of property to or by the Company and all instruments relating to transactions in respect of the shares, debt obligations or other securities of the Company and all instruments relating to other transactions relating to the business of the Company are exempt from payment of stamp duty in the BVI. This assumes that the Company does not hold an interest in real estate in the BVI.

 

There are currently no withholding taxes or exchange control regulations in the BVI applicable to the Company or its members.

 

People’s Republic of China Taxation  

 

Under the EIT Law, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a “de facto management body” is defined as a body that has material and substantial management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise.

 

Our PRC subsidiary and PRC consolidated VIE are companies incorporated under PRC law and, as such, are subject to PRC enterprise income tax on their taxable income in accordance with the relevant PRC income tax laws. Pursuant to the EIT Law, which became effective on January 1, 2008 and was amended on February 24, 2017, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises and domestic enterprises, except where a special preferential rate applies. The enterprise income tax of a PRC resident enterprise is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. We are subject to VAT at a rate of 6% on the services we provide, less any deductible VAT we have already paid or borne. We are also subject to surcharges on VAT payments in accordance with PRC law.

 

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In addition, the Circular 82 issued by the SAT in April 2009 specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seals, minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Further to Circular 82, the SAT issued the Bulletin No. 45, which took effect in September 2011, to provide more guidance on the implementation of Circular 82. Bulletin No. 45 provides for procedures and administration details of determination on resident status and administration on post-determination matters. Borqs Technologies, Inc. is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. As such, we do not believe that Borqs Technologies, Inc. meet all of the conditions above or are PRC resident enterprises for PRC tax purposes. For the same reasons, we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with us. If the PRC tax authorities determine that our British Virgin Islands holding company is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. One example is that a 10% withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders and with respect to gains derived by our non-PRC enterprise shareholders from transferring our shares and potentially a 20% of withholding tax would be imposed on dividends we pay to our non-PRC individual shareholders and with respect to gains derived by our non-PRC individual shareholders from transferring our shares. See “Risk Factors—Risk Related to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and has a material adverse effect on our results of operations and the value of your investment.”

 

As a British Virgin Islands holding company, our Hong Kong subsidiary may receive dividends from our PRC subsidiaries. The EIT Law and its implementing rules provide that dividends paid by a PRC entity to a non-resident enterprise for income tax purposes is subject to PRC withholding tax at a rate of 10%, subject to reduction by an applicable tax treaty with China. Pursuant to the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income or the Hong Kong Tax Treaty, which became effective on August 21, 2006, a company incorporated in Hong Kong, such as Borqs Hong Kong, will be subject to withholding income tax at a rate of 5% on dividends it receives from our PRC subsidiary if it holds a 25.0% or more interest in that particular PRC subsidiary at all times within the 12-month period immediately preceding the distribution of dividends and be a “beneficial owner” of the dividends. In February 2018, the SAT issued the Announcement on Issues Relating to Beneficial Owners under Tax Treaties , or the SAT Announcement 9, pursuant to which, applicants who intend to prove their status of the “beneficial owner” shall submit the relevant documents to the relevant tax bureau according to the Announcement on Issuing the Measures for the Administration of Non-Resident Taxpayers’ Enjoyment of the Treatment under Tax Agreements and the SAT Announcement 9. “Beneficial Owners” are residents who have ownership and the right to dispose of the income or the rights and properties giving rise to the income. These rules also set forth certain adverse factors against the recognition of a “Beneficial Owner”, such as not carrying out substantive business activities. Whether a non-resident enterprise may obtain tax benefits under the relevant tax treaty will be subject to approval of the relevant PRC tax authority and will be determined by the PRC tax authority on a case-by-case basis. SAT Announcement 9 further provides that a comprehensive analysis should be made when determining the beneficial owner status based on various factors that supported by various types of documents including the articles of association, financial statements, records of cash movements, board meeting minutes, board resolutions, staffing and materials, relevant expenditures, functions and risk assumption as well as relevant contracts and other information. In August 2015, the SAT promulgated the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, or SAT Circular 60, which became effective on November 1, 2015. SAT Circular 60 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax rate. Instead, non-resident enterprises may, if they determine by self-assessment that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply for the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-filing examinations by the relevant tax authorities. As a result, although our PRC subsidiary, Borqs Beijing, is currently wholly owned by Borqs Hong Kong, we cannot assure you that we would be entitled to the tax treaty benefits and enjoy the favorable 5.0% rate applicable under the Hong Kong Tax Treaty on dividends. If Borqs Hong Kong cannot be recognized as the beneficial owner of the dividends to be paid by our PRC subsidiaries to us, such dividends will be subject to a normal withholding tax of 10% as provided by the EIT Law.

 

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On February 3, 2015, the SAT issued a Public Notice Regarding Certain Enterprise Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or Public Notice 7, where a non-resident enterprise transfers taxable assets, through the offshore transfer of a foreign intermediate holding company, the non-resident enterprise, being the transferor, maybe subject to PRC enterprise income tax, if the indirect transfer is considered to be an arrangement which does not have a reasonable commercial purpose to circumvent enterprise income tax payment obligations. In addition, Public Notice 7 further provides certain criteria on how to assess reasonable commercial purposes and introduces safe harbor scenarios applicable to internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee of the indirect transfer as they have to make self-assessment on whether the transaction should be subject to PRC tax and to file or withhold the PRC tax accordingly. Although it appears that Public Notice 7 was not intended to apply to share transfers of publicly traded companies if the purchase of the shares and the sale of the shares both take place in open-market transactions, there is uncertainty as to the application of Public Notice 7. As a result, we and our non-resident investors may be at risk of being required to file a return and being taxed under Public Notice 7, and we may be required to expend valuable resources to comply with Public Notice 7 or to establish that we should not be taxed under Public Notice 7.

 

On October 17, 2017, the SAT issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-Resident Enterprises, or Announcement 37, which repealed certain provisions of Public Notice 7. Pursuant to Announcement 37, the income from a property transfer, as stipulated in the second item under Article 19 of the EIT Law, shall include the income derived from transferring equity investment assets such as stock equity. The balance of deducting the equity’s net value from the total income from the equity transfer shall be taxable income from the equity transfer.

 

U.S. Federal Income Taxation

 

General

 

The following are the material U.S. federal income tax consequences of the acquisition, ownership and disposition of the ordinary shares covered by this prospectus. As used in this discussion, references to “we,” “us” or “our” refer to Borqs Technologies, Inc.

 

The discussion below of the U.S. federal income tax consequences to “U.S. Holders” will apply to a beneficial owner of the ordinary shares that is for U.S. federal income tax purposes:

 

an individual citizen or resident of the United States;

 

  a corporation (or other entity treated as a corporation) that is created or organized (or treated as created or organized) in or under the laws of the United States, any state thereof or the District of Columbia;

 

  an estate whose income is includible in gross income for U.S. federal income tax purposes regardless of its source; or

 

  a trust if (i) a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons are authorized to control all substantial decisions of the trust, or (ii) it has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

 

A beneficial owner of the ordinary shares that is described above is referred to herein as a “U.S. Holder.” If a beneficial owner of the ordinary shares is not described as a U.S. Holder and is not an entity treated as a partnership or other pass-through entity for U.S. federal income tax purposes, such owner will be considered a “Non-U.S. Holder.” The material U.S. federal income tax consequences applicable specifically to Non-U.S. Holders are described below under the heading “Non-U.S. Holders.”

 

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This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), its legislative history, Treasury regulations promulgated thereunder, published rulings and court decisions, all as currently in effect. These authorities are subject to change or differing interpretations, possibly on a retroactive basis.

 

This discussion does not address all aspects of U.S. federal income taxation that may be relevant to any particular holder based on such holder’s individual circumstances. In particular, this discussion considers only holders that purchase ordinary shares pursuant to this offering and own and hold the ordinary shares as capital assets within the meaning of Section 1221 of the Code, and does not address the potential application of the alternative minimum tax or the U.S. federal income tax consequences to holders that are subject to special rules, including:

 

  financial institutions or financial services entities;

 

  broker-dealers;

 

  persons that are subject to the mark-to-market accounting rules under Section 475 of the Code;

 

  tax-exempt entities;

 

  governments or agencies or instrumentalities thereof;

 

  insurance companies;

 

  regulated investment companies;

 

  real estate investment trusts;

 

  certain expatriates or former long term residents of the United States;

 

  persons that actually or constructively own 5% or more of our voting shares (including as a result of ownership of the ordinary shares);

 

  persons that acquired the ordinary shares pursuant to an exercise of employee options, in connection with employee incentive plans or otherwise as compensation;

 

  persons that hold the ordinary shares as part of a straddle, constructive sale, hedging, conversion or other integrated transaction;

 

  persons whose functional currency is not the U.S. dollar;

 

  passive foreign investment companies; or

 

  controlled foreign corporations.

  

This discussion does not address any aspect of U.S. federal non-income tax laws, such as gift or estate tax laws, or state, local or non-U.S. tax laws or, except as discussed herein, any tax reporting obligations applicable to a holder of the ordinary shares. Additionally, this discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold the ordinary shares through such entities. If a partnership (or other entity classified as a partnership for U.S. federal income tax purposes) is the beneficial owner of the ordinary shares, the U.S. federal income tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. This discussion also assumes that any distribution made (or deemed made) to a holder in respect of the ordinary shares and any consideration received (or deemed received) by a holder in connection with the sale or other disposition of the ordinary shares will be in U.S. dollars.

 

We have not sought, and will not seek, a ruling from the Internal Revenue Service, (the “IRS”), or an opinion of counsel as to any U.S. federal income tax consequence described herein. The IRS may disagree with the description herein, and its determination may be upheld by a court. Moreover, there can be no assurance that future legislation, regulations, administrative rulings or court decisions will not adversely affect the accuracy of the statements in this discussion.

 

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EACH PROSPECTIVE INVESTOR IN OUR ORDINARY SHARES IS URGED TO CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR ORDINARY SHARES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS AND ANY APPLICABLE TAX TREATIES.

 

U.S. Holders

 

Taxation of Cash Distributions Paid on Ordinary Shares

 

Subject to the passive foreign investment company (“PFIC”) rules discussed below, a U.S. Holder generally will be required to include in gross income as ordinary income the amount of any cash dividend paid on the ordinary shares. A cash distribution on the ordinary shares generally will be treated as a dividend for U.S. federal income tax purposes to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). Such dividend generally will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations. The portion of such cash distribution, if any, in excess of such earnings and profits will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in the ordinary shares. Any remaining excess generally will be treated as gain from the sale or other taxable disposition of such ordinary shares.

 

With respect to non-corporate U.S. Holders, any such cash dividends may be subject to U.S. federal income tax at the lower applicable regular long term capital gains tax rate (see “—Taxation on the Disposition of Ordinary Shares” below) provided that (a) the ordinary shares are readily tradable on an established securities market in the United States or, in the event we are deemed to be a PRC “resident enterprise” under the EIT Law, we are eligible for the benefits of the Agreement between the Government of the United States of America and the Government of the People’s Republic of China for the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income (the “U.S.-PRC Tax Treaty”), (b) we are not a PFIC, as discussed below, for either the taxable year in which the dividend was paid or the preceding taxable year, and (c) certain holding period requirements are met. Therefore, if the ordinary shares are not readily tradable on an established securities market in the United States, and we are not eligible for the benefits of the U.S. – PRC Tax Treaty, then cash dividends paid by us to non-corporate U.S. Holders will not be subject to U.S. federal income tax at the lower regular long term capital gains tax rate. Under published IRS authority, ordinary shares are considered for purposes of clause (a) above to be readily tradable on an established securities market in the United States only if they are listed on certain exchanges, which presently include Nasdaq. There can be no assurance that the ordinary shares will continue to be listed and traded on Nasdaq in future periods subsequent to this offering. U.S. Holders should consult their own tax advisors regarding the availability of the lower rate for any cash dividends paid with respect to the ordinary shares.

 

If a PRC income tax applies to any cash dividends paid to a U.S. Holder on the ordinary shares, such tax may be treated as a foreign tax eligible for a deduction from such holder’s U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax liability (subject to applicable conditions and limitations). In addition, if such PRC tax applies to any such dividends, such U.S. Holder may be entitled to certain benefits under the U.S.-PRC Tax Treaty, if such holder is considered a resident of the United States for purposes of, and otherwise meets the requirements of, the U.S.-PRC Tax Treaty. U.S. Holders should consult their own tax advisors regarding the deduction or credit for any such PRC tax and their eligibility for the benefits of the U.S.-PRC Tax Treaty.

 

Taxation on the Disposition of Ordinary Shares

 

Upon a sale or other taxable disposition of the ordinary shares, and subject to the PFIC rules discussed below, a U.S. Holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. Holder’s adjusted tax basis in the ordinary shares.

 

The regular U.S. federal income tax rate on capital gains recognized by U.S. Holders generally is the same as the regular U.S. federal income tax rate on ordinary income, except that long term capital gains recognized by non-corporate U.S. Holders generally are subject to U.S. federal income tax at a maximum regular rate of 20%. Capital gain or loss will constitute long term capital gain or loss if the U.S. Holder’s holding period for the ordinary shares exceeds one year. The deductibility of capital losses is subject to various limitations.

 

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If a PRC income tax applies to any gain from the disposition of the ordinary shares by a U.S. Holder, such tax may be treated as a foreign tax eligible for a deduction from such holder’s U.S. federal taxable income or a foreign tax credit against such holder’s U.S. federal income tax liability (subject to applicable conditions and limitations). In addition, if such PRC tax applies to any such gain, such U.S. Holder may be entitled to certain benefits under the U.S.-PRC Tax Treaty, if such holder is considered a resident of the United States for purposes of, and otherwise meets the requirements of, the U.S.-PRC Tax Treaty. U.S. Holders should consult their own tax advisors regarding the deduction or credit for any such PRC tax and their eligibility for the benefits of the U.S.-PRC Tax Treaty.

 

Additional Taxes

 

U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally will be subject to a 3.8% Medicare contribution tax on unearned income, including, without limitation, dividends on, and gains from the sale or other taxable disposition of, the ordinary shares, subject to certain limitations and exceptions. Under applicable regulations, in the absence of a special election, such unearned income generally would not include income inclusions under the qualified electing fund (“QEF”), rules discussed below under “Passive Foreign Investment Company Rules,” but would include distributions of earnings and profits from a QEF. U.S. Holders should consult their own tax advisors regarding the effect, if any, of such tax on their ownership and disposition of the ordinary shares.

 

Passive Foreign Investment Company Rules

 

A foreign (i.e., non-U.S.) corporation will be a PFIC if either (a) at least 75% of its gross income in a taxable year of the foreign corporation, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income, or (b) at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than certain rents or royalties derived from the active conduct of a trade or business), and gains from the disposition of passive assets.

 

If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder of the ordinary shares, and the U.S. Holder did not make a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder held (or was deemed to hold) the ordinary shares, a QEF election along with a purging election, or a mark-to-market election, each as described below, such holder generally will be subject to special rules for regular U.S. federal income tax purposes with respect to:

 

  any gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares; and

 

any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of the ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for the ordinary shares).

 

Under these rules,

 

the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares;

 

the amount allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution or to the period in the U.S. Holder’s holding period before the first day of our first taxable year in which we qualified as a PFIC will be taxed as ordinary income;

 

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the amount allocated to other taxable years (or portions thereof) of the U.S. Holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and

 

the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. Holder.

 

We have not made a determination as to whether we would be classified as a “passive foreign investment company,” or PFIC, for our preceding taxable year nor can we assure you that we will not be a PFIC for our current taxable year or any future taxable year. Depending on the amount of cash or cash equivalents we currently hold and the amount of cash we raise in this offering, which are generally treated as passive assets, and because the calculation of the value of our assets may be based in part on the value of our ordinary shares, which is likely to fluctuate, we may be a PFIC for any taxable year.

 

In general, if we are determined to be a PFIC, a U.S. Holder may avoid the PFIC tax consequences described above with respect to the ordinary shares by making a timely QEF election (or a QEF election along with a purging election). Pursuant to the QEF election, a U.S. Holder will be required to include in income its pro rata share of our net capital gains (as long term capital gain) and other earnings and profits (as ordinary income), on a current basis, in each case whether or not distributed, in the taxable year of the U.S. Holder in which or with which our taxable year ends if we are treated as a PFIC for that taxable year. A U.S. Holder may make a separate election to defer the payment of taxes on undistributed income inclusions under the QEF rules, but if deferred, any such taxes will be subject to an interest charge.

 

The QEF election is made on a shareholder-by-shareholder basis and, once made, can be revoked only with the consent of the IRS. A U.S. Holder generally makes a QEF election by attaching a completed IRS Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund), including the information provided in a PFIC annual information statement, to a timely filed U.S. federal income tax return for the taxable year to which the election relates. Retroactive QEF elections generally may be made only by filing a protective statement with such return and if certain other conditions are met or with the consent of the IRS.

 

In order to comply with the requirements of a QEF election, a U.S. Holder must receive certain information from us. Upon request from a U.S. Holder, we will endeavor to provide to the U.S. Holder no later than 90 days after the request such information as the IRS may require, including a PFIC annual information statement, in order to enable the U.S. Holder to make and maintain a QEF election. However, there is no assurance that we will have timely knowledge of our status as a PFIC in the future or of the required information to be provided.

 

If a U.S. Holder has made a QEF election with respect to the ordinary shares, and the special tax and interest charge rules do not apply to such ordinary shares (because of a timely QEF election for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) such ordinary shares or a QEF election, along with a purge of the PFIC taint pursuant to a purging election, as described below), any gain recognized on the sale or other taxable disposition of such ordinary shares generally will be taxable as capital gain and no interest charge will be imposed. As discussed above, for regular U.S. federal income tax purposes, U.S. Holders of a QEF generally are currently taxed on their pro rata shares of the QEF’s earnings and profits, whether or not distributed. In such case, a subsequent distribution of such earnings and profits that were previously included in income generally should not be taxable as a dividend to such U.S. Holders. The adjusted tax basis of a U.S. Holder’s ordinary shares in a QEF will be increased by amounts that are included in income, and decreased by amounts distributed but not taxed as dividends, under the above rules. Similar basis adjustments apply to property if by reason of holding such property the U.S. Holder is treated under the applicable attribution rules as owning ordinary shares in a QEF.

 

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Although a determination as to our PFIC status will be made annually, an initial determination that we are a PFIC generally will apply for subsequent years to a U.S. Holder who held the ordinary shares while we were a PFIC, whether or not we meet the test for PFIC status in those subsequent years. A U.S. Holder who makes the QEF election discussed above for our first taxable year as a PFIC in which the U.S. Holder holds (or is deemed to hold) the ordinary shares, however, will not be subject to the PFIC tax and interest charge rules discussed above with respect to such ordinary shares. In addition, such U.S. Holder will not be subject to the QEF inclusion regime with respect to such ordinary shares for any of our taxable years that end within or with a taxable year of the U.S. Holder and in which we are not a PFIC. On the other hand, if the QEF election is not effective for each of our taxable years in which we are a PFIC and during which the U.S. Holder holds (or is deemed to hold) the ordinary shares, the PFIC rules discussed above will continue to apply to such ordinary shares unless the holder files on a timely filed U.S. federal income tax return (including extensions) a QEF election and a “purging election” to recognize under the rules of Section 1291 of the Code any gain that it would otherwise recognize if the U.S. Holder sold the ordinary shares for their fair market value on the “qualification” date. The qualification date is the first day of our tax year in which we qualify as a QEF with respect to such U.S. Holder. The purging election can only be made if such U.S. Holder held the ordinary shares on the qualification date. A purging election generally creates a deemed sale of such ordinary shares at their fair market value. The gain recognized by the purging election generally will be subject to the special tax and interest charge rules treating the gain as an excess distribution, as described above. As a result of the purging election, the U.S. Holder generally will increase the adjusted tax basis in its ordinary shares by the amount of gain recognized and will also have a new holding period in its ordinary shares for purposes of the PFIC rules.

 

Alternatively, if a U.S. Holder, at the close of its taxable year, owns ordinary shares in a PFIC that are treated as marketable stock, the U.S. Holder may make a mark-to-market election with respect to such ordinary shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for the first taxable year of the U.S. Holder in which the U.S. Holder holds (or is deemed to hold) the ordinary shares and for which we are determined to be a PFIC, such holder generally will not be subject to the PFIC rules described above with respect to its ordinary shares as long as such ordinary shares continue to be treated as marketable stock. Instead, in general, the U.S. Holder will include as ordinary income each year that we are treated as a PFIC the excess, if any, of the fair market value of its ordinary shares at the end of its taxable year over the adjusted tax basis in its ordinary shares. The U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted tax basis of its ordinary shares over the fair market value of its ordinary shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holder’s adjusted tax basis in its ordinary shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of the ordinary shares in a taxable year in which we are treated as a PFIC will be treated as ordinary income. Special tax rules may also apply if a U.S. Holder makes a mark-to-market election for a taxable year after the first taxable year in which the U.S. Holder holds (or is deemed to hold) the ordinary shares and for which we are treated as a PFIC.

 

The mark-to-market election is available only for stock that is regularly traded on a national securities exchange that is registered with the Securities and Exchange Commission, including Nasdaq, or on a foreign exchange or market that the IRS determines has rules sufficient to ensure that the market price represents a legitimate and sound fair market value. There can be no assurance that the ordinary shares will continue to be listed and traded on Nasdaq in future periods subsequent to this offering. U.S. Holders should consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election with respect to the ordinary shares under their particular circumstances.

 

If we are a PFIC and, at any time, have a foreign subsidiary that is classified as a PFIC, a U.S. Holder of the ordinary shares generally should be deemed to own a portion of the shares of such lower-tier PFIC, and generally could incur liability for the deferred tax and interest charge described above if we receive a distribution from, or dispose of all or part of our interest in, or the U.S. Holder were otherwise deemed to have disposed of an interest in, the lower-tier PFIC. Upon request, we will endeavor to cause any lower-tier PFIC to provide to a U.S. Holder no later than 90 days after the request the information that may be required to make or maintain a QEF election with respect to the lower-tier PFIC. However, there is no assurance that we will have timely knowledge of the status of any such lower-tier PFIC or that we will be able to cause the lower-tier PFIC to provide the required information. A mark-to-market election generally would not be available with respect to such a lower-tier PFIC. U.S. Holders are urged to consult their own tax advisors regarding the tax issues raised by lower-tier PFICs.

 

A U.S. Holder that owns (or is deemed to own) ordinary shares in a PFIC during any taxable year of the U.S. Holder may have to file an IRS Form 8621 (whether or not a QEF election or mark-to-market election is or has been made) with such U.S. Holder’s U.S. federal income tax return and provide such other information as may be required by the U.S. Treasury Department.

 

The rules dealing with PFICs and with the QEF and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly, U.S. Holders of the ordinary shares should consult their own tax advisors concerning the application of the PFIC rules to the ordinary shares under their particular circumstances.

 

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Non-U.S. Holders

 

Cash dividends paid or deemed paid to a Non-U.S. Holder with respect to the ordinary shares generally will not be subject to U.S. federal income tax unless such dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States).

 

In addition, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain attributable to a sale or other taxable disposition of the ordinary shares unless such gain is effectively connected with its conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) or the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of such sale or other disposition and certain other conditions are met (in which case, such gain from U.S. sources generally is subject to U.S. federal income tax at a 30% rate or a lower applicable tax treaty rate).

 

Cash dividends and gains that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains or maintained in the United States) generally will be subject to regular U.S. federal income tax at the same regular U.S. federal income tax rates as applicable to a comparable U.S. Holder and, in the case of a Non-U.S. Holder that is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.

 

Backup Withholding and Information Reporting

 

In general, information reporting for U.S. federal income tax purposes should apply to cash distributions made on the ordinary shares within the United States to a U.S. Holder (other than an exempt recipient) and to the proceeds from sales and other dispositions of the ordinary shares by a U.S. Holder (other than an exempt recipient) to or through a U.S. office of a broker. Payments made (and sales and other dispositions effected at an office) outside the United States will be subject to information reporting in limited circumstances. In addition, certain information concerning a U.S. Holder’s adjusted tax basis in its ordinary shares and adjustments to that tax basis and whether any gain or loss with respect to such ordinary shares is long-term or short-term also may be required to be reported to the IRS, and certain holders may be required to file an IRS Form 8938 (Statement of Specified Foreign Financial Assets) to report their interest in the ordinary shares.

 

Moreover, backup withholding of U.S. federal income tax, at a current rate of 24%, generally will apply to cash dividends paid on the ordinary shares to a U.S. Holder (other than an exempt recipient) and the proceeds from sales and other dispositions of the ordinary shares by a U.S. Holder (other than an exempt recipient), in each case who:

 

  fails to provide an accurate taxpayer identification number;

 

  is notified by the IRS that backup withholding is required; or

 

  in certain circumstances, fails to comply with applicable certification requirements.

 

A Non-U.S. Holder generally may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.

 

Backup withholding is not an additional tax. Rather, the amount of any backup withholding will be allowed as a credit against a U.S. Holder’s or a Non-U.S. Holder’s U.S. federal income tax liability and may entitle such holder to a refund, provided that certain required information is timely furnished to the IRS. Holders are urged to consult their own tax advisors regarding the application of backup withholding and the availability of and procedures for obtaining an exemption from backup withholding in their particular circumstances.

 

THE PRECEDING DISCUSSION OF U.S. FEDERAL TAX CONSIDERATIONS IS FOR GENERAL INFORMATION PURPOSES ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR ORDINARY SHARES, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

 

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UNDERWRITERS

 

Subject to the terms and conditions of the underwriting agreement, the underwriters named below, through their representative and sole book-running manager, Maxim Group LLC, located at 405 Lexington Avenue, New York, NY 10174, referred to herein as Maxim, have severally agreed to purchase from the Participating Stockholders and us on a firm commitment basis the following respective number of ordinary shares at a public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus:

 

Underwriter   Number of Shares  
Maxim Group LLC      
The Benchmark Company, LLC      
Total                    

 

The underwriting agreement provides that the obligations of the underwriters to purchase all of the ordinary shares being offered to the public is subject to specific conditions, including the absence of any material adverse change in our business or in the financial markets and the receipt of certain legal opinions, certificates and letters from us, our counsel and the independent auditors. Subject to the terms of the underwriting agreement, the underwriters will purchase all of the ordinary shares being offered to the public, other than those covered by the over-allotment option described below, if any of these shares are purchased. The Participating Stockholders in this offering are Zhengqi International Holding Limited and Ninepoint Capital LLC.

 

Over-Allotment Option

 

The Company has granted to the underwriters an option, exercisable not later than 45 days after the effective date of the registration statement, to purchase up to 400,000 additional ordinary shares (equivalent to 15% of the total number of ordinary shares sold in this offering) at the public offering price less the underwriting discounts and commissions set forth on the cover of this prospectus. The underwriters may exercise this option only to cover over-allotments made in connection with the sale of the ordinary shares in this offering. To the extent that the underwriters exercise this option, each of the underwriters will become obligated, subject to conditions, to purchase approximately the same percentage of these additional ordinary shares as the number of ordinary shares to be purchased by it in the above table bears to the total number of ordinary shares offered by this prospectus. We will be obligated, pursuant to the option, to sell these additional ordinary shares to the underwriters to the extent the option is exercised. If any additional ordinary shares are purchased, the underwriters will offer the additional shares on the same terms as those on which the other shares are being offered hereunder.

 

Commission and Expenses

 

The underwriting discounts and commissions are 7.0% of the public offering price. The Participating Stockholders and the Company have agreed to pay the underwriters the discounts and commissions set forth below, assuming either no exercise or full exercise by the underwriters of the underwriters’ over-allotment option. We have been advised by Maxim that the underwriters propose to offer the ordinary shares to the public at the public offering price set forth on the cover of this prospectus and to dealers at a price that represents a concession not in excess of $       per share under the public offering price of $       per share. The underwriters may allow, and these dealers may re-allow, a concession of not more than $       per share to other dealers. After the public offering, the representative of the underwriters may change the offering price and other selling terms.

 

The following table shows the underwriting discounts and commissions payable to the underwriters by us and the Participating Stockholders in connection with this offering:

 

    Fee Per
Share (1)
    Total Without Exercise of Over-Allotment     Total With Exercise of Over-Allotment  
Public offering price   $            $             $             
Discount paid by us   $     $     $  
Discount paid by the Participating Stockholders   $     $     $  
Expenses payable by us   $     $     $  
Expenses payable by the Participating Stockholders   $     $     $  
Proceeds, before expenses, to us   $     $     $  
Proceeds, before expenses, to the Participating Stockholders   $     $     $  

  

 

(1) The fees do not include the Representative’s Warrants or expense reimbursement as described below.

 

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In addition, we and the Participating Stockholders have agreed to reimburse Maxim for up to $200,000 of out-of-pocket expenses it incurs in connection with this offering, including, but not limited to, filing offering materials with the Financial Industry Regulatory Authority, or FINRA, background checks, “road show” expenses, costs of book-building, prospectus tracking and compliance software and the fees and disbursements of its counsel.

 

We estimate that expenses payable by us in connection with the offering of our ordinary shares, other than the underwriting discounts and commissions and the counsel fees and disbursement reimbursement provisions referred to above, will be approximately $1,067,779.

 

Representative’s Warrants

 

We have also agreed to issue to Maxim (or its permitted assignees) the warrants to purchase a number of our ordinary shares equal to an aggregate of 4% of the total number of ordinary shares sold in this offering (“Representative’s Warrants”). The Representative’s Warrants will have an exercise price equal to 120% of the offering price of the ordinary shares sold in this offering and may be exercised on a cashless basis. The Representative’s Warrants are exercisable commencing 180 days after the effective date of the registration statement related to this offering, and will be exercisable for three years after the effective date. The Representative’s Warrants are not redeemable by us. We have agreed to a one time demand registration of the ordinary shares underlying the Representative’s Warrants for a period of three years from the effective date of the registration statement related to this offering. The Representative’s Warrants also provide for unlimited “piggyback” registration rights at our expense with respect to the underlying ordinary shares during the three year period commencing from the effective date of the registration statement related to this offering. The Representative’s Warrants and the ordinary shares underlying the Representative’s Warrants, have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriters (or permitted assignees under the Rule) may not sell, transfer, assign, pledge or hypothecate the Representative’s Warrants or the securities underlying the Representative’s Warrants, nor will they engage in any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of the Representative’s Warrants or the underlying securities for a period of 12 months from the effective date of this offering, except to any FINRA member participating in the offering and their bona fide officers or partners. The Representative’s Warrants will provide for adjustment in the number and price of such Representative’s Warrants (and the ordinary shares underlying such Representative’s Warrants) in the event of recapitalization, merger or other structural transaction to prevent mechanical dilution or in the event of a future financing undertaken by us.

 

Indemnification

 

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and warranties contained in the underwriting agreement, or to contribute to payments that the underwriters may be required to make in respect of those liabilities.

 

Lock-up Agreements

 

Certain of our directors and executive officers, and shareholders have agreed that, for a period of 180 days after the date of this prospectus, subject to certain limited exceptions, they will not directly or indirectly, without the prior written consent of the representative of the underwriters, (1) offer, sell, agree to offer or sell, solicit offers to purchase, grant any call option or purchase any put option with respect to, pledge, encumber, assign, borrow or otherwise dispose of or transfer any ordinary shares, warrant to purchase ordinary shares or any other security of the company or any other entity that is convertible into, or exercisable or exchangeable for, ordinary shares or any other equity security of the company owned beneficially or otherwise as of the date of this prospectus, which we refer to as relevant securities, or otherwise publicly disclose the intention to do so, (2) establish or increase any “put equivalent position” or liquidate or decrease any “call equivalent position” (in each case within the meaning of Section 16 of the Exchange Act) with respect to any relevant security or otherwise enter into any swap, derivative or other transaction or arrangement that transfers to another, in whole or in part, any economic consequence of ownership of relevant securities, whether or not such transaction is to be settled by the delivery of relevant securities, other securities, cash or other consideration, or otherwise publicly disclose the intention to do so, (3) file or participate in the filing with the SEC of any registration statement or circulate or participate in the circulation of any preliminary or final prospectus or other disclosure document, in each case with respect to any proposed offering or sale of relevant securities or (4) exercise any rights to require registration with the SEC of any proposed offering or sale of relevant securities. In addition, the underwriting agreement provides that, subject to certain exceptions, we will not, for a period of six months following the closing of the offering of the ordinary shares, offer, sell or distribute any of our securities, without the prior written consent of Maxim. So long as an aggregate of at least $5,000,000 of shares are sold by the Participating Stockholders in this offering, each of Ninepoint Capital LLC and Zhengqi has agreed to enter into a lock-up agreement for a period of 135 days following the date of this prospectus with respect to that portion of such shareholder’s ordinary shares that are offered but not sold in this offering. Such lock-up may be waived by Maxim to the extent necessary with respect to any private placements taking place following the closing of this offering and as to which Maxim has been engaged as a placement agent.

 

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Price Stabilization, Short Positions and Penalty Bids

 

In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids in accordance with Regulation M under the Exchange Act:

 

  Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

 

  Over-allotment involves sales by the underwriters of ordinary shares in excess of the number of ordinary shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of ordinary shares over-allotted by the underwriters is not greater than the number of ordinary shares that they may purchase in the over-allotment option. In a naked short position, the number of ordinary shares involved is greater than the number of ordinary shares in the over-allotment option. Maxim may close out any covered short position by either exercising their over-allotment option and/or purchasing ordinary shares in the open market.

 

  Syndicate covering transactions involve purchases of ordinary shares in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of ordinary shares to close out the short position, Maxim will consider, among other things, the price of ordinary shares available for purchase in the open market as compared to the price at which they may purchase ordinary shares through the over-allotment option. If the underwriters sell more ordinary shares than could be covered by the over-allotment option, a naked short position, the position can only be closed out by buying ordinary shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the ordinary shares in the open market after pricing that could adversely affect investors who purchase in the offering.

 

  Penalty bids permit Maxim to reclaim a selling concession from a syndicate member when the ordinary shares originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

 

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our ordinary shares or preventing or retarding a decline in the market price of our securities. As a result, the price of our ordinary shares may be higher than the price that might otherwise exist in the open market.

 

Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our ordinary shares. In addition, neither we nor the underwriters make any representation that the underwriters will engage in these transactions or that any transaction, if commenced, will not be discontinued without notice.

 

Electronic Distribution

 

This prospectus in electronic format may be made available on websites or through other online services maintained by Maxim or by its affiliates. Other than this prospectus in electronic format, the information on Maxim’s website and any information contained in any other websites maintained by it is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or Maxim in its capacity as an underwriter, and should not be relied upon by investors.

 

Other Terms

 

In addition, we have agreed to grant to Maxim, upon the consummation of an offering of at least $15 million in gross proceeds, the right of first refusal to act as a lead managing underwriter and book runner or minimally as a co-lead manager and co-book runner and/or co-lead placement agent with at least 80% of the economics for any and all future public and private equity, equity-linked or debt (excluding commercial bank debt) offerings of the Company or any successor to or any subsidiary of the Company, for a period of twelve (12) months after the commencement of sales of this offering. Zhengqi and the other Participating Stockholder have also engaged Maxim to act as a placement agent in connection with potential private placements of shares held by them following the offering.

 

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Offers Outside the United States

 

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the ordinary shares offered by this prospectus in any jurisdiction where action for that purpose is required. The ordinary shares offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such ordinary shares be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any ordinary shares offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

 

LEGAL MATTERS

 

Maples and Calder, Hong Kong, will pass upon the validity of the issuance of the ordinary shares offered by this prospectus. Loeb & Loeb LLP, New York, New York is representing the underwriters in this offering.

 

EXPERTS

 

The consolidated balance sheets of Borqs Technologies, Inc. at December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income (loss), shareholders’ (deficit) equity and cash flows for each of the three years in the period ended December 31, 2017, appearing in this prospectus and registration statement have been audited by Ernst & Young Hua Ming LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the ordinary shares offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some items of which are contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our ordinary shares, we refer you to the registration statement, including the exhibits and the consolidated financial statements and notes filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The exhibits to the registration statement should be reviewed for the complete contents of these contracts and documents. A copy of the registration statement, including the exhibits and the financial statements and notes filed as a part of the registration statement, may be inspected without charge at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, and copies of all or any part of the registration statement may be obtained from the SEC upon the payment of fees prescribed by it. You may call the SEC at 1-800-SEC-0330 for more information on the operation of the public reference facilities. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements and other information regarding companies that file electronically with it.

 

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BORQS TECHNOLOGIES, INC.

 

INDEX

 

  Page
   
Consolidated Financial Statements for the Years Ended December 31, 2016 and 2017  
   
Report of Independent Registered Public Accounting Firm F-2
   
Consolidated Balance Sheets as of December 31, 2016 and 2017 F-3 – F-6
   
Consolidated Statements of Operations for the Years Ended December 31, 2015, 2016 and 2017 F-7
   
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2015, 2016 and 2017 F-8
   
Consolidated Statements of Shareholders’ (Deficit) Equity for the Years Ended December 31, 2015, 2016 and 2017 F-9 – F-11
   
Consolidated Statements of Cash Flows for the Years Ended December 31, 2015,  2016 and 2017 F-12 – F-13
   
Notes to the Consolidated Financial Statements F-14 – F-57

 

Unaudited Condensed Consolidated Financial Statements for the Three and Six Months Ended June 30, 2017 and 2018  
   
Condensed Consolidated Balance Sheets as of December 31, 2017 and June 30, 2018 F-58 –  F-61
   
Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2017 and 2018 F- 6 2
   
Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2017 and 2018 F-63
   
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2018 F-64
   
Notes to the Unaudited Condensed Consolidated Financial Statements F-65 – F-78

  

  F- 1  

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and the Board of Directors of

Borqs Technologies, Inc. (Formerly known as Pacific Special Acquisition Corp.):

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Borqs Technologies, Inc. (Formerly known as Pacific Special Acquisition Corp.) (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income (loss), shareholders’ (deficit) equity and cash flows for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.

 

The Company’s Ability to Continue as a Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a working capital deficiency, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

/s/ Ernst & Young Hua Ming LLP

 

We have served as the Company’s auditor since 2016.

 

Shanghai, the People’s Republic of China

 

April 2, 2018

 

  F- 2  

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of US dollars (“US$”))

 

        As of December 31,  
    Note   2016     2017  
        US$     US$  
ASSETS                
Current assets:                    
Cash and cash equivalents         3,610       13,060  
Restricted cash         1,153       3,459  
Accounts receivable         28,257       65,720  
Accounts receivable from related parties   (17)     490       -  
Receivable from Mobile Virtual Network Operator (“MVNO”) franchisees         4,319       3,514  
Inventories   (5)     12,682       17,031  
Deferred cost of revenues         969       507  
Prepaid expenses and other current assets   (6)     6,599       16,240  
                     
Total current assets         58,079       119,531  
                     
Non-current assets:                    
Property and equipment, net   (7)     1,488       1,362  
Intangible assets, net   (8)     15,498       20,004  
Goodwill   (9)     693       736  
Deferred tax assets   (16)     1,054       1,463  
Deferred cost of revenues         689       2,642  
Other non-current assets         529       2,994  
                     
Total non-current assets         19,951       29,201  
                     
Total assets         78,030       148,732  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

  F- 3  

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), except for number of shares and per share data)

 

        As of December 31,  
    Note   2016     2017  
        US$     US$  
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY                    
Current liabilities:                    
Accounts payable (including accounts payable of the Consolidated VIEs without recourse to the primary beneficiary of US$4,598 and US$4,143 as of December 31, 2016 and 2017, respectively)         22,691       49,690  
Accrued expenses and other payables (including accrued expenses and other payables of the Consolidated VIEs without recourse to the primary beneficiary of US$2,778 and US$4,038 as of December 31, 2016 and 2017, respectively)   (11)     7,634       12,163  
Advances from customers (including advances from customers of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2016 and 2017, respectively)         -       3,623  
Deferred revenue (including deferred revenue of the Consolidated VIEs without recourse to the primary beneficiary of US$9,134 and US$5,904 as of December 31, 2016 and 2017, respectively)         11,995       7,960  
Income tax payable (including income tax payable of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2016 and 2017, respectively)         216       1,232  
Short-term bank and other borrowings (including short-term bank   borrowings of the Consolidated VIEs without recourse to the primary beneficiary of US$721 and nil as of December 31, 2016 and 2017, respectively)   (10)     6,306       12,648  
Long-term bank borrowings – current portion (including long-term bank borrowings – current portion of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2016 and 2017, respectively)   (10)     1,381       5,432  
Deferred government grants (including deferred government grants of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2016 and 2017, respectively)   (12)     264       -  
                     
Total current liabilities         50,487       92,748  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

  F- 4  

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), except for number of shares and per share data)

 

        As of December 31,  
    Note   2016     2017  
        US$     US$  
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY                    
Non-current liabilities:                    
Unrecognized tax benefits (including unrecognized tax benefits of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2016 and 2017, respectively)   (16)     1,755       2,121  
Warrant liabilities (including warrant liabilities grants of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2016 and 2017, respectively)   (10)     1,344       -  
Deferred tax liabilities (including deferred tax liabilities of the Consolidated VIEs without recourse to the primary beneficiary of US$1,539 and US$1,550 as of December 31, 2016 and 2017, respectively)   (16)     2,170       3,555  
Deferred revenue (including deferred revenue of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2016 and 2017, respectively)         2,428       1,346  
Long-term bank borrowings (including long-term bank borrowings of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2016 and 2017, respectively)   (10)     4,491       -  
Deferred government grants (including deferred government grants of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2016 and 2017, respectively)   (12)     1,844       1,957  
                     
Total non-current liabilities         14,032       8,979  
                     
Total liabilities         64,519       101,727  
                     
Commitments and contingencies   (22)                

 

The accompanying notes are an integral part of these consolidated financial statements.

 

  F- 5  

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), except for number of shares and per share data)

 

        As of December 31,  
    Note   2016     2017  
        US$     US$  
LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY                    
Mezzanine equity:                    
Series A convertible redeemable preferred shares (US$0.001 par value; 39,900,000 and nil shares authorized; 39,900,000 and nil issued and outstanding as of December 31, 2016 and 2017, respectively)   (19)     11,970       -  
Series B convertible redeemable preferred shares (US$0.001 par value; 82,857,143 and nil shares authorized; 82,857,143 and nil issued and outstanding as of December 31, 2016 and 2017, respectively)   (19)     26,126       -  
Series C convertible redeemable preferred shares (US$0.001 par value; 50,909,089 and nil shares authorized; 50,909,089 and nil issued and outstanding as of December 31, 2016 and 2017, respectively)   (19)     21,069       -  
Series D convertible redeemable preferred shares (US$0.001 par value; 23,721,443 and nil shares authorized; 23,721,443 and nil issued and outstanding as of December 31, 2016 and 2017, respectively)   (19)     9,697       -  
Series E convertible redeemable preferred shares (US$0.001 par value; nil and 13,275,162 shares authorized; nil and nil issued and outstanding as of December 31, 2016 and 2017, respectively)   (19)     -       -  
                     
Total mezzanine equity         68,862       -  
                     
Shareholders’ (deficit) equity :                    
Ordinary shares (no par value; unlimited shares authorized; 4,224,725 shares and 30,804,635 shares issued and outstanding as of December 31, 2016 and 2017, respectively)         -       -  
Additional paid-in capital         1,178       120,642  
Statutory reserve         1,898       1,898  
Accumulated deficit         (54,706 )     (74,231 )
Accumulated other comprehensive loss   (13)     (2,626 )     (507 )
                     
Total Borqs Technologies, Inc. shareholders’ (deficit) equity         (54,256 )     47,802  
                     
Noncontrolling interest         (1,095 )     (797 )
                     
Total shareholders’ (deficit) equity         (55,351 )     47,005  
                     
Total liabilities, mezzanine equity, noncontrolling interest and shareholders’ (deficit) equity         78,030       148,732  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

  F- 6  

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Amounts in thousands of US dollars (“US$”), except for number of shares and per share data)

 

        For the years ended December 31,  
    Note   2015     2016     2017  
        US$     US$     US$  
Net Revenues:                            
Software         22,468       14,912       11,212  
Hardware         32,647       70,536       111,021  
MVNO         16,007       29,309       30,118  
Others         3,950       5,829       1,956  
                             
Total net revenues         75,072       120,586       154,307  
                             
Software         (12,699 )     (7,491 )     (7,247 )
Hardware         (26,101 )     (57,452 )     (96,247 )
MVNO         (16,225 )     (28,784 )     (22,836 )
Others         (2,980 )     (1,709 )     (811 )
                             
Total cost of revenues         (58,005 )     (95,436 )     (127,141 )
                             
Total gross profit         17,067       25,150       27,166  
                             
Operating expenses:                            
Sales and marketing expenses         (7,359 )     (5,874 )     (7,952 )
General and administrative expenses         (4,883 )     (10,042 )     (20,753 )
Research and development expenses         (7,206 )     (5,742 )     (6,443 )
Changes in the fair value of warrant liabilities         -       (12 )     (200 )
                             
Total operating expenses         (19,448 )     (21,670 )     (35,348 )
                             
Other operating income         3,094       1,760       272  
                             
Operating income (loss)         713       5,240       (7,910 )
                             
Interest income         61       65       14  
Interest expense         (156 )     (797 )     (1,877 )
Other income         208       114       633  
Other expense         (35 )     (59 )     (121 )
Foreign exchange gain (loss)         855       692       (779 )
                             
Profit (loss) before income taxes         1,646       5,255       (10,040 )
Income tax expense   (16)     (851 )     (2,659 )     (2,319 )
                             
Net income (loss)         795       2,596       (12,359 )
                             
Less: net (loss) income attributable to noncontrolling interests         (1,316 )     (632 )     210  
                             
Net income (loss) attributable to Borqs Technologies, Inc.         2,111       3,228       (12,569 )
Add:                            
Accretion to redemption value of Convertible Redeemable Preferred Shares         (2,417 )     (976 )     (6,956 )
Allocation to holders of Convertible Redeemable Preferred Shares         -       (2,252 )     -  
                             
Net loss attributable to ordinary shareholders         (306 )     -       (19,525 )
                             
Loss per share:                            
Basic         (0.07 )     0.00       (1.52 )
Diluted         (0.07 )     0.00       (1.52 )
Number of ordinary shares used in loss per share computation:                            
Basic         4,224,090       4,224,725       12,842,671  
Diluted         4,224,090       4,224,725       12,842,671  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands of US dollars (“US$”))

  

        For the years ended December 31,  
    Note   2015     2016     2017  
        US$     US$     US$  
Net income (loss)         795       2,596       (12,359 )
Other comprehensive (loss) income, net of tax of nil:                            
Foreign currency translation adjustments, net of tax of nil         (1,491 )     (1,575 )     2,207  
Other comprehensive (loss) income, net of tax of nil   (13)     (1,491 )     (1,575 )     2,207  
Comprehensive (loss) income         (696 )     1,021       (10,152 )
Less: comprehensive (loss) income attributable to noncontrolling interest         (1,519 )     (730 )     298  
Comprehensive income (loss) attributable to Borqs Technologies, Inc.         823       1,751       (10,450 )

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

(Amounts in thousands of US dollars (“US$”), except for number of shares)

 

    Note   Number of ordinary shares     Ordinary shares     Additional paid-in capital     Accumulated statutory reserves     Accumulated other comprehensive loss     Accumulated deficit     Total Borqs Technologies, Inc. shareholders’ deficit     Noncontrolling interest    

Total shareholders’

deficit

 
                                                           
Balance as of January 1, 2015       4,222,120       -       1,174       860       139       (55,614 )     (53,441 )     1,154       (52,287 )
Consolidated net income                 -       -       -       -       2,111       2,111       (1,316 )     795  
Appropriation of statutory reserves                 -       -       410       -       (410 )     -       -       -  
Foreign exchange difference                 -       -       -       (1,288 )     -       (1,288 )     (203 )     (1,491 )
Accretion to redemption value of convertible redeemable preferred shares                 -       -       -       -       (2,417 )     (2,417 )     -       (2,417 )
Vesting of restricted shares         2,605       -       4       -       -       -       4       -       4  
                                                                             
Balance as of December 31, 2015         4,224,725       -       1,178       1,270       (1,149 )     (56,330 )     (55,031 )     (365 )     (55,396 )

  

The accompanying notes are an integral part of these consolidated financial statements.

 

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY

(Amounts in thousands of US dollars (“US$”), except for number of shares)

 

    Note   Number of ordinary shares     Ordinary shares     Additional paid-in capital     Accumulated statutory reserves    

Accumulated

other comprehensive loss

    Accumulated deficit     Total Borqs Technologies, Inc. shareholders’ deficit     Noncontrolling interest    

Total shareholders’

deficit

 
                                                           
Balance as of January 1, 2016       4,224,725       -       1,178       1,270       (1,149 )     (56,330 )     (55,031 )     (365 )     (55,396 )
Consolidated net income         -       -       -       -       -       3,228       3,228       (632 )     2,596  
Appropriation of statutory reserves         -       -       -       628       -       (628 )     -       -       -  
Foreign exchange difference         -       -       -       -       (1,477 )     -       (1,477 )     (98 )     (1,575 )
Accretion to redemption value of Convertible Redeemable Preferred Shares         -       -       -       -       -       (976 )     (976 )     -       (976 )
                                                                             
Balance as of December 31, 2016         4,224,725       -       1,178       1,898       (2,626 )     (54,706 )     (54,256 )     (1,095 )     (55,351 )

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ (DEFICIT) EQUITY (CONTINUED)

(Amounts in thousands of US dollars (“US$”), except for number of shares and per share data)

 

    Number of ordinary shares     Ordinary shares     Series E-1 Preferred Shares     Additional paid-in capital     Accumulated statutory reserves    

Accumulated

other comprehensive loss

    Accumulated deficit    

Total Borqs Technologies Inc. shareholders’
(deficit)

equity

    Noncontrolling interest    

Total

(deficit)

equity

 
                                                             
Balance as of January 1, 2017     4,224,725       -       -       1,178       1,898       (2,626 )     (54,706 )     (54,256 )     (1,095 )     (55,351 )
Consolidated net loss     -       -       -       -       -       -       (12,569 )     (12,569 )     210       (12,359 )
Foreign exchange difference     -       -       -       -       -       2,119       -       2,119       88       2,207  
Issuance of ordinary shares     35,173       -       -       386       -       -       -       386       -       386  
Issuance of Series E-1 Preferred Shares     -       -       2,708       -       -       -       -       2,708       -       2,708  
Beneficiary conversion feature of Series E Preferred Shares     -       -       -       3,258       -       -       -       3,258       -       3,258  
Reclassification of warrants upon the consummation of the Merger     -       -       -       1,544       -       -       -       1,544       -       1,544  
Conversion of Convertible Redeemable Preferred Shares into ordinary shares upon the consummation of the Merger     16,622,491       -       -       78,860       -       -       (6,956 )     71,904       -       71,904  
Conversion of Series E-1 Preferred Shares into ordinary shares upon the consummation of the Merger     558,725       -       (2,708 )     2,708       -       -       -       -       -       -  
Change in equity due to the Merger     9,363,521       -       -       26,818       -       -       -       26,818       -       26,818  
Share-based compensation     -       -       -       5,890       -       -       -       5,890       -       5,890  
                                                                                 
Balance as of December 31, 2017     30,804,635       -       -       120,642       1,898       (507 )     (74,231 )     47,802       (797 )     47,005  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands of US dollars (“US$”))

 

      For the years ended December 31,  
  Note   2015     2016     2017  
      US$     US$     US$  
                     
CASH FLOWS FROM OPERATING ACTIVITIES                          
Net income (loss)       795       2,596       (12,359 )
Adjustments to reconcile net income (loss) to net cash used in operating activities:                        
Foreign exchange (gain) loss       (855 )     (692 )     779  
(Loss) gain on disposal of property and equipment       (350 )     1       -  
Depreciation of property and equipment       1,371       1,011       744  
Amortization of intangible assets       1,109       2,146       3,935  
Deferred income tax (benefits)       (1,044 )     402       937  
Interest expense       -       352       661  
Share-based compensation expenses       -       -       14,667  
Changes in the fair value of warrant liabilities       -       12       200  
                           
Changes in operating assets and liabilities, net of the effects of an acquisition:                          
Restricted cash       211       (383 )     (2,306 )
Accounts receivable       6,830       (22,189 )     (37,463 )
Accounts receivable from related parties       (5,866 )     5,508       490  
Receivable from MVNO franchisees       (3,295 )     (1,024 )     805  
Inventories       (4,074 )     (6,418 )     (4,349 )
Deferred cost of revenues       2,469       (497 )     (1,491 )
Prepaid expenses and other current assets       579       (3,175 )     (12,140 )
Accounts payable       (742 )     15,740       26,999  
Accrued expenses and other payables       2,100       1,371       5,215  
Unrecognized tax benefits       645       1,064       366
Advances from customers       -       -       3,623  
Deferred revenue       4,888       (3,351 )     (5,117 )
Income tax payable       165       51       1,016  
Deferred government grants       (3,302 )     (1,906 )     (151 )
                           
Net cash generated from (used in) operating activities       1,634       (9,381 )     (14,939 )

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BORQS TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Amounts in thousands of US dollars (“US$”))

 

    For the years ended December 31,  
    2015     2016     2017  
    US$     US$     US$  
CASH FLOWS FROM INVESTING ACTIVITIES                        
Purchases of property and equipment     (798 )     (494 )     (842 )
Purchases of intangible assets     (5,175 )     (5,230 )     (7,650 )
Proceeds from disposal of property and equipment     14       1       1  
Loan to a third party     (1,482 )     -       -  
Repayments of a loan to a third party     75       457       371  
                         
Net cash used in investing activities     (7,366 )     (5,266 )     (8,120 )
                         
CASH FLOWS FROM FINANCING ACTIVITIES                        
Proceeds from issuance of ordinary shares     -       -       62  
Cash received from the Merger     -       -       18,034  
Proceeds from issuance of Series E Preferred Shares     -       -       9,000  
Proceeds from exercise of warrants for Series E-1 Preferred Shares (“Series E-1 Warrants”)     -       -       8  
Payment of issuance costs for Series E Preferred Shares     -       -       (312 )
Proceeds from short-term bank and other borrowings     -       6,776       10,456  
Repayments of short-term bank and other borrowings     (817 )     (2,000 )     (4,756 )
Proceeds from long-term bank borrowings     999       6,000       2,000  
Repayments of long-term bank borrowings     (47 )     (571 )     (2,631 )
Net cash generated from financing activities     135       10,205       31,861  
                         
Effect of foreign exchange rate changes on cash and cash equivalents     (34 )     265       648  
                         
Net (decrease) increase in cash and cash equivalents     (5,631 )     (4,177 )     9,450  
Cash and cash equivalents at beginning of year     13,418       7,787       3,610  
                         
Cash and cash equivalents at end of year     7,787       3,610       13,060  

 

    For the years ended December 31,  
    2015     2016     2017  
    US$     US$     US$  
Supplemental disclosures of cash flow information:      
Income taxes paid     (620 )     (554 )     -  
Interest paid     (156 )     (797 )     (1,877 )
Interest received     61       65       14  
                         
Supplemental schedule of non-cash activities:                        
Acquisition of fixed assets included in account payable, accrued expenses and other liabilities     462       432       52  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

1. ORGANIZATION

 

Borqs Technologies, Inc. (formerly known as “Pacific Special Acquisition Corp.”, the “Company” or “Borqs Technologies”) was incorporated in the British Virgin Islands on July 1, 2015. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all of the assets of, entering into contractual arrangements, or engaging in any other similar business combination with one or more businesses or entities.

 

On August 18, 2017, the Company acquired 100% equity interest of BORQS International Holding Corp. (“Borqs International”) and its subsidiaries, variable interest entities (the “VIE”) and the VIE’s subsidiaries (collectively referred to as “Borqs Group” hereinafter) (the Company and Borqs Group collectively referred to as the “Group”) in an all-stock transaction (the “Merger”) as described in Note 4. Concurrent with the completion of the acquisition of Borqs International, the Company changed its name from Pacific Special Acquisition Corp.”, to Borqs Technologies, Inc.      

 

Borqs Group are principally engaged in the provision of commercial grade Android+ platform solutions, hardware product sales and MVNO services in the People’s Republic of China (the “PRC”).

 

(a)    As of the date of report, the details of the Company’s major subsidiaries, consolidated VIEs and the subsidiaries of the VIEs are as follows:

 

  Entity   Date of incorporation/
Acquisition
  Place of
incorporation
  Percentage of direct or indirect ownership by the Company Direct   Principal activities
             
  Subsidiaries:            
  Borqs International   July 27, 2007   Cayman   100%   Holding company
  BORQS Hong Kong Limited
(“Borqs HK”)
  July 19, 2007   Hong Kong   100%   Provision of software and service solutions and hardware products sales
 

BORQS Beijing Ltd.
(“Borqs Beijing”) (1)

  September 4, 2007   PRC   100%   Provision of software and service solutions and hardware products sales
  BORQS Software Solutions Private Limited (“Borqs India”)   July 17, 2009   India   100%   Provision of software and service solutions
                   
  VIE:                
                 
  Beijing Big Cloud Network Technology Co., Ltd. (“Big Cloud Network”) (1)/(2)   April 18, 2014   PRC   Nil   Holding company
                   
  Subsidiaries of the VIE:                
                   
  Yuantel (Beijing) Investment Management Co., Ltd. (“Yuantel Investment”) (2)/(3)   July 11, 2014   PRC   79%   Holding company
  Yuantel (Beijing) Telecommunications Technology Co., Ltd.
(“Yuantel Telecom”) (2)/(3)

  July 11, 2014   PRC   75.05%   Provision of MVNO and other services

 

  (1) Collectively, the “PRC Subsidiaries”.
  (2) Collectively, the “Consolidated VIEs”.
  (3) On July 11, 2014, Borqs International through Big Cloud Network acquired controlling interest in Yuantel Investment and its subsidiary.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

1. ORGANIZATION (CONTINUED)

 

(b) PRC laws and regulations prohibit foreign ownership in certain telecommunication related businesses. To comply with these foreign ownership restrictions, the Group conducts its businesses in the PRC through the VIE using contractual agreements (the “VIE Agreements”).

 

The Group funds Big Cloud Network through loans to the two Big Cloud Network’s shareholders, (collectively the “Nominee Shareholders”). The effective control of Big Cloud Network is held by the Group, through a series of contractual agreements between Borqs Beijing and Big Cloud Network whereby Big Cloud Network became a consolidated VIE of the Group. Through the contractual agreements, the Group receives substantially all of the economic benefits of Big Cloud Network.

 

Big Cloud Network provides MVNO services in China through its 79% owned entity of Yuantel Investment which owns 95% of Yuantel Telecom; therefore Big Cloud Network effectively owns 75.05% of Yuantel Telecom which is the entity that operates the business and holds the MVNO license from the Chinese Ministry of Industry and Information Technology.

 

The following is a summary of the key terms of the latest VIE Agreements:

 

Loan agreements

 

Borqs Beijing and the Nominee Shareholders entered into loan agreements for Borqs Beijing to provide interest free loans of RMB50,000 to the Nominee Shareholders, respectively, for the purpose of providing capital to Big Cloud Network to develop its MVNO business. There is no fixed term for the loans.

 

Power of attorney agreement

 

The Nominee Shareholders of Big Cloud Network entered into the power of attorney agreement whereby they authorized Borqs Beijing or its designated party to act on behalf of the Nominee Shareholders as exclusive agent and attorney with all respect to all matters concerning the shareholding including but not limited to (1) attend shareholders’ meetings of Big Cloud Network; (2) exercise all the shareholders’ rights, including voting rights; and (3) designate and appoint on behalf of each shareholder the senior management members of Big Cloud Network. The power of attorney remains irrevocable and continuously valid from the date of execution so long as each Nominee Shareholder remains as a shareholder of Big Cloud Network. The power of attorney agreement was subsequently reassigned to Borqs International.

 

Exclusive option agreement

 

Pursuant to the exclusive option agreement entered into between the Nominee Shareholders and Borqs Beijing or its designated party, the Nominee Shareholders granted Borqs Beijing or its designated party, an irrevocable and exclusive right to purchase all or part of the equity interests held by the Nominee Shareholders in Big Cloud Network, to the extent permitted under the PRC laws, at an amount equal to RMB10 or the minimum consideration permitted under the applicable PRC law. The purchase consideration in excess of RMB10 shall be refunded by the Nominee Shareholders to Borqs Beijing or Borqs Beijing may deduct the excess amount upon payment of consideration. The Nominee Shareholders shall not declare dividend or any form of distribution or grant loans in any form without the prior consent of Borqs Beijing or its designated party. The term of the agreement is 10 years, expiring on June 22, 2024 which will be automatically renewed every three-year thereafter if Borqs Beijing or its designated party does not provide notice of termination to the Nominee Shareholders fifteen days prior to expiration.

 

Exclusive technical & support agreement

 

Pursuant to the agreement entered into between Borqs Beijing and Big Cloud Network, Big Cloud Network engaged Borqs Beijing or its designated party as its exclusive provider of technical, consulting and other services in relation to its major business during the contractual period in return for service fees which will be determined at the sole discretion of Borqs Beijing or its designated party. The term of the agreement is 10 years, expiring on June 22, 2024, which will be automatically renewed every three-year thereafter if Borqs Beijing or its designated party does not provide notice of termination to the Nominee Shareholders fifteen days prior to expiration.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

1. ORGANIZATION (CONTINUED)

 

Business cooperation agreement

 

Pursuant to the business cooperation agreement entered into between Borqs Beijing and Big Cloud Network, Borqs Beijing or its designated party agreed to provide unlimited financial support for the VIE’s daily operating activities through entrusted loans and agree to forgo the right to seek repayment.

 

Share pledge agreement

 

Pursuant to the agreement, the Nominee Shareholders pledged all of their equity interests in Big Cloud Network to Borqs Beijing as collateral to guarantee the repayment of the loans and to secure their obligations under the above agreements. The Nominee Shareholders agreed not to transfer or otherwise create any encumbrance on their equity interests in Big Cloud Network without prior consent of Borqs Beijing. The share pledge agreements will remain effective until all the obligations under above agreements have been satisfied in full or all of the guarantee liabilities have been repaid.

 

Despite the lack of technical majority ownership, there exists a parent-subsidiary relationship between Borqs Beijing’s designee, Borqs International, and Big Cloud Network through the irrevocable power of attorney agreement, whereby the Nominee Shareholders effectively assigned all of the voting rights underlying their equity interest in Big Cloud Network to Borqs   International. Furthermore, pursuant to the exclusive option agreement and share pledge agreement, Borqs International, via Borqs Beijing, obtained effective control over Big Cloud Network through the ability to exercise all the rights of Nominee Shareholders and therefore the power to govern the activities that most significantly impact the economic performance of Big Cloud Network. In addition, through the VIE Agreements, Borqs International demonstrates its ability and intention to continue the ability to absorb substantially all the expected losses and the majority of the profit of the VIE, and therefore have the rights to the economic benefits of the VIE. Thus, Borqs International consolidates Big Cloud Network and its subsidiaries under ASC 810-10 Consolidation Overall.

 

In the opinion of the Group’s management and PRC counsel, (i) the ownership structure of the Consolidated VIEs is in compliance with all existing PRC laws and regulations in any material respect, (ii) each of the VIE Agreements is valid, legally binding and enforceable to each party of such agreements and will not result in any violation of PRC laws or regulations currently in effect; and (iii) each of the Group’s PRC subsidiaries, VIE and VIE’s subsidiaries have the necessary corporate power and authority to conduct its business as described in its business scope under its business license, which is in full force and effect, and the Group’s business operation in PRC are in compliance with existing PRC laws and regulations.

 

However, uncertainties in the PRC legal system could cause the relevant regulatory authorities to find the current VIE Agreements and businesses to be in violation of any existing or future PRC laws or regulations. If Borqs International, the primary beneficiary or any of its current or future VIEs are found in violation of any existing or future laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including levying fines, confiscating the income of the primary beneficiary, and the VIE, revoking the business licenses or operating licenses of the primary beneficiary, and VIE, shutting down the Group’s servers, discontinuing or placing restrictions or onerous conditions on the Group’s operations, requiring the Group to undergo a costly and disruptive restructuring or enforcing actions that could be harmful to the Group’s business. Any of these actions could cause significant disruption to the Group’s business operations and severely damage the Group’s reputation, which would in turn materially and adversely affect the Group’s business and results of operations. In addition, if the imposition of any of these penalties causes the primary beneficiary to lose the rights to direct the activities of VIE or the right to receive its economic benefits, Borqs International would no longer be able to consolidate the VIE.

 

In addition, if the VIE or the Nominee Shareholders fail to perform their obligations under the VIE Agreements, the Group may have to incur substantial costs and expend resources to enforce the primary beneficiary’ rights under the contracts. The Group may have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief and claiming damages, which may not be effective. All of these VIE Agreements are governed by PRC laws and provide for the resolution of disputes through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system in PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit the Group’s ability to enforce these contractual arrangements. Under PRC laws, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would incur additional expenses and delay. In the event the Group is unable to enforce these VIE Agreements, the primary beneficiary may not be able to exert effective control over its VIE, and the Group’s ability to conduct its business may be negatively affected.

 

  F- 16  

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

1. ORGANIZATION (CONTINUED)

 

(c) VIE disclosures

 

The consolidated VIEs contributed 27%, 29% and 21% of the Group’s consolidated revenues for the years ended December 31, 2015, 2016 and 2017. As of December 31, 2016 and 2017, the Consolidated VIEs accounted for an aggregate of 23% and 17%, respectively, of the consolidated total assets, and 41% and 37%, respectively, of the consolidated total liabilities.

 

The Consolidated VIEs mainly operate the MVNO services. The VIE also holds the MVNO license, which is a revenue-producing asset recorded on the Group’s consolidated balance sheets. The Group expects increases in revenue generated from the Consolidated VIEs compared to the whole Group for the foreseeable future as the Group focuses on strengthening telecommunication platforms to strategically grow the Group’s MVNO business.

 

The Group believes that there are no assets held in the Consolidated VIEs that can be used only to settle obligations of the Consolidated VIEs, except for registered capital and the PRC statutory reserves. Relevant PRC laws and regulations restrict the Consolidated VIEs from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the Group in the form of loans and advances or cash dividends. Please refer to Note 18 for disclosure of restricted net assets. As the Consolidated VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the Consolidated VIEs do not have recourse to the general credit of the Group for any of the liabilities of the Consolidated VIEs. There were no pledges or collateralization of the Consolidated VIEs’ assets.

  

The following tables represent the financial information of the Consolidated VIEs as of December 31, 2016 and 2017 and for the years ended December 31, 2015, 2016 and 2017 before eliminating the intercompany balances and transactions between the Consolidated VIEs and other entities within the Group:

 

  F- 17  

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

1. ORGANIZATION (CONTINUED)

 

(c) VIE disclosures (Continued)

 

      As of December 31,  
      2016     2017  
      US$     US$  
               
  ASSETS            
  Current assets:            
 

Cash and cash equivalents

    414       51  
  Restricted cash     1,153       3,459  
  Accounts receivable     129       2,565  
  Receivable from MVNO franchisees     4,319       3,514  
  Inventories     67       221  
  Prepaid expenses and other current assets     926       423  
                   
  Total current assets     7,008       10,233  
                   
  Non-current assets:                
  Property and equipment, net     987       897  
  Intangible assets, net     8,609       8,393  
  Goodwill     693       736  
  Deferred tax assets     1,054       940  
  Other non-current assets     58       81  
                   
  Total non-current assets     11,401       11,047  
                   
  Total assets     18,409       21,280  

 

  F- 18  

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

1. ORGANIZATION (CONTINUED)

 

(c) VIE disclosures (Continued)

 

      As of December 31,  
      2016     2017  
      US$     US$  
  Current liabilities:            
  Accounts payable     4,598       4,143  
  Accrued expenses and other payables     2,778       4,038  
  Deferred revenue     9,134       5,904  
  Short-term bank borrowings     721       -  
  Intercompany payables     7,923       14,279  
  Total current liabilities     25,154       28,364  
                   
  Non-current liabilities                
  Deferred tax liabilities     1,539       1,500  
                   
  Total non-current liabilities     1,539       1,500  
                   
  Total liabilities     26,693       29,864  

 

      For the Years Ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
  Net revenues     19,957       35,138       32,074  
  Net (loss) income     (5,029 )     (3,381 )     347  

 

      For the Years Ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
  Net cash provided by (used in) operating activities     2,413       (2,128 )     683  
  Net cash used in investing activities     (1,622 )     (634 )     (281 )
  Net cash (used in) provided by financing activities     (770 )     721       (765 )
  Net increase (decrease) in cash and cash equivalents     21       (2,041 )     (363 )

  

  F- 19  

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a) Basis of presentation

 

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”).

 

(b) Liquidity

 

As of December 31, 2017, the company has accumulated deficit of US$74,231 and has suffered net loss of US$12,359 and negative cash flow from operating of US$14,939 for the year then ended. These condition raises substantial doubt about the Group’s ability to continue as a going concern.

 

When preparing the consolidated financial statements as of December 31, 2017 and for the year then ended, the Group’s management concluded that a going concern basis of preparation was appropriate after analyzing the forecasted cash flows for the next twelve months, which indicates that the Group will have sufficient liquidity through March 2019. In preparing the forecasted cash flow analysis, management took into account of the expected net cash inflows to be funded by the public offering and short term debt of approximately US$32,000. As a result, management prepared the consolidated financial statements assuming the Group will continue as a going concern. However, there is no assurance that the public offering can be completed in a timely manner or at all, and there is no assurance that any short term debt is available at acceptable terms. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

(c) Principles of consolidation

 

The consolidated financial statements include the financial statements of the Group, its subsidiaries and Consolidated VIEs, for which, the Group is the primary beneficiary. All significant inter-company transactions and balances between the Group, its subsidiaries and the Consolidated VIEs are eliminated upon consolidation. Results of acquired subsidiaries and its Consolidated VIEs are consolidated from the date on which control is transferred to the Group.

 

(d) Use of estimates

 

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Areas where management uses subjective judgment include, but are not limited to, estimating the useful lives of long-lived assets and intangible assets, assessing the initial valuation of the assets acquired and liabilities assumed in a business combination and the subsequent impairment assessment of long-lived assets, intangible assets and goodwill, determining the provisions for accounts receivable and inventories, accounting for deferred income taxes and uncertain tax benefits, valuation for share-based compensation arrangements, warrants for Series D convertible redeemable preferred shares, beneficiary conversion feature for Series E Preferred Shares. Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements.

 

(e) Foreign currency

 

The functional currency of the Group and its non-PRC subsidiaries, excluding Borqs India, is the United States dollar. The functional currency of Borqs India is Rupee, whereas the functional currency of the Group’s PRC subsidiaries and its Consolidated VIEs is the Chinese Renminbi (“RMB”) as determined based on the criteria of ASC 830, Foreign Currency Matters . The Group uses the US$ as its reporting currency. Transactions denominated in foreign currencies are re-measured into the functional currency at the exchange rates prevailing on the transaction dates. Foreign currency denominated financial assets and liabilities are re-measured at the balance sheet date exchange rate. Exchange gains and losses are included in foreign exchange gains and losses in the consolidated statements of operations.

 

Assets and liabilities of the Group’s PRC subsidiaries are translated into US$ at fiscal year-end exchange rates. Equity amounts are translated at historical exchange rates. Income and expense items are translated at average exchange rates prevailing during the fiscal year. Translation adjustments arising from translation of foreign currency financial statements are reported as cumulative translation adjustments and are shown as a separate component of other comprehensive (loss) income in the consolidated statements of comprehensive income (loss).

 

(f) Cash and cash equivalents

 

Cash and cash equivalents consist of cash on hand and bank deposits which are unrestricted as to withdrawal and use. All highly liquid investments with a stated maturity of 90 days or less from the date of purchase are classified as cash equivalents.

 

  F- 20  

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(g) Restricted cash

 

Restricted cash mainly represents short-term deposits with China United Network Communications Group Co., Ltd. (“China Unicom”) as guarantee for minimum purchase requirements, and therefore are not available for the Group’s use until the end of contract period with China Unicom.

 

(h) Accounts receivable

 

Accounts receivable are carried at net realizable value. An allowance of doubtful accounts is recorded in the period when the collection of full amount is no longer probable. The Group reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Group considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends. As of December 31, 2016 and 2017, the Group evaluated and wrote off the doubtful accounts as they were determined to be uncollectible. Thus, there was no allowance for doubtful accounts outstanding.

 

(i) Inventories

 

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out method. Adjustments to reduce the cost of inventories to its net market value are made, if required, for decreases in sales prices, obsolescence or similar reductions in the estimated net realizable value. Inventories provision of US$1,038 and US$918 was recorded as of December 31, 2016 and 2017, respectively.   

 

(j) Property and equipment

 

Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets, as follows:

 

  Category   Estimated useful life
       
  Computer and network equipment   3-5 years
  Office equipment   5 years
  Motor vehicles   5 years
  Leasehold improvements   Over the shorter of lease term or the estimated useful lives of the assets

 

Repair and maintenance costs are charged to expense as incurred, whereas the costs of betterments that extend the useful life of property and equipment are capitalized as additions to the related assets. Retirements, sale and disposals of assets are recorded by removing the cost and accumulated depreciation with any resulting gain or loss reflected in the consolidated statements of operations.

 

Property and equipment that are purchased or constructed which require a period of time before the assets are ready for their intended use are accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including installation costs. Construction-in-progress is transferred to specific property and equipment accounts and commences depreciation when these assets are ready for their intended use.

 

(k) Intangible assets

 

Intangible assets are carried at cost less accumulated amortization and any recorded impairment. Intangible assets acquired in a business combination are recognized initially at fair value at the date of acquisition. Intangible assets with finite useful lives are amortized using the straight-line method. These amortization methods reflect the estimated pattern in which the economic benefits of the respective intangible assets are to be consumed.

 

Development costs of software to be sold, leased, or otherwise marketed are subject to capitalization beginning when technological feasibility is reached, in accordance with ASC 985-20, Costs of Software to be Sold, Leased, or Marketed .

 

Intangible assets have weighted average useful lives from the date of purchase as follows:

 

  Purchased software   5.8 years
  MVNO license   10 years
  Capitalized software development costs   3 years
  Internal-use software   5 years

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(l) Goodwill

 

Goodwill represents the excess of the purchase price over the amounts assigned to the fair value of the assets acquired and the liabilities assumed of an acquired business. The Group’s goodwill as of December 31, 2016 and 2017 was related to its acquisition of Yuantel Investment. In accordance with ASC 350, Goodwill and Other Intangible Assets ( “ASC 350” ) , recorded goodwill amounts are not amortized, but rather are tested for impairment annually or more frequently if there are indicators of impairment present.

 

The performance of the impairment test in accordance to ASC 350 involves a two-step process. The first step of the impairment test involves comparing the fair value of the reporting unit with its carrying amount, including goodwill. Fair value is primarily determined by computing the future discounted cash flows expected to be generated by the reporting unit. If the reporting unit’s carrying value exceeds its fair value, goodwill may be impaired. If this occurs, the Group performs the second step of the goodwill impairment test to determine the amount of impairment loss.

 

The fair value of the reporting unit is allocated to its assets and liabilities in a manner similar to a purchase price allocation in order to determine the implied fair value of the reporting unit’s goodwill. If the implied goodwill fair value is less than its carrying value, the difference is recognized an impairment loss.

 

In accordance with ASC 350, the Group assigned and assessed goodwill for impairment at the reporting unit level. A reporting unit is an operating segment or one level below the operating segment. The Group has determined that it has two operating segments as its reporting units, namely Yuantel and Connected Solution. Goodwill is recorded at the Yuantel reporting unit.   

 

(m) Impairment of long-lived assets

 

The Group evaluates its long-lived assets or asset group, including intangible assets with indefinite and finite lives, for impairment. Intangible assets with indefinite lives that are not subject to amortization are tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the assets might be impaired in accordance with ASC 350. Such impairment test compares the fair values of assets with their carrying values with an impairment loss recognized when the carrying values exceed fair values.

 

For long-lived assets and intangible assets with finite lives that are subject to depreciation and amortization are tested for impairment whenever events or changes in circumstances (such as a significant adverse change to market conditions that will impact the future use of the assets) indicate that the carrying amount of an asset or a Group of long-lived assets may not be recoverable. When these events occur, the Group evaluates impairment by comparing the carrying amount of the assets to future undiscounted net cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Group would recognize an impairment loss based on the excess of the carrying amount of the asset group over its fair value.

 

(n) Fair value of financial instruments

 

The Group’s financial instruments include cash and cash equivalents, restricted cash, accounts receivable and payable, accounts receivable from related parties, receivable from MVNO franchisees, short-term and long-term bank borrowings, warrants for Series D convertible redeemable preferred shares and Convertible Redeemable Preferred Shares. Other than the long-term bank borrowings, warrants for Series D convertible redeemable preferred shares, the carrying values of these financial instruments approximate their fair values due to their short-term maturities.

 

The Group applies ASC 820, Fair Value Measurements and Disclosures , (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.

 

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

Level 2 — Other inputs that are directly or indirectly observable in the marketplace.

 

Level 3 — Unobservable inputs which are supported by little or no market activity.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

  (n) Fair value of financial instruments (continued)

 

ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

 

During the years ended December 31, 2016 and 2017, there was no financial instrument measured at fair value. The warrants for Series D convertible redeemable preferred shares were classified as level 3 and fair valued using the binomial option pricing model as of December 31, 2016. The carrying amounts of long-term bank borrowings approximated their fair values since they bear interest rates which approximate market interest rates. The Convertible Redeemable Preferred Shares are initially recognized at its fair value on the closing date, at the issuance price, net of issuance cost.

 

(o) Revenue recognition

 

The Group is mainly engaged in the business of providing 1) Android+ platform solutions and services, 2) hardware product sales, and 3) MVNO services. The Group recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed and determinable, and collectability is reasonably assured.

 

1. Android+ platform solutions and services

 

Android+ platform solutions

 

The Group provides customized Android+ software platform solutions that are developed to maximize the commercial grade quality or performance of open source Android+ software for integration with particular chipsets. The Group also provides customized Android+ service platform solutions that are end to end software developed for mobile operators to allow data synchronization between their platform and mobile devices. The Group charges its customers, mainly including mobile device manufacturers and mobile operators, fixed fees for project-based software contracts, as well as per chip or per mobile device royalty fees.

 

The project-based software contracts are generally considered multiple element arrangements as they consist of perpetual software licenses, software development services such as customization, modification, implementation and integration, and post-contract customer support (“PCS”) where customers have the right to receive bug fixes, telephone support and unspecified upgrades on a when-and-if available basis. Pursuant to ASC 985-605, Revenue Recognition: Software (“ASC 985-605”), given the project-based software contracts require significant customization that are generally completed within one year from the contract dates, the Group accounts for the entire software contracts in conformity with the relevant guidance in ASC 605-35, Revenue Recognition: Contract Accounting , applying the completed contract method.

 

As the Group was unable to establish vendor specific objective evidence of the fair value of PCS and PCS is the only undelivered element upon completion of software projects, the entire software project fixed fees are recognized ratably over the PCS service period. PCS service periods are generally 12 months, with ranges from six months to three years, and commences upon completion of customer acceptance of the completed software projects. Costs incurred to complete the software projects are deferred to match revenue recognition.

 

Where the Group is entitled to receive on going usage based royalties determined based on the chip or mobile device sales, the usage-based royalties are recognized according to the customers’ usage reports, generally on a quarterly basis.

 

Service contracts

 

The Group provides research and development services to certain customers for their mobile-computing related development projects where fees are charged on a time and material basis and the Group is not responsible for the outcome of such development projects. The revenue is recognized proportionately as the services are delivered and is included as software revenues on the consolidated statement of operations.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

  (o) Revenue recognition (Continued)

 

2. Hardware product sales

 

The Group provides total solutions on original design manufacturer (“ODM”) basis to customers of mobile devices. Revenue is recognized when sale of each final hardware product to the customers are delivered. Warranty is provided to all customers, which is not considered an additional service; rather, an integral part of the product sales. ASC 450, Contingencies, specifically addresses the accounting for standard warranties. The Group believes that accounting for its standard warranty pursuant to ASC 450 does not impact revenue recognition because the cost of honoring the warranty can be reliably estimated. The Group has determined the likelihood of claims arising from warranties to be remote based on strong quality control procedures in the production process and historical experience with regard to claims being made by customers. The basis for the warranty accrual will be reviewed periodically based on actual experience. The Group does not sell extended warranty coverage.

 

3. MVNO

 

On July 11, 2014, the Group, through the VIE, acquired and obtained control of Yuantel Investment, which mainly operates the MVNO business. The license to operate such MVNO business is issued by the Chinese Ministry of Industry and Information Technology and the core mobile network is provided by the PRC government owned China Unicom. Yuantel Investment receives wholesale rates for mobile voice and data services from China Unicom and repackages the voice and data services into competitive bundles for Chinese consumers.

 

In accordance with ASC 605-45, Revenue Recognition; Principal agent consideration, the Group is the principal in providing the bundled voice and data services to Chinese consumers, thus revenue is recognized on a gross basis. As sales of bundled services are mostly pre-paid by the consumers, cash received in advance of voice and data consumption are recognized as deferred revenue. Revenue is recognized when the services are actually used. Pre-paid bundled services do not expire.

 

Sales of the bundles are mostly made through agents and franchisees. Bundled services sold to agents are discounted and not refundable to the Group. The Group accounts for such discounts as reductions of revenue in accordance with ASC 605-50 (“ASC 605-50”) Customer Payments and Incentives .

 

The Group enters into profit sharing arrangements with franchisees under which bundled services may be returned to the Group if not sold to the consumers. The franchisees receive certain percentages of profits made by the Group on the sales of the bundled services as they are used by the consumers. The Group accounts for profit sharing with franchisees as selling expenses in the consolidated statements of operations. Pursuant to the Group’s policy, the amount of discounts that may be provided by the franchisees to consumers is capped at 5%, based on which, the Group recognized the maximum amount of discounts that may be provided by the franchisees as reductions of revenue in accordance with ASC 605-50.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(p) Cost of revenues

 

Cost of revenues consists primarily of telecommunication costs, depreciation of long-lived assets, amortization of acquired intangible asset, payroll and other related costs of operations. Deferred cost of revenues was US$1,658 and US$3,149 for the years ended December 31, 2016 and 2017.

 

(q) Advertising expenditures

 

Advertising expenditures are expensed as incurred and are included in sales and marketing expenses, which amounted to US$46, US$78 and US$45 for the years ended December 31, 2015, 2016 and 2017, respectively.

 

(r) Research and development expenses

 

Research and development expenses include payroll, employee benefits, and other headcount-related expenses associated with research and platform development. Research and development expenses also include rent, depreciation and other related expenses. Research and development expenses are expensed as incurred.

 

(s) Government grants

 

Government grants are provided by the relevant PRC municipal government authorities to subsidize the cost of certain technology development projects. The amount of such government grants are determined solely at the discretion of the relevant government authorities and there is no assurance that the Group will continue to receive these government grants in the future. Government grants are recognized when it is probable that the Group will comply with the conditions attached to them, and the grants are received. When the grant relates to an expense item, it is recognized in the consolidated statement of operations over the period necessary to match the grant on a systematic basis to the costs that it is intended to compensate, as a reduction of the related operating expense. When the grant relates to an asset, it is recognized as deferred government grants and released to the consolidated statement of operations in equal amounts over the expected useful life of the related asset, when operational, as a reduction of the related depreciation expense.

 

(t) Leases

 

Leases are classified at the inception date as either a capital lease or an operating lease. The Group did not enter into any leases whereby it is the lessor for any of the periods presented. As the lessee, a lease is a capital lease if any of the following conditions exists: a) ownership is transferred to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease term is at least 75% of the property’s estimated remaining economic life, or d) the present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date. A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. The Group did not enter into any capital leases for the years ended December 31, 2015, 2016 and 2017.

 

All other leases are accounted for as operating leases wherein rental payments are expensed on a straight-line basis over the periods of their respective lease terms. The Group leases office space under operating lease agreements. Certain lease agreements contain rent holidays and escalating rent. Rent holidays and escalating rent are considered in determining the straight-line rent expense to be recorded over the lease term. The lease term begins on the date of initial possession of the lease property for purposes of recognizing lease expense on a straight-line basis over the term of the lease.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(u) Income taxes

 

The Group accounts for income taxes using the liability method. Current income taxes are provided for in accordance with the laws of the relevant tax authorities. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the period in which the differences are expected to reverse. The Group records a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

 

The Group applies ASC 740, Accounting for Income Taxes, (“ASC 740”) , to account for uncertainty in income taxes. ASC 740 prescribes a recognition threshold a tax position is required to meet before being recognized in the financial statements.

 

The Group has elected to classify interest related to unrecognized tax benefits, if and when required, as part of “income tax expense” in the consolidated statements of operations.

 

The Group elected to early adopt ASU No. 2016-16, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. Thus, all the deferred income tax assets and liabilities are classified as noncurrent in the consolidated balance sheet statement of financial position.

 

(v) Share-based compensation

 

The Group accounts for share-based compensation in accordance with ASC 718, Compensation-Stock Compensation: Overall , (“ASC 718”).

 

In accordance with ASC 718, the Group determines whether an award should be classified and accounted for as a liability award or equity award. All grants of share-based awards to employees classified as equity awards are measured based on their grant date fair values and recognized as compensation expense over the requisite service period and/or performance period in the consolidated statements of operations.

 

The Group recognizes compensation expense using the accelerated method for share-based awards granted with service and performance conditions. According to ASC 718, the amount of compensation cost recognized (or attributed) when achievement of a performance condition is probable depends on the relative satisfaction of the performance condition based on performance to date. According to ASC 718, probable means the future event or events are likely to occur and the Group interprets “probable” to be generally in excess of a 70% likelihood of occurrence.

 

The Group elected to account for forfeitures as they occur.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(w) Comprehensive income (loss)

 

Comprehensive income (loss) is defined as the (decrease) increase in equity of the Group during a period from transactions and other events and circumstances excluding transactions resulting from investments by owners and distributions to owners. Accumulated other comprehensive income (loss) of the Group includes foreign currency translation adjustments related to the Group and its PRC subsidiaries, whose functional currency is RMB.

 

(x) Segment reporting

 

In accordance with ASC 280 “ Segment Reporting ” (“ASC 280”), the Group has two operating segments, namely Yuantel and Connected Solution as the Group’s chief executive officer, who has been identified as the Group’s chief operating decision maker (“CODM”) reviews the operating results of the two difference service lines in order to allocate resources and assess performance for the Group.

 

(y) Employee benefits

 

The full-time employees of the Group’s PRC subsidiaries are entitled to staff welfare benefits including medical care, housing fund, pension benefits and unemployment insurance, which are governmental mandated defined contribution plans. These entities are required to accrue for these benefits based on certain percentages of the employees’ respective salaries, subject to certain ceilings, in accordance with the relevant PRC regulations, and make cash contributions to the state-sponsored plans out of the amounts accrued.

 

(z) Comparatives

 

Certain items reported in the prior year’s consolidated financial statements have been reclassified to conform to the current year’s presentation.

 

(aa) (Loss) earnings per share

 

(Loss) earnings per share is computed by dividing net (loss)/income attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period using the two-class method. Under the two-class method, net income (loss) is allocated between ordinary shares and other participating securities based on their participating rights. The Group’s Convertible Redeemable Preferred Shares (Note 19) were participating securities. As the participating securities do not share the losses of the Group, the computation of basic earnings per share using two-class method is not applicable when the Group is at a net loss position. Diluted (loss) earnings per share is calculated by dividing net (loss) income attributable to ordinary shareholders by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of shares issuable upon the exercise of share options using the treasury stock method and shares issuable upon the conversion of the Group’s Convertible Redeemable Preferred Shares using the if-converted method. Ordinary equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such shares would be anti-dilutive.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(bb) Recent accounting pronouncements

 

In August 2015, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-14 (“ASU 2015-14”), Revenue from Contracts with Customers-Deferral of the effective date . The amendments in ASU 2015-14 defer the effective date of ASU No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers , issued in May 2014. As a result, ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period for public entities; and, annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019 for all other entities. Early adoption is permitted to the original effective date. In March 2016, the FASB issued ASU No. 2016-08 (“ASU 2016-08”), Revenue from Contracts with Customers—Principal versus Agent Considerations , which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU No. 2016-10 (“ASU 2016-10”), Revenue from Contracts with Customers—Identifying Performance Obligations and Licensing , which clarify guidance related to identifying performance obligations and licensing implementation guidance contained in ASU 2014-09. In May 2016, the FASB issued ASU No. 2016-12 (“ASU 2016-12”), Revenue from Contracts with Customers— Narrow-Scope Improvements and Practical Expedients , which addresses narrow-scope improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition and provides practical expedients for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The effective date for the amendment in ASU 2016-08, ASU 2016-10 and ASU 2016-12 are the same as the effective date of ASU No 2014-09. The Group is in the process of developing a plan for evaluating the impact of adoption of this guidance on its consolidated financial statement including the selection of the adoption method, the identification of differences, if any, from the application of the standard and the impact of such differences, if any, on its consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases, (“ASU 2016-02”) . ASU 2016-02 specifies the accounting for leases. For operating leases, ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. ASU 2016-02 is effective for public companies for annual reporting periods and interim periods within those years beginning after December 15, 2018, and, annual reporting periods beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020 for all other entities. Early adoption is permitted. The Group is currently evaluating the impact of adopting ASU 2016-02 on its consolidated financial statements.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(bb) Recent accounting pronouncements (Continued)

 

In June 2016, the FASB issued ASU No. 2016-13 (“ASU 2016-13”), Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. The standard will replace “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. The standard is effective for public business entities for annual periods beginning after December 15, 2019, and interim periods therein, and annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021 for all other entities. Early adoption is permitted. The Group is evaluating the effect that this guidance will have on its consolidated financial statements.

 

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments which addresses eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. The standard is effective for public business entities for annual periods beginning after December 15, 2017, and interim periods therein, and annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019 for all other entities, and early adoption is permitted. The Group is evaluating the effect that this guidance will have on its consolidated financial statements.

 

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash which requires that the statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The standard is effective for public business entities for annual periods beginning after December 15, 2017, and interim periods therein, and annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019 for all other entities, and early adoption is permitted. The Group is evaluating the effect that this guidance will have on its consolidated financial statements.

 

In January 2017, FASB has issued ASU No. 2017-01,  Business Combinations (Topic 805): Clarifying the Definition of a Business . The ASU affects all companies and other reporting organizations that must determine whether they have acquired or sold a business. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The ASU is effective for annual periods beginning after December 15, 2017, including interim periods within those periods for public entities; and, annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019 for all other entities. The Group is evaluating the effect that this guidance will have on its consolidated financial statements.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(bb) Recent accounting pronouncements (Continued)

 

In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (“ASU 2017-04”), Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. This standard is effective for public business entities for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020 and for all other entities for their annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2021. Early adoption is permitted. The Group is currently evaluating the impact of adopting this standard on its consolidated financial statements.

 

In February 2017, the FASB issued ASU 2017-05 (“ASU 2017-05”), Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets . ASU 2017-05 defines an in-substance nonfinancial asset and clarifies guidance related to partial sales of nonfinancial assets. The update is effective for public business entities for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period; and, annual reporting periods beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019 for all other entities with early adoption permitted. The Group is evaluating the effect that this guidance will have on its consolidated financial statements.

 

In May 2017, the FASB issued ASU 2017-09 (“ASU 2017-09”), Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. This standard provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to a change to the terms or conditions of a share-based payment award. The updated guidance is effective for interim and annual periods beginning after December 15, 2017 for all entities, and early adoption is permitted. The Group is evaluating the effect that this guidance will have on its consolidated financial statements.

 

3. CONCENTRATION OF RISKS

 

(a) Credit risk

 

Financial instruments that potentially subject the Group to significant concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts receivable, accounts receivable from related parties and receivable from MVNO franchisees. As of December 31, 2016 and 2017, the aggregate amount of cash and cash equivalents and restricted cash of US$2,563 and US$4,545, respectively, were held at major financial institutions located in the PRC, and US$2,200 and US$11,974, respectively, were deposited with major financial institutions located outside the PRC. Management believes that these financial institutions are of high credit quality and continually monitors the credit worthiness of these financial institutions. Historically, deposits in Chinese banks are secure due to the state policy on protecting depositors’ interests. However, China promulgated a new Bankruptcy Law in August 2006 that came into effect on June 1, 2007, which contains a separate article expressly stating that the State Council may promulgate implementation measures for the bankruptcy of Chinese banks based on the Bankruptcy Law. Under the new Bankruptcy Law, a Chinese bank may go into bankruptcy. In addition, since China’s concession to the World Trade Organization, foreign banks have been gradually permitted to operate in China and have been significant competitors against Chinese banks in many aspects, especially since the opening of the Renminbi business to foreign banks in late 2006. Therefore, the risk of bankruptcy of those Chinese banks in which the Group has deposits has increased. In the event of bankruptcy of one of the banks which holds the Group’s deposits, it is unlikely to claim its deposits back in full since it is unlikely to be classified as a secured creditor based on PRC laws.

 

Accounts receivable, accounts receivable from related parties and receivable from MVNO franchisees are both typically unsecured, and are derived from revenues earned from customers. The risk is mitigated by credit evaluations the Group performs on its ongoing credit evaluations of its customers’ financial conditions and ongoing monitoring process of outstanding balances. The Group maintains reserves for estimated credit losses and these losses have generally been within expectations.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

3. CONCENTRATION OF RISKS (CONTINUED)

 

(b) Business supplier, customer, and economic risk

 

The Group participates in a dynamic and competitive high technology industry and believes that changes in any of the following areas could have a material adverse effect on the Group’s future financial position, results of operations or cash flows: changes in the overall demand for services; competitive pressures due to new entrants; advances and new trends in new technology; control of telecommunication infrastructures by local regulators and industry standards; strategic relationships or customer relationships; regulatory considerations; and risks associated with the Group’s ability to attract and retain employees necessary to support its growth.

 

(i) Business supplier risk – the Group’s MVNO operations are dependent upon telecommunication resources provided by China Unicom. There is no guarantee that the supply of telecommunication resources provided by China Unicom will be renewed annually. Further, there is no guarantee around the continuance of the MVNO license granted by the PRC government Ministry of Industry and Information Technology which may be amended or discontinued in light of changes to political, economic and social reforms.

 

(ii) Customer risk – The success of the Group’s business going forward will rely in part on Group’s ability to continue to obtain and expand business from existing customers while also attracting new customers. The Group has a diversified base of customers covering its services and the revenue from the largest single customer A accounted for 9%, customer B accounted for 23% and customer C accounted for 41% of the Group’s total net revenues for the three years ended December 31, 2015, 2016 and 2017, respectively, and the accounts receivable from the largest single customer B accounted for 25% and customer C accounted for 47% of the Group’s total accounts receivable and accounts receivable from related parties for the years ended December 31, 2016 and 2017, respectively.

 

(iii) Economic risk – the Group’s operations could be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than 20 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

 

(c) Foreign currency exchange rate risk

 

From July 21, 2005, the RMB is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. The appreciation / (depreciation) of the US$ against RMB was approximately 6.1%, 6.8% and (5.8%) in the years ended December 31, 2015, 2016 and 2017, respectively. The appreciation / (depreciation) of the US$ against Rupee was approximately 4.7%, 3.3% and (5.9%) in the years ended December 31, 2015, 2016 and 2017, respectively.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

4. ACQUISITIONS

 

Reverse Acquisition

 

The Company was a NASDAQ listed special purpose acquisition company formed for the purpose of effecting a merger, acquisition, or similar business combination. On August 18, 2017, the Company completed the acquisition of Borqs International in an all-stock transaction (the “Merger”). The Company issued 25,913,950 of its ordinary shares (“Merger Consideration Shares”) to Borqs International’s shareholders in exchange for the transfer of 100% equity interest in Borqs International to the Company and Borqs International became the Company’s wholly own subsidiary.

 

Of the Merger Consideration Shares, a total of 25,913,950 ordinary shares were issued to Borqs International’s shareholders at closing, with 942,467 of such shares deposited into escrow for indemnification obligations (“Indemnity shares”), 2,352,285 of such shares deposited in escrow subject to Borqs Technologies meeting certain earn-out requirements, (“Earnout Shares” and together with the Indemnity Shares, the “Escrow Shares”) in the event certain net income earnout conditions are met during the period from July 1, 2017 to June 30, 2018 (“Earnout Period”) and 1,178,084 ordinary shares were issued to a financial advisor engaged by Borqs International in connection with the Merger. As transfers between the shareholders of the Company, the Escrow Shares did not have any impact on the Company’s financial statements.

 

Additionally at the effective time of the Merger, the holders of Borqs International issued and outstanding warrants (Note 10) received replacement warrants to acquire an aggregate of 417,166 Borqs Technologies’ ordinary shares (“Replacement Warrants”), and the holders of Borqs International issued and outstanding options (Note 15) had their options assumed by Borqs Technologies to hold options to acquire Borqs Technologies’ ordinary shares upon the exercise of those options (“Assumed Options”).

 

Equity classified instruments including (i) an option to purchase up to 400,000 units at $10.00 per unit (“Unit Purchase Option”), (ii) 5,750,000 public warrants and (iii) 531,875 private warrants issued by the Company prior to the Merger remain outstanding. Each unit consists of one ordinary share of the Company, one right (convertible into one tenth of an ordinary share) and one warrant to purchase one half of one ordinary share at $12. Each public and private warrant also entitles the holder to purchase one half of one ordinary share at $12.00 per whole share.

 

Borqs International was determined as the accounting acquirer in the Merger in accordance with ASC 805, Business Combinations . This determination was primarily based on the Group comprising the ongoing operations, with its senior management operating the business going forward, and Borqs International’s shareholders having the majority voting power of the combined entity. Consequently, in the transaction with a special purpose acquisition company whereby the operating company, Borqs International was identified as the accounting acquirer, the Merger was treated as a capital transaction involving the issuance of the Company’s ordinary shares. The historical consolidated financial statements for all periods prior to the consummation of the Merger only reflect the historical consolidated financial statements of Borqs International. Subsequent to the Merger, the consolidated financial statements reflect the results of the combined entity. The historically issued and outstanding Borqs International’s ordinary shares have been recasted to retrospectively reflect the number of ordinary shares issued in the Merger in all periods presented.

 

As the Merger occurred between public accounting acquiree and a private accounting acquirer, the determination of consideration is based on the fair value of the legal acquirer’s stock. Difference between purchase consideration of US$45,734 transferred and net assets of US$18,059 acquired, which was predominately cash, was recorded in additional paid-in capital.

 

Transaction Expenses

 

Advisory, financing, integration and other transaction costs directly related to the Merger totaled US$15.3 million for the year ended December 31, 2017, including US$8.8 million in share-based compensation expense recorded for the ordinary shares issued to the financial advisors.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

5. INVENTORIES

 

Inventories consisted of the following as of December 31, 2016 and 2017:

 

      As of December 31,  
      2016     2017  
      US$     US$  
               
  Raw materials     5,406       11,588  
  Goods in transit     7,164       4,643  
  Work in process     1,023       977  
  Finished goods     127       741  
                   
  Less: Provision     (1,038 )     (918 )
                   
  Inventories, net     12,682       17,031  

 

6. PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consist of the following:

 

      As of December 31,  
      2016     2017  
      US$     US$  
               
  Staff advances     293       312  
  Prepayment for products     -       1,008  
  Advance to OEM     3,739       3,662  
  Rental and other deposits     1,048       1,203  
  VAT recoverable     963       2,189  
  Loan to third parties     519       1,469  
  Receivable from an agent     -       6,318  
  Others     37       79  
                   
        6,599       16,240  

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

7. PROPERTY AND EQUIPMENT, NET

 

Property and equipment consist of the following:

 

      As of December 31,  
      2016     2017  
      US$     US$  
  At cost:            
  Leasehold improvements     837       933  
  Computer and network equipment     5,801       6,458  
  Office equipment     763       918  
  Motor vehicles     220       233  
        7,621       8,542  
  Less: accumulated depreciation     (6,133 )     (7,180 )
                   
        1,488       1,362  

 

Depreciation expense was US$1,371, US$1,011 and US$501 for the years ended December 31, 2015, 2016 and 2017, respectively, and were included in the following captions:

 

      For the years ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
                     
  Cost of revenues     472       347       140  
  Sales and marketing expenses     54       15       13  
  General and administrative expenses     144       277       190  
  Research and development expenses     701       372       158  
                           
        1,371       1,011       501  


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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

8. INTANGIBLE ASSETS, NET

 

The following table presents the Group’s intangible assets as of the respective balance sheet dates:

 

      Software     Capitalized software development costs     License     Total  
      US$     US$     US$     US$  
                           
  Balance as of January 1, 2016     2,337       3,266       7,659       13,262  
  Additions     315       4,915       -       5,230  
  Amortization expense     (205 )     (1,098 )     (843 )     (2,146 )
  Foreign currency translation difference     (153 )     (209 )     (486 )     (848 )
                                   
  Balance as of December 31, 2016     2,294       6,874       6,330       15,498  
  Additions     348       7,248       54       7,650  
  Amortization expense     (253 )     (2,784 )     (898 )     (3,935 )
  Foreign currency translation difference     140       262       389       791  
                                   
  Balance as of December 31, 2017     2,529       11,600       5,875       20,004  

 

The intangible assets are amortized using the straight-line method, which is the Group’s best estimate of how these assets will be economically consumed over their respective estimated useful lives of 3-10 years.

 

Amortization expense was US$1,109, US$2,146 and US$3,935 for the years ended December 31, 2015, 2016 and 2017, respectively.

 

The annual estimated amortization expenses for the intangible assets for each of the next five years are as follows:

 

      US$  
         
  2018     6,407  
  2019     5,272  
  2020     3,322  
  2021     1,114  
  2022     1,090  
           
        17,205  

 

9. GOODWILL

 

The changes in the carrying amount of goodwill were as follows:

 

      As of December 31,  
      2016     2017  
      US$     US$  
               
  Balance as of January 1     741       693  
  Foreign currency translation difference     (48 )     43  
                   
  Balance as of December 31     693       736  

 

No impairment charge was recorded in any of the three years ended December 31, 2016 and 2017.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

10. BANK AND OTHER BORROWINGS

 

Bank and other borrowings are as follows as of the respective balance sheet dates:

 

      As of December 31,  
      2016     2017  
      US$     US$  
               
  Short-term bank and other borrowings     6,306       12,648  
  Long-term bank borrowings, current portion     1,381       5,432  
        7,687       18,080  
                   
  Long-term bank borrowings, non-current portion     4,491       -  
                   
  Total borrowings     12,178       18,080  

 

The short-term bank borrowings outstanding as of December 31, 2016 and 2017 bore a weighted average interest rate of 6.89% and 6.73% per annum, respectively, and were denominated in RMB and US$. These borrowings were obtained from financial institutions and have term of one year.

 

The long-term bank borrowings, current portion outstanding as of December 31, 2017 bore a weighted average interest rate of 7.97%, and were denominated in US$. These borrowings were obtained from financial institutions located in USA, and have terms of three years.

 

On November 28, 2017, the Company entered into short-term loan agreements with HHMC Microelectronic Co., Limited of US$5,000,000 with an interest rate of 14.6% per annum and a maturity term of three months, for working capital.

 

Bank borrowings as of December 31, 2017 were pledged by the account receivable amounted to US$43,135.

 

As of December 31, 2017, the Company was in breach of two of the financial covenants under a long-term bank borrowing with an outstanding balance of US$1,515. The breach would result in acceleration of the repayment according to the contract term. Therefore, the outstanding balance was reclassified as current liability as of December 31, 2017.

 

In August 2016, the Group issued 2,515,123 and 1,900,800 warrants (“2016 Warrants”) to two banks in connection with a short term loan facility of $2,000,000 and a long term loan facility of $6,000,000 respectively, for working capital purpose. The 2016 Warrants entitled the banks to subscribe for Series D convertible redeemable preferred shares at the exercise price of $0.5059. The 2016 Warrants shall lapse and expire after 5 and 7 years from their issuance dates, respectively. The 2016 Warrants were replaced by Replacement Warrants to acquire an aggregate of 417,166 the Group’s ordinary shares at the consummation date of the Merger.

 

As the 2016 Warrants were granted to the banks for loan facilities, their fair value on the issuance date were recognized as deferred borrowing costs presented as deductions of the carrying value of the term loans. The deferred borrowing costs were recognized over the lives of the term loans as financing cost, using the effective interest rate method. Given the 2016 Warrants were convertible into Series D convertible redeemable preferred shares classified as mezzanine equity, the 2016 Warrants were financial liabilities in accordance with ASC 480, Distinguishing Liabilities from Equity that are re-measured at the end of each reporting period with an adjustment for fair value through earnings.

 

As part of the Merger, the 2016 Warrants were replaced by Replacement Warrants to acquire an aggregate of 417,166 the Group’s ordinary shares classified as permanent equity. As the modification of the 2016 Warrants term resulted in the reclassification of the 2016 Warrants from liability to equity, the 2016 Warrants amounted to US$1,544 were re-measured at fair value upon Merger and reclassified to additional paid in capital as of December 31, 2017.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

11. ACCRUED EXPENSES AND OTHER PAYABLES

 

The components of accrued expenses and other payables are as follows:

 

      As of December 31,  
      2016     2017  
      US$     US$  
               
  Payroll and welfare payable     3,235       2,030  
  Accrued liability     50       -  
  VAT, and other taxes payable     831       2,473  
  Payables for office supply and utilities     743       711  
  Payables for purchase of property and equipment     432       52  
  Professional service fees     -       3,161  
  Deposits from agents     2,315       3,509  
  Others     28       227  
        7,634       12,163  

 

12. DEFERRED GOVERNMENT GRANTS

 

The government grants received are required to be used in construction of property and equipment. These grants are initially deferred and subsequently recognized in the statement of operations over the life of the related assets as other operating income.

 

      For the years ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
                     
  Balance at beginning of the year     7,316       4,014       2,108  
  Recognized as other operating income     (2,880 )     (1,650 )     (281 )
  Foreign currency translation difference     (422 )     (256 )     130  
  Balance at ending of the year     4,014       2,108       1,957  

 

13. ACCUMULATED OTHER COMPREHENSIVE LOSS

 

The changes in accumulated other comprehensive loss, net of tax of nil, are as follows:

 

      Foreign currency translation     Total  
      US$     US$  
               
  Balance as of January 1, 2015     139       139  
  Current year other comprehensive loss     (1,288 )     (1,288 )
  Balance as of December 31, 2015     (1,149 )     (1,149 )
  Current year other comprehensive loss     (1,477 )     (1,477 )
  Balance as of December 31, 2016     (2,626 )     (2,626 )
  Current year other comprehensive income     2,119       2,119  
  Balance as of December 31, 2017     (507 )     (507 )

 

14. MAINLAND CHINA EMPLOYEE CONTRIBUTION PLAN

 

As stipulated by the regulations of the PRC, full-time employees of the Group in the PRC participate in a government-mandated multiemployer defined contribution plan organized by municipal and provincial governments. Under the plan, certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. The Group is required to make contributions to the plan based on certain percentages of employees’ salaries. The total expenses the Group incurred for the plan were US$2,238, US$2,362 and US$2,527, respectively, for the years ended December 31, 2015, 2016 and 2017.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

15. SHARE BASED COMPENSATION

 

Share-based awards under the 2007 Plan

 

In order to provide additional incentives to employees and to promote the success of the Group’s business, the Group adopted a share incentive plan in (the “2007 Plan”) December 2007, which was last amended in February 2011. The 2007 Plan allows the Group to grant options to employees, directors, consultants or members of the board of directors of the Group. Under the 2007 Plan, the maximum aggregate number of shares that may be issued shall not exceed 38,700,000. The terms of the options shall not exceed ten years from the date of grant. 25% of the shares subject to the options shall vest on the first anniversary of the vesting commencement date, and 1/48 of the shares subject to the options shall vest each month thereafter over the next three years, provided the optionee continues to be a service provider to the Group. Thus, there is an explicit service condition of 4 years. In addition, the options contain a performance condition whereby vesting will commence upon the earlier to occur of an initial public offering or a change in control as defined in the 2007 Plan, provided there is continued employment of the optionees on such date.

 

During the years ended December 31, 2015, December 31, 2016 and the period ended August 18, 2017, the Group granted 6,525,190, 610,000 and 9,085,000 shares of options, respectively, to purchase ordinary shares to employees, officers, and directors with the exercise price of $0.459, $0.56 and $0.678 ~ $0.859 per share, respectively.

 

The following table summarizes the Group’s option activities under the 2007 Plan:

 

      Number of options    

Weighted average

exercise

price

  Weighted average remaining contractual term   Aggregate intrinsic value
            (US$)   (Years)   (US$)
                     
  Outstanding, January 1, 2015     29,554,630     0.27   6.88   308
  Granted     6,525,190     0.46        
  Forfeited     (4,042,580 )   0.36        
                       
  Outstanding, December 31, 2015     32,037,240     0.30   4.97   308
                       
  Vested and expect to vest at December 31, 2015     32,037,240     0.30   4.97   308
                       
  Outstanding, January 1, 2016     32,037,240     0.30   4.97   308
  Granted     610,000     0.56        
  Forfeited     (5,190,297 )   0.34        
                       
  Outstanding, December 31, 2016     27,456,943     0.30   5.26   308
                       
  Vested and expected to vest at December 31, 2016     27,456,943     0.30   5.26   308
                       
  Outstanding, January 1, 2017     27,456,943     0.30   5.26   308
  Granted     9,085,000     0.70        
  Forfeited     (8,007,606 )   0.04        
                       
  Outstanding, August 18, 2017     28,534,337     0.48   6.99   -
                       
  Vested and expected to vest at August 18, 2017     28,534,337     0.48   6.99   -

 

As of August 18, 2017, no options were vested and exercisable given the performance condition in place described above. Historically, compensation cost related to performance options that only vest upon the consummation of an initial public offering or change in control event was recognized when the offering or change in control event was consummated. Accordingly, the Group did not recognized any compensation cost under the 2007 Plan.

 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the fair value of the underlying stock at each reporting date, for those awards that have an exercise price below the estimated fair value of the Group’s shares.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

15. SHARE BASED COMPENSATION (CONTINUED)

 

As of December 31, 2015, 2016 and August 18, 2017, the Group had options outstanding to purchase an aggregate of 5,500,000 shares, 5,500,000 shares and nil with an exercise price below the fair value of the Group’s shares, resulting in an aggregate intrinsic value of US$308, US$308 and nil, respectively.

 

Consummation of reverse acquisition in 2017

 

Upon the consummation of the Merger, the holders of Borqs International issued and outstanding options had their options assumed by the Company and now hold options to acquire a total of 2,695,194 of the Company’s ordinary shares upon exercise of those options. In addition, the performance condition whereby vesting will commence upon the earlier to occur of an initial public offering or a change in control (collectively, “IPO condition”) as defined in the 2007 Plan was removed.

 

Pursuant to ASC 718, the cancellation of the terms or conditions of an equity award under original award in exchange for a new award should be treated as modification. As the IPO condition was not expected to be satisfied as of the modification date, the original grant-date fair value is no longer used to measure compensation cost for the awards. As a result, the compensation cost recognized for the replacement awards would be based on the modification date fair value of the awards. For those awards that were fully vested at the time of the modification, the Group recognized a one-time catch up of US$5,658 in share-based compensation expense upon the Merger.

 

On November 18, 2017, the Group granted 180,000 share of options to purchase ordinary shares to directors with the exercise price of $5.30 share.

 

      Number of options    

Weighted average

exercise

price

    Weighted average remaining contractual term     Aggregate intrinsic value  
            (US$)     (Years)     (US$)  
                           
  Converted under Assumed Options:                        
  Outstanding, August 18, 2017     2,695,194       5.08       6.99       6,561  
  Granted     180,000       5.30                  
  Forfeited     (49,804 )     6.58                  
                                   
  Outstanding, December 31, 2017     2,825,390       5.38       6.43       6,860  
                                   
  Vested and expected to vest at December 31, 2017     2,825,390       5.38       6.43       6,860  

 

As of August 18, 2017 and December 31, 2017, the Group had options outstanding to purchase an aggregate of 2,583,250 and 2,735,174 shares with an exercise price below the fair value of the Group’s shares, resulting in an aggregate intrinsic value of US$6,561 and US$6,860, respectively.

 

The Group calculated the estimated fair value of the options on the respective grant dates using the binomial-lattice option valuation model with the following assumptions for each applicable period which takes into account variables such as volatility, dividend yield, and risk-free interest rate, contractual term of the option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of termination or retirement of the option holder in computing the value of the option:

 

      Year 2015     Year 2016     Year 2017  
                     
  Risk-free interest rates     1.95%-2.28 %     1.58%-2.60 %     1.06%-2.32 %
  Expected life (years)     10 years       10 years       10 years  
  Expected volatility     40%-45 %     45%-46 %     31.9%-43.9 %
  Expected dividend yield     0 %     0 %     0 %
  Exercise multiple     2.20       2.20       2.20  
  Post-vesting forfeit rate     10 %     10 %     10 %
  Fair value of underlying ordinary shares     US$0.158-US$0.231       US$0.615-US$0.697       US$7.45  
  Fair value of share option     US$0.026-US$0.096       US$0.309-US$0.315       US$2.34-US$7.45  

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

15. SHARE BASED COMPENSATION (CONTINUED)

 

Total compensation expense relating to share options granted to employees recognized for the year ended December 31, 2017 is as follows:

 

     

For the year ended December 31, 2017

 
         
  Cost of revenues     -  
  Sales and marketing expenses     1,470  
  General and administrative expenses     1,277  
  Research and development expenses     3,143  
           
        5,890  

 

Ordinary shares issued in 2017

 

On March 17, 2017, the Group issued 450,000 ordinary shares to certain employees and a non-employee for a total proceeds of US$62. The fair value of the ordinary shares in excess of the proceeds received by the Group was immediately recognized as compensation expense which amounted to US$324. The 450,000 ordinary shares were fully vested as of December 31, 2017.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

16. TAXATION

 

Enterprise income tax (“EIT”)

 

British Virgin Islands

 

The Company is incorporated in the British Virgin Islands and conducts its primary business operations through the subsidiaries and VIEs in the PRC, India and Hong Kong. Under the current laws of the British Virgin Islands, the Company is not subject to tax on income or capital gains.

 

Cayman Islands

 

Borqs International is incorporated in the Cayman Islands and conducts its primary business operations through the subsidiaries and VIEs in the PRC, India and Hong Kong. Under the current laws of the Cayman Islands, Borqs International is not subject to tax on income or capital gains.

 

Hong Kong

 

Borqs HK is subject to Hong Kong profits tax rate of 16.5% for the years ended December 31, 2015, 2016 and 2017. No provision for Borqs HK profits tax has been made in the consolidated financial statements as the entity had losses in the years ended December 31, 2015, 2016 and 2017.

 

India

 

Borqs India is subject to income tax rate of 32.45% for the years ended December 31, 2015, 2016 and 2017. Amounts of US$1,158, US$1,684 and US$2,024 are included as income tax expense for the years ended December 31, 2015, 2016 and 2017, respectively.

 

The PRC

 

The Group’s PRC subsidiaries are incorporated in the PRC and subject to PRC EIT on the taxable income in accordance with the relevant PRC income tax laws.

 

Effective January 1, 2008, the statutory corporate income tax rate is 25%, except for certain entities eligible for preferential tax rates.

 

BORQS Beijing was qualified for a High and New Technology Enterprises (“HNTE”) since 2012 and is eligible for a 15% preferential tax rate from 2012 to 2014. In July 2015, BORQS Beijing obtained a new HNTE certificate, which will expire in July 2018. For the years ended December 31, 2015, 2016 and 2017, BORQS Beijing enjoyed a preferential tax rate of 15%.

 

Yuantel Telecom was qualified for a High and New Technology Enterprises (“HNTE”) since 2011 and is eligible for a 15% preferential tax rate from 2011 to 2013. In October 2014, Yuantel Telecom obtained a new HNTE certificate, which expired in October 2017. Yuantel Telecom has successfully renewed the HNTE certificate in December 2017 with effective term of three years. In accordance with the PRC Income Tax Laws, an enterprise awarded with the HNTE status may enjoy a reduced EIT rate of 15%. For the years ended December 31, 2015, 2016 and 2017, Yuantel Telecom enjoyed a preferential tax rate of 15%.

 

The Group’s other PRC subsidiaries were subject to EIT at a rate of 25% for the years ended December 31, 2015, 2016 and 2017.

 

The New EIT Law also provides that enterprises established under the laws of foreign countries or regions and whose “place of effective management” is located within the PRC are considered PRC tax resident enterprises and subject to PRC income tax at the rate of 25% on worldwide income. The definition of “place of effective management” refers to an establishment that exercises, in substance, overall management and control over the production and business, personnel, accounting, properties, etc. of an enterprise. As of December 31, 2017, no detailed interpretation or guidance has been issued to define “place of effective management”. Furthermore, as of December 31, 2017, the administrative practice associated with interpreting and applying the concept of “place of effective management” is unclear. If the Group is deemed as a PRC tax resident, it would be subject to PRC tax under the New CIT Law. The Group will continue to monitor changes in the interpretation or guidance of this law.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

16. TAXATION (CONTINUED)

 

Profit (loss) before income taxes consists of:

 

      For the years ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
                     
  Non-PRC     3,241       2,777       (7,138 )
  PRC     (1,595 )     2,478       (2,902 )
                           
        1,646       5,255       (10,040 )

 

Income tax expense comprises of:

 

      For the years ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
                     
  Current     (1,895 )     (2,257 )     (1,382 )
  Deferred     1,044       (402 )     (937 )
                           
        (851 )     (2,659 )     (2,319 )

 

The reconciliation of tax computed by applying the statutory income tax rate of 25% for the years ended December 31, 2015, 2016 and 2017 applicable to the PRC operations to income tax expense is as follows:

 

      For the years ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
                     
  Profit (loss) before income taxes     1,646       5,255       (10,040 )
                           
  Income tax (expense) income computed at the statutory income tax rate at 25%     (412 )     (1,314 )     2,510  
  Non-deductible expenses     (166 )     (491 )     (2,698 )
  Non-taxation income     1,300       414       68  
  Preferential rate     (423 )     400       (324 )
  Current and deferred tax rate differences     790       310       55  
  Foreign rate differences     (292 )     560       (426 )
  Change of valuation allowance     (1,643 )     (2,529 )     (1,039 )
  Taxable income     -       -       (215 )
  Deferred tax     -       74       -  
  Interest expense     (5 )     (83 )     (250 )
                           
  Income tax expense     (851 )     (2,659 )     (2,319 )

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

16. TAXATION (CONTINUED)

 

Deferred Taxes

 

The significant components of deferred taxes are as follows:

 

      As of December 31,  
      2016     2017  
      US$     US$  
  Deferred tax assets                
  Inventories provision     156       229  
  Accrued salary and welfare payable     274       165  
  Property and equipment     20       14  
  Tax losses     13,279       14,769  
  Valuation allowance     (12,675 )     (13,714 )
  Total deferred tax assets     1,054       1,463  

 

  Deferred tax liabilities            
  Intangible assets     2,146       2,004  
  Deferred cost of revenue     24       1,551  
                   
  Total deferred tax liabilities     2,170       3,555  

 

As of December 31, 2017, the Group had net tax operating losses from its PRC subsidiaries and its Consolidated VIEs, as per filed tax returns, of US$38,503, which will expire from 2018 to 2022. The Group has net tax operating loss from its HK subsidiary of US$15,500, which will not expire.

 

As of December 31, 2017, the Group intends to permanently reinvest the undistributed earnings from its foreign subsidiaries and the Consolidated VIEs to fund future operations. The amount of unrecognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries and the Consolidated VIEs is not determined because such a determination is not practicable.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

16. TAXATION (CONTINUED)

 

Unrecognized Tax Benefits

 

As of December 31, 2016 and 2017, the Group recorded an unrecognized tax benefits of US$4,053 and US$4,547, respectively, of which, US$2,381 and US$2,764, respectively, are presented on a net basis against the deferred tax assets related to tax loss carry forwards on the consolidated balance sheets. The unrecognized tax benefits and its related interest are primarily related to under-reported intercompany profit. The amount of unrecognized tax benefits will change in the next 12 months, pending clarification of current tax law or audit by the tax authorities, however, an estimate of the range of the possible change cannot be made at this time. As of December 31, 2016 and 2017, unrecognized tax benefits of US$1,681 and US$2,043, if ultimately recognized, will impact the effective tax rate.

 

A roll-forward of unrecognized tax benefits is as follows:

 

      For the years ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
                     
  Balance at beginning of year     620       2,177       4,053  
  Additions based on tax positions related to the current year     1,557       1,876       217  
  Foreign currency translation difference     -       -       277  
                           
  Balance at end of year     2,177       4,053       4,547  

 

In the years ended December 31, 2016 and 2017, the Group recorded interest expense accrued in relation to the unrecognized tax benefit of US$83 and US$250 in income tax expense, respectively. Accumulated interest expense recorded by the Group was US$88 and US$338 as of December 31, 2016 and 2017, respectively. As of December 31, 2017, the tax years ended December 31, 2012 through 2017 for the PRC subsidiaries and the VIE remain open for statutory examination by the PRC tax authorities.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

17. RELATED PARTY TRANSACTIONS

 

  (a) Related parties

 

  Names of related parties   Relationship with the Group
  Intel Capital Corporation (“Intel”) and its affiliates   Intel was a shareholder *
  Qualcomm Global Trading PTE. Ltd (“Qualcomm”) and its affiliates   Qualcomm was a shareholder *

 

(b) Other than disclosed elsewhere, the Group had the following significant related party transactions for the years ended December 31, 2015, 2016 and 2017:

 

      For the years ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
  Software services provided to:                        
  Intel Corporation     6,204       271       *
  Intel (China) Co., Ltd.     5       9       *  
  Intel Asia-Pacific Research and Development Ltd.     328       119       *  
  Intel (China) Research Center Co., Ltd.     -       57       *  
                           
  Hardware sold to:                        
  Intel Corporation     55       -       *  

 

(c) The Group had the following related party balances as of December 31, 2016 and 2017:

 

      As of December 31,  
      2016     2017  
      US$     US$  
  Accounts receivable from related parties:                
  Current:                
  Intel Corporation     481       *
  Intel (China) Co., Ltd.     -       *  
  Intel Asia-Pacific Research and Development Ltd.     9       *  

 

All balances with the related parties as of December 31, 2016 were unsecured, interest-free and have no fixed terms of repayment.

 

* Upon the consummation of the Merger, both entities ceased to be shareholders of the Group.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

18. RESTRICTED NET ASSETS

 

The Group’s ability to pay dividends is primarily dependent on the Group receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the VIE and subsidiaries of the VIE incorporated in PRC only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The consolidated results of operations reflected in the consolidated financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Group’s subsidiaries.

 

Under PRC law, the Group’s subsidiaries, VIE and the subsidiaries of the VIE located in the PRC (collectively referred as the “PRC subsidiaries”) are required to provide for certain statutory reserves, namely a general reserve, an enterprise expansion fund and a staff welfare and bonus fund. The PRC subsidiaries are required to allocate at least 10% of their after tax profits on an individual company basis as determined under PRC accounting standards to the statutory reserve and has the right to discontinue allocations to the statutory reserve if such reserve has reached 50% of registered capital on an individual company basis. In addition, the registered capital of the PRC subsidiaries is also restricted.

 

Appropriations to the enterprise expansion fund and staff welfare and bonus fund are at the discretion of the Board of Directors of the subsidiary. The PRC subsidiaries are also subject to similar statutory reserve requirements. These reserves can only be used for specific purposes and are not transferable to the Group in the form of loans, advances or cash dividends. As of December 31, 2016 and December 31, 2017, the Group’s PRC subsidiaries had appropriated US$1,898 and US$1,898, respectively, in its statutory reserves.

 

As a result of these PRC laws and regulations subject to the limit discussed above that require annual appropriations of 10% of after-tax income to be set aside, prior to payment of dividends as general reserve fund, the Group’s PRC subsidiaries are restricted in their ability to transfer a portion of their net assets to the Group. Amounts restricted include paid-in capital and statutory reserve funds of the Group’s PRC subsidiaries and the equity of the Consolidated VIEs, as determined pursuant to PRC generally accepted accounting principles, totaling an aggregate of US$1,898 as of December 31, 2017.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

19. CONVERTIBLE REDEEMABLE PREFERRED SHARES

 

On December 27, 2007, March 17, 2008, September 26, 2008 and October 8, 2008, the Group issued 19,800,000, 3,100,000, 12,000,000 and 5,000,000 Series A convertible redeemable preferred shares (the “Series A Preferred Shares”), respectively, to certain external investors at a price of $0.20 per share for a total cash consideration of $7,980. The cash proceeds received was $7,889, net of issuance costs of $91.

 

On June 26, 2009, August 19, 2009 and October 12, 2009, the Group issued 64,285,715,15,000,000 and 3,571,428 Series B convertible redeemable preferred shares (the “Series B Preferred Shares”), respectively, to certain external investors at a price of $0.21 per share for a total consideration of $17,400 (includes cash proceeds of $14,400 and $3,000 upon conversion of convertible notes). The cash proceeds received was $14,242, net of issuance costs of $158.

 

On February 14, 2011 and May 24, 2012, the Group issued 38,181,817 and 5,454,545 Series C convertible redeemable preferred shares (the “Series C Preferred Shares”), to certain external investors at the price of $0.275 per share for a total cash consideration of $12,000. The cash proceeds received was $11,817, net of issuance costs of $183.

 

On August 20, 2014 the Group issued 23,721,443 Series D convertible redeemable preferred shares (the “Series D Preferred Shares”), to certain external investors at the price of $0.33725 per share for a total cash consideration of $8,000. The cash proceeds received was $7,874, net of issuance costs of $126.

 

On February 8, 2017 and March 2, 2017, the Group closed the issuances of 10,325,126 and 2,950,036 Series E convertible redeemable preferred shares (the “Series E Preferred Shares”), respectively, for a purchase price of $0.678 per share. Concurrently, Series E-1 Warrants to purchase up to an aggregate of 7,094,164 Series E-1 convertible preferred shares (the “Series E-1 Preferred Shares”) were issued and immediately exercised, at $0.001 per share. The total cash proceeds received was US$9,008, net of issuance costs of US$312. Net proceeds were allocated to the Series E Preferred Shares and Series E-1 Preferred Shares based on their relative fair value on closing dates.

 

Series E-1 Preferred Shares shall vote with Series E Preferred Shares as a single class. Series E-1 Preferred Shares have neither redemption rights nor any other rights preferential to the ordinary shares and therefore Series E-1 Preferred Shares are classified as permanent equity.

 

The significant terms of the Series A, Series B, Series C, Series D, and Series E convertible redeemable preferred shares (together “Convertible Redeemable Preferred Shares”) are summarized as follows.

 

Conversion

 

Convertible Redeemable Preferred Shares can be converted into ordinary shares at the option of the holder at any time by dividing the applicable original purchase price by the applicable conversion price which is initially equal to the original purchase price and as such, the initial conversion ratio for each Convertible Redeemable Preferred Shares into each ordinary share shall be one-for-one.

 

Convertible Redeemable Preferred Shares shall automatically be converted into ordinary shares at the then-effective conversion rate applicable to the relevant series of Preferred Shares: (a) in the event of the closing of a Qualified IPO; or (b) in relation only to Series A and Series B Preferred Shares, upon the approval and written consent of a majority of the outstanding Series A and Series B Preferred Shares holders to convert their respective Preferred Shares into ordinary shares.

 

The conversion price is subject to additional adjustments if the Group makes certain dilutive issuances of shares.

 

Dividends

 

Series D and Series E Preferred Shares shall receive dividends at an annual rate of six percent (6%) of the original purchase price in preference and priority to any dividends on the Series A, Series B, Series C Preferred Shares and ordinary shares. Dividends on Series D and Series E Preferred Shares shall be cumulative whether declared by the Board of Directors or not.  

 

Each holder of Series A, Series B and Series C Preferred Shares is entitled to receive non-cumulative dividends when and if declared by the Board of Directors of the Group in preference and priority to any dividends on ordinary shares, after all accumulated dividends on the Series D and Series E Preferred shares have been paid or set aside for payment to the holders of Series D and Series E Preferred Shares in a calendar year.

 

Any additional dividends declared, after all accumulated dividends and declared dividends on the Preferred Shares have been paid or set aside for payment to the holders of Preferred Shares in a calendar year, shall be distributed among all holders of ordinary shares and Preferred Shares.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

19. CONVERTIBLE REDEEMABLE PREFERRED SHARES (CONTINUED)

 

Redemption

 

All outstanding Convertible Redeemable Preferred Shares can be redeemed at the election of the majority holders at any time after the fifth anniversary of the first issuance date of Series E Preferred Shares.

 

Prior to the fifth anniversary of the first issuance date of Series E Preferred Shares, all outstanding Series C Preferred Shares held by Intel can be redeemed at any time of the holder’s election to redeem for investigation or for breach as defined in the Memorandum of Association and Articles of Association.

 

Prior to the fifth anniversary of the first issuance date of Series E Preferred Shares, all outstanding Series D and Series E Preferred Shares can be redeemed at any time of a holder of Series D and a holder of Series E Preferred Shares’ election to redeem for breach event or to redeem for investigation and failure to obtain MVNO license event as defined in the Memorandum of Association and Articles of Association.

 

Convertible Redeemable Preferred Shares are redeemed at a price equal to 150% the original purchase price plus any unpaid declared dividends. The redemption price for Preferred Shares under the event of the election of Intel, a holder of Series D Preferred Shares or a holder of Series E Preferred Shares to redeem for investigation is set to be 100% of the original purchase price.

 

The redemption price for Convertible Redeemable Preferred Shares under the event of the election of Intel, a holder of Series D Preferred Shares or a holder of Series E Preferred Shares to redeem for breach is set to be 150% of the original purchase price.

 

Winding up / Liquidation

 

In the event of any liquidation, dissolution, or winding up of the Group, either voluntary or involuntary, distributions to the shareholders of the Group shall be made as stated below.

 

The holders of Series E Preferred Shares then outstanding are entitled to be paid first out of the assets of the Group available for distribution a liquidation preference in an amount per Preferred Share equal to the sum of (i) 150% of the original purchase price as adjusted and (ii) all unpaid accumulated dividends, in priority to any other holders of Preferred Shares or ordinary shares.

 

Upon full payment of the Series E Preferred Shares liquidation preference, the holders of Series D Preferred Shares are entitled to be paid first out of the assets of the Group available for distribution a liquidation preference in an amount per Preferred Share equal to the sum of (i) 150% of the original purchase price as adjusted and (ii) all unpaid accumulated dividends, in priority to any other holders of Preferred Shares or ordinary shares.

 

Upon full payment of the Series D and Series E Preferred Shares liquidation preference Series A, Series B and Series C Preferred Shares then outstanding shall be entitled to be paid first out of the assets of the Group available for distribution (and prior and in preference to any payment on the ordinary shares) a liquidation preference in an amount per Series A, Series B and Series C Preferred Shares equal to the sum of (i) the original purchase price applicable to such Preferred Share as adjusted and (ii) all unpaid declared dividends. The holders of Series C Preferred Shares shall receive their liquidation preference amount in preference to holders of Series A and Series B Preferred Shares. Subject to the prior payment of all amounts due to the holders of Preferred Shares, the balance of all remaining assets available for distribution are made with equal priority and pro rata amongst the holders of ordinary shares and the holders of Preferred Shares on an as–converted basis.

 

Voting

 

Each share of Convertible Redeemable Preferred Shares has voting rights equal to an equivalent number of shares of ordinary shares into which it is convertible and votes together as one class with the ordinary shares. All directors of the Group’s board of directors are elected by the holders of the outstanding ordinary shares and the Preferred Shares, voting together as a single class on an as-converted basis.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

19. CONVERTIBLE REDEEMABLE PREFERRED SHARES (CONTINUED)

 

Accounting for Convertible Redeemable Preferred Shares

 

The Convertible Redeemable Preferred Shares have been classified as mezzanine equity as they can be redeemed at the option of the holders. The initial carrying values of the Preferred Shares are the total consideration received at their respective dates of issuance net of issuance costs. There were no embedded features except for Series E Preferred Shares that qualified for bifurcation and separate accounting in accordance with ASC 815-10 Derivatives and Hedging .

 

At the respective closing dates of the Series E Preferred Shares, beneficiary conversion feature was identified and recorded as a reduction of Series E Preferred Shares with an offsetting credit to additional paid-in capital. 

 

As of December 31, 2016 and August 18, 2017, no dividend was declared by the Group. US$1,120 and US$1,709 of dividend was accumulated to the holders of the Series D and Series E Preferred Shares as of December 31, 2016 and August 18, 2017.  

 

Convertible Redeemable Preferred Shares were accreted to redemption value based on the terms stipulated in the Memorandum of Association (“MOA”). Changes in the redemption value are recorded against retained earnings. Upon the consummation of the Merger, all Convertible Redeemable Preferred Shares and Series E-1 Preferred Shares were converted to ordinary shares. Upon conversion, all unamortized discounts, including any original issue discounts and discounts from allocation of proceeds for beneficiary conversion feature, are recognized immediately as deemed dividend and deducted from income available to ordinary shareholders.

 

The following is the roll-forward of the carrying amounts of Convertible Redeemable Preferred Shares   for the years ended December 31, 2015, 2016 and 2017:

 

      For the years ended December 31,  
      2015     2016     2017  
        US$       US$       US$  
  Balance at beginning of the year     65,469       67,886       68,862  
  Issuance of Series E Preferred Shares     -       -       6,300  
  Beneficiary conversion feature of Series E Preferred Shares     -       -       (3,258 )
  Change in redemption value     2,417       976       6,956  
  Conversion to ordinary shares     -       -       (78,860 )
                           
  Balance at end of the year     67,886       68,862       -  

 

Series E-1 Preferred Shares of US$2,708 were converted to ordinary shares as of December 31, 2017.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

20. LOSS PER SHARE

 

Basic and diluted loss per share for each of the years presented are calculated as follows:

 

      For the years ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
  Numerator:                        
  Net income (loss)     795       2,596       (12,359 )
  Less: net (loss) income attributable to noncontrolling interests     (1,316 )     (632 )     210  
  Net income (loss) attributable to Borqs Technologies, Inc.     2,111       3,228       (12,569 )
  Accretion to redemption value of Convertible Redeemable Preferred Shares     (2,417 )     (976 )     (6,956 )
  Allocation to holders of Convertible Redeemable Preferred Shares     -       (2,252 )     -  
  Net loss attributable to Borqs Technologies, Inc.’s ordinary shareholders     (306 )     -       (19,525 )
                           
  Denominator:                        
  Weighted-average number of ordinary shares outstanding—basic     4,224,090       4,224,725       12,842,671  
  Weighted-average number of ordinary shares outstanding—diluted     4,224,090       4,224,725       12,842,671  
                           
  Loss per share—Basic:     (0.07 )     0.00       (1.52 )
  Loss per share—Diluted:     (0.07 )     0.00       (1.52 )

 

For the year ended December 31, 2017, share options and Replacement Warrants to purchase ordinary shares, Unit Purchase Option, public warrants and private warrants were anti-dilutive and excluded from the calculation of diluted net loss per share.

 

21. FAIR VALUE MEASUREMENTS

 

The Group applies ASC 820, Fair Value Measurements and Disclosures . ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 requires disclosures to be provided on fair value measurement.

 

ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Include other inputs that are directly or indirectly observable in the marketplace.

Level 3 — Unobservable inputs which are supported by little or no market activity.

 

ASC 820 describes three main approaches to measuring the fair value of assets and liabilities: (1) market approach; (2) income approach; and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

 

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

21. FAIR VALUE MEASUREMENTS (CONTINUED)

 

2016 Warrants are classified within Level 3. We estimated the fair value of these warrants as of December 31, 2016 and August 18, 2017 using the binomial-lattice option valuation model, based on the remaining contractual term of the warrants, risk-free interest rates and expected volatility of the price of the underlying Series D convertible redeemable preferred shares. The 2016 Warrants are then reclassified to equity following the Merger (Note 4). The assumptions used, including the market value of the underlying Series D convertible redeemable preferred shares and the expected volatility, were subjective unobservable inputs.

 

Liabilities measured at fair value on a recurring basis are summarized below:

 

      Fair value measurement using:        
      Quoted prices in active markets for identical assets
(Level 1)
    Significant other observable inputs
(Level 2)
    Unobservable inputs
(Level 3)
    Fair value at December 31, 2016  
        US$       US$       US$       US$  
  Warrant liabilities     -       -       1,344       1,344  
                                   
  Liabilities     -       -       1,344       1,344  

 

There are no assets and liabilities measured at fair value on a recurring basis as of December 31, 2017.

 

      Warrant liabilities  
      US$  
           
  Fair value at January 1, 2016     -  
  Increase in liability     1,332  
  Changes in the fair value     12  
  Fair value at December 31, 2016     1,344  
  Changes in the fair value     200  
  Fair value at August 18, 2017     1,544  
  Transfer to permanent equity     (1,544 )
  Fair value at December 31, 2017     -  

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

22. COMMITMENTS AND CONTINGENCIES

 

Operating lease commitments

 

The Group leases buildings in the PRC and India under non-cancelable operating leases expiring on different dates. For the years ended December 31, 2015, 2016 and 2017, total rental expenses for all operating leases amounted to US$1,368, US$1,340 and US$1,418, respectively.

 

As of December 31, 2017, the Group has future minimum lease payments under non-cancelable operating leases with initial terms in excess of one year in relation to office buildings consisting of the following:

 

      US$  
         
  2018     1,138  
  2019     721  
  2020     654  
  2021     1,171  
  2022 and thereafter     -  
           
        3,684  

 

Payments under operating leases are expensed on a straight-line basis over the periods of their respective leases.

 

Income Taxes

 

As of December 31, 2017, the Group recognized an accrual of US$2,121 for unrecognized tax benefits and its interest (Note 16). The final outcome of the tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of statutes of limitation. However, due to the uncertainties associated with the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these tax uncertainties. As of December 31, 2017, the Group classified the accrual for unrecognized tax benefits as a non-current liability.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

23. SEGMENT REPORTING

 

The operations of the Group are organized into two segments, consisting of Yuantel and Connected Solution.

 

The CODM measures the performance of each segment based on metrics of revenue and earnings from operations and uses these results to evaluate the performance of, and to allocate resources to each of the segments. CODM does not evaluate operating segments using asset information.

 

The CODM evaluates performance based on each reporting segment’s net revenue and operating profit (loss). The table below provides a summary of the Group’s operating segment results for the years ended December 31, 2015, 2016 and 2017:

 

  FY2017   Yuantel     Connected Solution     Total segments     Eliminations     Consolidated  
                                 
  Net revenue                              
  -External customers     32,074       122,233       154,307       -       154,307  
  -Inter-segment     -       1,879       1,879       (1,879 )     -  
  Total net revenue     32,074       124,112       156,186       (1,879 )     154,307  
                                           
  Operating loss     331       (8,241 )     (7,910 )     -       (7,910 )

 

  FY2016   Yuantel     Connected Solution     Total segments     Eliminations     Consolidated  
                                 
  Net revenue                              
  -External customers     35,138       85,448       120,586       -       120,586  
  -Inter-segment     -       2,016       2,016       (2,016 )     -  
  Total net revenue     35,138       87,464       122,602       (2,016 )     120,586  
                                           
  Operating profit     (3,589 )     8,829       5,240       -       5,240  

 

  FY2015   Yuantel     Connected Solution     Total segments     Eliminations     Consolidated  
                                 
  Net revenue                              
  -External customers     19,957       55,115       75,072       -       75,072  
  -Inter-segment     -       3,615       3,615       (3,615 )     -  
  Total net revenue     19,957       58,730       78,687       (3,615 )     75,072  
                                           
  Operating profit     (5,968 )     6,789       821       (108 )     713  

 

      For the years ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
                     
  PRC     28,442       41,214       49,761  
  Outside PRC:                        
  United States     14,978       34,526       23,312  
  India     7,949       25,126       70,421  
  Rest of the world     23,703       19,720       10,813  
  Total net revenue     75,072       120,586       154,307  

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

24. SUBSEQUENT EVENTS  

 

(a) Repurchase of Shares from Zhengqi International Holding Ltd.

   

On January 10, 2018, we entered into a stock repurchase agreement (“Stock Repurchase Agreement”) with Zhengqi International Holding Limited (“Zhengqi”), pursuant to which we agreed to repurchase 966,136 of our ordinary shares that were originally issued and sold to Zhengqi on August 18, 2017, at an aggregate purchase price of approximately US$10 million, or US$10.40 per share. In addition, Zhengqi agreed to forfeit all of its rights to 1,278,776 shares that had been held in escrow and which will instead be treated as part of the merger consideration shares under the merger agreement pursuant to which the Company acquired Borqs International. The Stock Repurchase Agreement provides that those shares will be treated in the following manner: 51,151 shares (4% of the total) became additional shares placed in an indemnity escrow account; and 1,227,625 shares were distributed to the former Borqs International shareholders based on their respective proportionate interests in the merger consideration. The funds used in the repurchase were the same amount of funds provided by Zhengqi when the shares were sold to Zhengqi on August 18, 2017 under the Backstop and Subscription Agreement between the Company, Zhengqi and EarlyBirdCapital. The Company and Zhengqi are currently making arrangements for the completion of this transaction.

 

(b) Investment into Crave and Colmei.

 

On January 18, 2018, the Company entered into an agreement with Colmei Technology International Ltd (“Colmei”) and its affiliate Shenzhen Crave Communication Co., Ltd (“Crave”), along with the shareholders of Crave and Colmei (“Selling Shareholders”), pursuant to which the Selling Shareholders agreed to sell to the Company and the Company agreed to acquire 13.8% of the outstanding shares of Crave and 13.8% of the outstanding shares of Colmei from the Selling Shareholders, which will not result in the Company’s significant influence in either Colmei or Crave. Under the agreement, the Company will pay purchase consideration consisting of Company shares and cash. The Company shares will consist of 473,717 ordinary shares to be issued to the Selling Shareholders at closing and cash in the amount of US$10.0 million to be paid to the Selling Shareholders over a period of 36 months. If approved by the Company’s board of directors, the Company will also issue additional shares to the Selling Shareholders if the aggregate value of the Company shares initially issued to the Selling Shareholders under this agreement is less than US$3.0 million on August 18, 2018. This transaction was completed on March 22, 2018.

 

(c) Share Purchase by Employees of our Subsidiary in India.

 

In effort to gain compliance with Nasdaq’s requirement for the Company to have at least 300 round lot shareholders by April 10, 2018, the Company initiated a restricted ordinary shares purchase program through which eligible employees of our wholly owned subsidiary in India, Borqs Software Solutions Private Ltd, were allowed to voluntarily participate in the purchase of between 100 to 250 restricted ordinary shares of the Company pursuant to the terms and conditions of the Company’s 2017 Equity Incentive Plan. The purchase price was set at $9.40 per share which was the closing price of the Company’s ordinary shares as traded on Nasdaq on March 19, 2018, the day immediately prior to the date of the transaction. The participants of the program paid for the shares by having the purchase amount deducted from their payroll on March 23, 2018. A total of 222 employees participated and purchased a total of 29,170 ordinary shares.

 

(d) Public Offering of Ordinary Shares

 

For financing of the Company’s working capital needs and intended acquisitions, the Company is contemplating a public offering of its ordinary shares to be underwritten by the Maxim Group. A registration statement on form S-1 was filed on February 14, 2018 and the Company received a round of comments from the SEC on March 13, 2018. After the filing of this annual report, the Company will immediately respond to those SEC comments and file an amended S-1 incorporating the Company’s 2017 audited financial statements.

 

  (e) Acquisition of Shanghai KADI  Technologies Co., Ltd. (“KADI”)

 

On January 8, 2018, the Company entered into a letter of intent to acquire a 60% equity interest in KADI, a Chinese company that develops software and hardware solutions for electric vehicle control modules, such as charging, battery management and vehicle controls. We are currently negotiating a definitive agreement to acquire such equity interest for an aggregate of $11.7 million in cash to be paid to KADI and ordinary shares with an agreed-upon value of $3.3 million to be issued to selling shareholders of KADI. KADI is not a customer or a supplier of Borqs.

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

25. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

 

Condensed balance sheets

 

          As of December 31,  
      Note   2016     2017  
          US$     US$  
  ASSETS                
  Current assets                    
  Cash and cash equivalents         15       2  
  Prepaid expenses and other current assets         2       164  
  Amount due from subsidiaries   (b)     50,107       68,643  
                       
  Total current assets         50,124       68,809  
                       
  Non-current assets                    
  Investments in subsidiaries         (35,247 )     (13,197 )
                       
  Total non-current assets         (35,247 )     (13,197 )
                       
  Total assets         14,877       55,612  
                       
  LIABILITIES AND SHAREHOLDERS’ EQUITY                    
  Current liabilities                    
  Accrued expenses and other payables         271       2,810  
  Short-term bank and other borrowings         -       5,000  
                       
  Total current liabilities         271       7,810  
                       
  Total liabilities         271       7,810  
                       
  Mezzanine equity         68,862       -  
                       
  Total mezzanine equity         68,862       -  
                       
  Shareholders’ (deficit) equity                    
  Additional paid-in capital         1,178       120,642  
  Accumulated deficit         (52,808 )     (72,333 )
  Accumulated other comprehensive loss         (2,626 )     (507 )
                       
  Total shareholders’ (deficit) equity         (54,256 )     47,802  
                       
  Total liabilities, mezzanine equity and shareholders’ equity         14,877       55,612  

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

25. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (CONTINUED)

 

Condensed statements of operations

 

      For the years ended December 31,  
      2015     2016     2017  
        US$       US$       US$  
                           
  Revenues     -       -       -  
                           
  Cost of revenues     -       -       -  
                           
  Gross Profit     -       -       -  
                           
  Operating Expenses                        
  General and administrative expenses     (123 )     (383 )     (856 )
                           
  Operating loss     (123 )     (383 )     (856 )
                           
  Investment (loss) income     (183 )     383       (18,669 )
                           
  Loss before income taxes     (306 )     -       (19,525 )
                           
  Net loss     (306 )     -       (19,525 )

 

Condensed statements of comprehensive loss

 

      For the years ended December 31,  
      2015     2016     2017  
        US$       US$       US$  
                           
  Net profit (loss)     2,111       3,228       (12,569 )
  Other comprehensive income (loss), net of tax of nil:                        
  Foreign currency translation adjustments, net of tax of nil     (1,288 )     (1,477 )     2,119  
  Other comprehensive loss, net of tax of nil:                        
  Comprehensive income (loss)     823       1,751       (10,450 )
  Comprehensive income (loss) attributable to the Company’s ordinary shareholders     823       1,751       (10,450 )

 

 

Condensed statements of cash flows

 

      For the years ended December 31,  
      2015     2016     2017  
      US$     US$     US$  
                           
  Net cash generated from operating activities     156       5       4,118  
  Net cash used in investing activities     (3,466 )     -       (17,117 )
  Net cash generated from financing activities     -       -       12,986  
                           
  Net (decrease) increase in cash     (3,310 )     5       (13 )
  Cash at beginning of the year     3,320       10       15  
                           
  Cash at end of the year     10       15       2  

 

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BORQS TECHNOLOGIES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(Amounts in thousands of US dollars (“US$”), unless otherwise stated)

 

25. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (CONTINUED)

 

  (a) Basis of presentation

 

In the Company-only financial statements, the Company’s investment in subsidiaries is stated at cost plus equity in undistributed earnings of subsidiaries since inception.

 

The Company records its investment in its subsidiary under the equity method of accounting as prescribed in ASC 323-10, Investment-Equity Method and Joint Ventures , and such investment is presented on the balance sheet as “Investment in subsidiaries” and the share of the subsidiaries’ profit or loss is presented as “Share of profits (losses) of subsidiaries and Consolidated VIEs” on the statements of operations.

 

The subsidiaries did not pay any dividends to the Company for the years presented.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted and as such, these Company-only financial statements should be read in conjunction with the Group’s consolidated financial statements.

 

  (b) Intercompany transactions

 

The Company had the following related party balances as of December 31, 2016 and 2017:

 

      As of December 31,  
      2016     2017  
      US$     US$  
  Amount due from subsidiaries                
  - Borqs HK     50,107       68,643  

 

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BORQS TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands of US dollars (“US$”))

   

        As of
December 31,
    As of
June 30,
 
    Note   2017     2018  
        US$     US$  
              (Unaudited)  
ASSETS                
Current assets:                
Cash and cash equivalents         13,060       1,305  
Restricted cash         3,459       766  
Accounts receivable         65,720       33,279  
Receivable from Mobile Virtual Network Operator (“MVNO”) franchisees         3,514       3,437  
Inventories         17,031       14,119  
Deferred cost of revenues         507       730  
Prepaid and other current assets   (3)     16,240       35,161  
                     
Total current assets         119,531       88,797  
                     
Non-current assets:                    
Property and equipment, net   (4)     1,362       1,167  
Intangible assets, net   (5)     20,004       20,542  
Goodwill   (6)     736       727  
Long-term investment   (7)     -       11,662  
Deferred tax assets         1,463       1,201  
Deferred cost of revenues         2,642       3,875  
Other non-current assets         2,994       5,656  
                     
Total non-current assets         29,201       44,830  
                     
Total assets         148,732       133,627  

   

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  

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BORQS TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Amounts in thousands of US$)

 

        As of
December 31,
    As of
June 30,
 
    Note   2017     2018  
        US$     US$  
              (Unaudited)  
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable (including accounts payable of the Consolidated VIEs without recourse to the primary beneficiaries of US$4,143 and US$2,986 as of December 31, 2017 and June 30, 2018, respectively)         49,690       11,658  
Accrued expenses and other payables (including accrued expenses and other payables of the Consolidated VIEs without recourse to the primary beneficiaries of US$4,038 and US$5,053 as of December 31, 2017 and June 30, 2018, respectively)   (9)     12,163       19,007  
Advances from customers (including advances from customers of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2017 and June 30, 2018, respectively)         3,623       6,307  
Deferred revenues (including deferred revenues of the Consolidated VIEs without recourse to the primary beneficiaries of US$5,904 and US$4,009 as of December 31, 2017 and June 30, 2018, respectively)         7,960       6,717  
Income tax payable (including income tax payable of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2017 and June 30, 2018, respectively)         1,232       361  
Short-term bank borrowings (including short-term bank borrowings of the Consolidated VIEs without recourse to the primary beneficiaries of nil and US$38 as of December 31, 2017 and June 30, 2018, respectively)   (8)     12,648       11,653  
Long-term bank borrowings – current portion (including long-term bank borrowings – current portion of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2017 and June 30, 2018, respectively)   (8)     5,432       6,532  
                     
Total current liabilities         92,748       62,235  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  

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BORQS TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Amounts in thousands of US$)

 

        As of
December 31,
    As of
June 30,
 
    Note   2017     2018  
        US$     US$  
              (Unaudited)  
LIABILITIES AND SHAREHOLDERS’ EQUITY                
Non-current liabilities:                
Unrecognized tax benefits (including unrecognized tax benefits of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2017 and June 30, 2018, respectively)   (13)     2,121       2,780  
Deferred tax liabilities (including deferred tax liabilities of the Consolidated VIEs without recourse to the primary beneficiaries of US$1,500 and US$1,415 as of December 31, 2017 and June 30, 2018, respectively)   (13)     3,555       4,050  
Deferred revenues  (including deferred revenues of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2017 and June 30, 2018, respectively)         1,346       4,277  
Long-term bank payable (including long-term payable of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2017 and June 30, 2018, respectively)   (7)     -       5,563  
Deferred government grants (including deferred government grants of the Consolidated VIEs without recourse to the primary beneficiary of nil and nil as of December 31, 2017 and June 30, 2018, respectively)   (10)     1,957       1,933  
                     
Total non-current liabilities         8,979       18,603  
                     
Total liabilities         101,727       80,838  
                     
Commitments and contingencies   (16)                

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  

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BORQS TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)

(Amounts in thousands of US$, except for number of shares and per share data)

 

        As of
December 31,
    As of
June 30,
 
    Note   2017     2018  
        US$     US$  
              (Unaudited)  
LIABILITIES AND SHAREHOLDERS’ EQUITY                
                 
Shareholders’ equity:                
Ordinary shares (no par value; unlimited shares authorized; 30,804,635 and 31,307,522 shares issued; 30,804,634 and 31,303,350 shares outstanding as of December 31, 2017 and June 30, 2018, respectively)         -       -  
Additional paid-in capital         120,642       124,058  
Statutory reserve         1,898       2,156  
Accumulated deficit         (74,231 )     (71,482 )
Accumulated other comprehensive (loss) income   (11)     (507 )     (1,494 )
                     
Total Borqs Technologies, Inc. shareholder’s equity         47,802       53,238  
                     
Noncontrolling interest         (797 )     (449 )
                     
Total shareholders’ equity         47,005       52,789  
                     
Total liabilities and shareholders’ equity         148,732       133,627  

  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  

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BORQS TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Amounts in thousands of US$, except for number of shares and per share data)

  

        Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    Note   2017     2018     2017     2018  
        US$     US$     US$     US$  
Net Revenues:                            
Software         3,499       1,624       6,583       3,880  
Hardware         11,122       47,018       32,801       95,136  
MVNO         6,987       7,220       12,919       14,729  
Others         521       477       1,036       850  
                                     
Total net revenues         22,129       56,339       53,339       114,595  
                                     
Software         (1,612 )     (668 )     (3,942 )     (1,437 )
Hardware         (10,008 )     (42,535 )     (29,246 )     (85,934 )
MVNO         (4,533 )     (5,247 )     (9,820 )     (10,308 )
Others         (288 )     (180 )     (488 )     (351 )
                                     
Total cost of revenues         (16,441 )     (48,630 )     (43,496 )     (98,030 )
                                     
Total gross profit         5,688       7,709       9,843       16,565  
                                     
Operating expenses:                                    
Sales and marketing expenses         (1,646 )     (1,665 )     (2,985 )     (3,347 )
General and administrative expenses         (2,599 )     (2,260 )     (4,157 )     (5,356 )
Research and development expenses         (1,184 )     (1,452 )     (1,476 )     (2,341 )
Changes in the fair value of warrant liabilities         -       -       (161 )     -  
                                     
Total operating expenses         (5,429 )     (5,377 )     (8,779 )     (11,044 )
                                     
Other operating income         1       -       267       -  
                                     
Operating income         260       2,332       1,331       5,521  
Interest income         8       2       10       8  
Interest expense         (524 )     (1,117 )     (1,143 )     (1,362 )
Other income         51       14       354       53  
Other expense         (158 )     (2 )     (276 )     (47 )
Foreign exchange (loss) gain         (156 )     633       (333 )     259  
                                     
(Loss) profit before income taxes         (519 )     1,862       (57 )     4,432  
Income tax (expenses) benefit   (13)     (446 )     146       (890 )     (1,037 )
                                     
Net (loss) income         (965 )     2,008       (947 )     3,395  
Less: net income attributable to noncontrolling interests         197       178       119       366  
                                     
Net (loss) income attributable to Borqs Technologies, Inc.         (1,162 )     1,830       (1,066 )     3,029  
Add:                                    
Accretion to redemption value of convertible redeemable preferred shares         (150 )     -       (448 )     -  
                                     
Net (loss) income attributable to ordinary shareholders         (1,312 )     1,830       (1,514 )     3,029  
                                     
(Loss) earnings per share:                                    
Basic         (0.31 )     0.07       (0.36 )     0.11  
Diluted         (0.31 )     0.07       (0.36 )     0.11  
Number of ordinary shares used in (loss) earnings per share computation:                                    
Basic         4,259,898       26,830,514       4,243,964       26,613,800  
Diluted         4,259,898       27,675,005       4,243,964       27,585,851  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  

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  BORQS TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands of US$)

  

        Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    Note   2017     2018     2017     2018  
        US$     US$     US$     US$  
Net (loss) income         (965 )     2,008       (947 )     3,395  
Other comprehensive income, net of tax of nil:                                    
Foreign currency translation adjustments, net of tax of                                    
Nil         546       (2,397 )     851       (1,005 )
Other comprehensive income (loss), net of tax of nil   (11)     546       (2,397 )     851       (1,005 )
Comprehensive (loss) income         (419 )     (389 )     (96 )     2,390  
Less: comprehensive income attributable to noncontrolling interest         197       100       119       348  
Comprehensive (loss) income attributable to Borqs Technologies, Inc.         (616 )     (489 )     (215 )     2,042  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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BORQS TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS

(Amounts in thousands of US$)

 

    Six Months Ended
June 30,
 
    2017     2018  
    US$     US$  
             
CASH FLOWS FROM OPERATING ACTIVITIES            
Net cash (used in) generated from operating activities     (3,853 )     1,552  
                 
CASH FLOWS FROM INVESTING ACTIVITIES                
Purchases of property and equipment     (186 )     (148 )
Purchases of intangible assets     (3,998 )     (3,874 )
Repayments of a loan to a third party     244       1,469  
                 
Net cash used in investing activities     (3,940 )     (2,553 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Prepayment for repurchase of ordinary shares     -       (10,070 )
Proceeds from ordinary shares     62       -  
Proceeds from Series E Convertible Redeemable Preferred Shares     9,000       -  
Proceeds from Series E-1 Convertible Preferred Shares     8       -  
Payment of Series E Convertible Redeemable Preferred Shares’ issuance costs     (312 )     -  
Proceeds from short-term bank borrowings     -       1,124  
Repayments of short-term bank borrowings     -       (2,086 )
Proceeds from long-term bank borrowings     2,000       2,955  
Repayments of long-term bank borrowings     (286 )     (2,000 )
                 
Net cash generated from (used in) financing activities     10,472       (10,077 )
                 
Effect of foreign exchange rate changes on cash and cash equivalents     171       (677 )
                 
Net increase (decrease)  in cash and cash equivalents     2,850       (11,755 )
Cash and cash equivalents at beginning of period     3,610       13,060  
                 
Cash and cash equivalents at end of period     6,460       1,305  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

  

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BORQS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(Amounts in thousands of US$, unless otherwise stated)

 

1. ORGANIZATION

 

Borqs Technologies, Inc. (formerly known as “Pacific Special Acquisition Corp.”, the “Company” or “Borqs Technologies”) was incorporated in the British Virgin Islands on July 1, 2015. The Company was formed for the purpose of acquiring, engaging in a share exchange, share reconstruction and amalgamation, purchasing all or substantially all of the assets of, entering into contractual arrangements, or engaging in any other similar business combination with one or more businesses or entities.

 

On August 18, 2017, the Company acquired 100% equity interest of BORQS International Holding Corp. (“Borqs International”) and its subsidiaries, variable interest entities (the “VIE”) and the VIE’s subsidiaries (collectively referred to as “Borqs Group” hereinafter) (the Company and Borqs Group collectively referred to as the “Group”) in an all-stock transaction (the “Merger”). Concurrent with the completion of the acquisition of Borqs International, the Company changed its name from Pacific Special Acquisition Corp. to Borqs Technologies, Inc.      

  

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

(a) Basis of presentation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and applicable rules and regulations of the Securities and Exchange Commission, regarding financial reporting, and include all normal and recurring adjustments that management of the Group considers necessary for a fair presentation of its financial position and operation results. Certain information and footnote disclosures normally included in financial statements prepared in conformity with US GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these statements should be read in conjunction with the Group’s unaudited consolidated financial statements as of and for the three years in the periods ended December 31, 2017.

 

(b) Liquidity

 

As of December 31, 2017 and June 30, 2018, the Group had cash and cash equivalents of US$13.1 million and $1.3 million, respectively. As of June 30, 2018, the Group has accumulated deficit of US$71.5 million and net cash outflows of US$11.8 million for the six months then ended. These conditions raise substantial doubt about the Group’s ability to continue as a going concern and therefore, the Group is exposed to liquidity risk as it may not have sufficient working capital to meet its commitments and business needs.

 

The Group’s ability to fund its operations is based on its ability to generate cash, its ability to attract investors and its ability to borrow funds on reasonable economic terms. The Group’s ability to continue as a going concern is dependent on management’s ability to successfully execute its business plan and generate positive cash inflows. The Group is now in the process of completing a public offering to secure funding. Therefore, the management is of the opinion that it will be able to meet its payment obligations for the next twelve months from the date of issuance of the unaudited condensed consolidated financial statements. Based on the above considerations, the Group’s unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business.

 

(c) Long-term investment

 

The Group’s long-term investment represents cost method investment purchased during the six months period ended June 30, 2018.

 

In accordance with ASC 325-20 (“ASC 325-20”), Investments-Other: Cost Method Investments, for investments in investees over which the Group does not have significant influence, the Group carries the investments at cost and only adjusts for other-than-temporary declines in fair value and distributions of earnings. The Group’s management regularly evaluates the impairment of its cost method investments based on the performance and financial position of the investees as well as other evidence of estimated market values. Such evaluation includes, but is not limited to, reviewing the investees’ cash position, recent financing, projected and historical financial performance, cash flow forecasts and current and future financing needs. An impairment loss is recognized in the consolidated statements of comprehensive income equal to the excess of the investment’s cost over its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value would then become the new cost basis of investment.

 

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(d) Recent accounting pronouncements

 

The Group is an emerging growth company (’‘EGC’’) as defined by the Jumpstart Our Business Startups Act (’‘JOBS Act’’). The JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay adoption of certain accounting standards until those standards would otherwise apply to private companies. The Group elected to take advantage of the extended transition period. However, this election will not apply should the company cease to be classified as an EGC.

 

In May 2014, the Financial Accounting Standards Board (’‘FASB’’) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements in ASC 605, and requires entities to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date of ASU 2014-09 by one year. As a result, ASU 2014-09 is effective for the Group for annual reporting periods beginning January 1, 2019 and interim periods within annual periods beginning January 1, 2020. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers—Principal versus Agent Considerations, which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers—Identifying Performance Obligations and Licensing, which clarify guidance related to identifying performance obligations and licensing implementation guidance contained in ASU 2014-09. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers— Narrow-Scope Improvements and Practical Expedients, which addresses narrow-scope improvements to the guidance on collectability, non-cash consideration, and completed contracts at transition and provides practical expedients for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. The effective dates for these amendments are the same as the effective date of ASU No 2014-09. Early adoption is permitted, and the standard permits the use of either the retrospective or cumulative effect transition method. The Group does not plan to early adopt the standard and amendments and it is in the process of developing a plan for evaluating the impact of adoption of these guidance on its unaudited consolidated financial statements, including the selection of the adoption method, the identification of differences, if any, from the application of the guidance, and the impact of such differences, if any, on its unaudited consolidated financial statements.

   

In January 2016, the FASB issued ASU 2016-01, Financial Instruments. ASU 2016-01 requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. An entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. ASU 2016-01 also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. ASU 2016-01 is effective for the Group beginning January 1, 2019 with interim periods within annual periods beginning January 1, 2020. Early adoption is permitted no earlier than the fiscal year beginning January 1, 2018 including interim periods within that year. The Group does not plan to early adopt ASU 2016-01 and it is currently evaluating the impact of adopting this standard on its unaudited consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases, which specifies the accounting for leases. For operating leases, ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. ASU 2016-02 is effective for the Group for annual reporting periods beginning January 1, 2020 and interim periods within annual periods beginning January 1, 2021. Early adoption is permitted. The Group does not plan to early adopt ASU 2016-02 and it is currently evaluating the impact of adopting the standard on its unaudited consolidated financial statements.

   

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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

(d) Recent accounting pronouncements (Continued)

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. The standard will replace “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. The standard is effective for public business entities for annual periods beginning after December 15, 2019, and interim periods therein, and annual reporting periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021 for all other entities. Early adoption is permitted. The Group does not plan to early adopt ASU No. 2016-13 and it is evaluating the effect that this guidance will have on its unaudited consolidated financial statements.

 

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues: Debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)); distributions received from equity method investees; beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle. In November 2016, the FASB issued ASU 2016-18, Statements of Cash Flow (Topic 230): Restricted Cash, which requires that a statement of cash flows explain the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amount shown on the statement of cash flows. ASU 2016-15 and ASU 2016-18 are effective for the Group for annual reporting periods beginning January 1, 2019 and interim periods within annual periods beginning January 1, 2020. Early adoption is permitted. The Group does not plan to early adopt ASU 2016-15 and ASU 2016-18 and it is evaluating the impacts that these standards will have on its unaudited consolidated financial statements.

   

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business. The revised framework establishes a screen for determining whether an integrated set of assets and activities is a business and narrows the definition of a business, which is expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. ASU 2017-01 is effective for the Group for annual reporting periods beginning January 1, 2020 and interim periods within annual periods beginning January 1, 2021, with early adoption permitted for transactions that have not been reported in previously issued (or available to be issued) financial statements. The Group does not plan to early adopt ASU 2017-01 and does not expect the impact that this standard will have a material impact on its unaudited consolidated financial statements.

 

In January 2017, the FASB issued Accounting Standards Update No. 2017-04, Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. This standard is effective for public business entities for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Group does not plan to early adopt ASU 2017-04 and it is currently evaluating the impact of adopting this standard on its unaudited consolidated financial statements.

  

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3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

 

Prepaid expenses and other current assets consist of the following:

 

      As of
December 31,
    As of
June 30,
 
      2017     2018  
      US$     US$  
               
  Staff advances     312       327  
  Prepayment for share repurchase (i)     -       10,100  
  Prepayment for products     1,008       5,347  
  Advance to OEM     3,662       11,718  
  Rental and other deposits     1,203       990  
  VAT recoverable     2,189       3,157  
  Loan to third parties     1,469       -  
  Receivable from an agent     6,318       3,392  
  Others     79       129  
                   
        16,240       35,160  

 

(i) On January 10, 2018, the Company entered into a stock repurchase agreement (“Stock Repurchase Agreement”) with Zhengqi International Holding Limited (“Zhengqi”), an existing shareholder, pursuant to which the Company agreed to repurchase 966,136 ordinary shares from Zhengqi at an aggregate purchase price of $10 million. The $10 million share repurchase consideration was transferred to Zhengqi in January 2018 and recorded as a prepayment as of June 30, 2018. The repurchase is expected to be completed in the second half of 2018.

 

4. PROPERTY AND EQUIPMENT, NET

 

Property and equipment consist of the following:

 

      As of
December 31,
    As of
June 30,
 
      2017     2018  
      US$     US$  
  At cost:            
  Leasehold improvements     933       921  
  Computer and network equipment     6,458       6,408  
  Office equipment     918       939  
  Motor vehicles     233       257  
        8,542       8,525  
  Less: accumulated depreciation     (7,180 )     (7,358 )
                   
        1,362       1,167  

 

Depreciation expense was US$455 and US$232 for the six months ended June 30, 2017 and 2018, respectively, were included in the following captions:

 

      Six Months Ended
June 30,
 
      2017     2018  
      US$     US$  
               
  Cost of revenues     156       82  
  Sales and marketing expenses     14       7  
  General and administrative expenses     117       34  
  Research and development expenses     168       109  
                   
        455       232  

  

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5. INTANGIBLE ASSETS, NET

 

The following table presents the Group’s intangible assets as of the respective balance sheet dates:

 

      Software     Capitalized
software
development
costs
    License     Total  
      US$     US$     US$     US$  
                           
  Balance as of January 1, 2017     2,294       6,874       6,330       15,498  
  Additions     74       3,924       -       3,998  
  Amortization expense     (117 )     (1,356 )     (432 )     (1,905 )
  Foreign currency translation difference     54       102       152       308  
                                   
  Balance as of June 30, 2017     2,305       9,544       6,050       17,899  
                                   
  Balance as of January 1, 2018     2,529       11,600       5,875       20,004  
  Additions     274       3,600       -       3,874  
  Amortization expense     (94 )     (2,612 )     (448 )     (3,154 )
  Foreign currency translation difference     (32 )     (77 )     (73 )     (182 )
                                   
  Balance as of June 30, 2018     2,677       12,511       5,354       20,542  

 

The intangible assets are amortized using the straight-line method, which is the Group’s best estimate of how these assets will be economically consumed over their respective estimated useful lives of 3-10 years. Amortization expense was US$1,905 and US$3,154 for the six months ended June 30, 2017 and 2018, respectively.

  

6. GOODWILL

 

The changes in the carrying amount of goodwill were as follows:

 

      As of
December 31,
    As of
June 30,
 
      2017     2018  
      US$     US$  
                   
  Balance at beginning of the period     693       736  
  Foreign currency translation difference     43       (9 )
                   
  Balance at end of the period     736       727  

 

No impairment charge was recorded in any of the six months ended June 30, 2017 and 2018, respectively.

  

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7. LONG-TERM INVESTMENT

 

On January 18, 2018, the Company entered into an agreement with Colmei Technology International Ltd (“Colmei”) and its affiliate Shenzhen Crave Communication Co., Ltd (“Crave”), along with the shareholders of Crave and Colmei (“Selling Shareholders”), pursuant to which the Selling Shareholders sold to the Company 13.8% of the outstanding shares of Crave and 13.8% of the outstanding shares of Colmei. Under the agreement, the Company paid purchase consideration consisting of the Company’s 473,717 ordinary shares issued and cash in the amount of US$10,000 to be paid to the Selling Shareholders over a period of 36 months from the date of agreement. If approved by the Company’s board of directors, the Company will also issue additional shares to the Selling Shareholders if the aggregate value of the Company shares initially issued to the Selling Shareholders under this agreement is less than US$3,000 on August 18, 2018. This transaction was completed on March 22, 2018.

 

The Company does not have significant influence over the investees and therefore the investment was accounted for under the cost method. Cost of the long-term investment consisted of the fair value of the ordinary shares on the date of issuance and the present value of the cash consideration determined based on management’s estimated payment schedule.

 

8. BANK AND OTHER BORROWINGS

 

Bank and other borrowings are as follows as of the respective balance sheet dates:

  

      As of
December 31,
    As of
June 30,
 
      2017     2018  
      US$     US$  
                
  Short-term bank and other borrowings     12,648       11,653  
  Long-term bank borrowings, current portion     5,432       6,532  
                   
  Total borrowings     18,080       18,185  

 

The short-term bank borrowings outstanding as of December 31, 2017 and June 30, 2018 bore a weighted average interest rate of 6.89% and 6.27% per annum, respectively, and were denominated in RMB and US$. These borrowings were obtained from financial institutions and have terms of one year.

 

In addition, on November 20, 2017, the Company entered into a three month short-term loan agreement with HHMC Microelectronic Co., Limited (“HHMC’) for US$5,000 with an interest rate of 0.04% per day, for working capital and has term of three months. If the loan is not fully repaid within three months, the interest rate will increase to 0.1% per day. The initial term of the agreement was subsequently extended to May 28, 2018. The Company is currently in discussion with HHMC for another extension. The short-term loan outstanding as of June 30, 2018 was US$2,914.

 

The long-term bank borrowings, current portion outstanding as of June 30, 2018 bore a weighted average interest rate of 8% and were denominated in US$. These borrowings were obtained from financial institutions located in the United States, and have terms of three years.

 

As of June 30, 2018, the Company was in breach of two of the financial covenants under long-term bank borrowing with an outstanding balance of US$3,032. The breach would result in acceleration of the repayments of the borrowings according to the contractual terms. Therefore, the outstanding balances were reclassified as current liabilities as of June 30, 2018.

 

Certain bank borrowings as of June 30, 2018 were pledged by account receivable amounted to US$33,279.

 

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9. ACCRUED EXPENSES AND OTHER PAYABLES

 

The components of accrued expenses and other payables are as follows:

 

      As of
December 31,
    As of
June 30,
 
      2017     2018  
      US$     US$  
               
  Payroll and welfare payable     2,030       2,869  
  Payable for long-term investment (Note 7)     -       3,263  
  VAT, and other taxes payable     2,473       3,291  
  Payables for office supply and utilities     711       958  
  Payables for purchase of property and equipment     52       51  
  Professional service fees     3,161       3,764  
  Deposits from agents     3,509       4,577  
  Others     227       234  
        12,163       19,007  

 

10. DEFERRED GOVERNMENT GRANTS

 

The government grants received are required to be used in construction of property and equipment. These grants are initially deferred and subsequently recognized in the statement of operations over the life of the related assets as other operating income.

 

      Six Months Ended
June 30,
 
      2017     2018  
      US$     US$  
               
  Balance at beginning of the period     2,108       1,957  
  Recognized as other operating income     (271 )     -  
  Foreign currency translation difference     51       (24 )
  Balance at ending of the period     1,888       1,933  

 

11. ACCUMULATED OTHER COMPREHENSIVE LOSS

 

The changes in accumulated other comprehensive loss, net of tax of nil, are as follows:

 

      Foreign currency
translation
    Total  
      US$     US$  
  Balance as of December 31, 2016     (2,626 )     (2,626 )
  Current year other comprehensive income     2,119       2,119  
  Balance as of December 31, 2017     (507 )     (507 )
  Current period other comprehensive loss     (987 )     (987 )
  Balance as of June 30, 2018     (1,494 )     (1,494 )

 

12. MAINLAND CHINA EMPLOYEE CONTRIBUTION PLAN

 

As stipulated by the regulations of the PRC, full-time employees of the Company in the PRC participate in a government-mandated multiemployer defined contribution plan organized by municipal and provincial governments. Under the plan, certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. The Company is required to make contributions to the plan based on certain percentages of employees’ salaries. The total expenses for the plan were US$1,139K and US$635K respectively, for the six months ended June 30, 2017 and 2018.

 

 

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13. TAXATION

 

(Loss) profit before income taxes consists of:

 

      Six Months Ended
June 30,
 
      2017     2018  
      US$     US$  
               
  Non-PRC     1,384       1,942  
  PRC     (1,441 )     2,490  
                   
        (57 )     4,432  

 

Income tax expenses comprise of:

 

      Six Months Ended
June 30,
 
      2017     2018  
      US$     US$  
               
  Current     (943 )     (187 )
  Deferred     53       (850 )
                   
        (890 )     (1,037 )

 

The reconciliation of tax computed by applying the statutory income tax rate of 25% for the six months ended June 30, 2017 and 2018 applicable to the PRC operations to income tax expenses is as follows:

 

      Six Months Ended
June 30,
 
      2017     2018  
      US$     US$  
               
  (Loss) profit before income taxes     (57 )     4,432  
                   
  Income tax benefit (expenses) computed at the statutory income tax rate at 25%     14       (1,108 )
  Non-deductible expenses     (304 )     272  
  Non-taxation income     67       -  
  Preferential rate     (102 )     464  
  Current and deferred tax rate differences     (120 )     (225 )
  Foreign rate differences     (266 )     (222 )
  Change of valuation allowance     (116 )     811  
  Prior year provision to return true up     -       (848 )
  Interest expenses     (63 )     (181 )
                   
  Income tax expenses     (890 )     (1,037 )

 

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13. TAXATION (CONTINUED)

 

Deferred Taxes

 

The significant components of deferred taxes are as follows:

 

      As of
December 31,
    As of
June 30,
 
      2017     2018  
      US$     US$  
  Deferred tax assets            
  Inventories provision     229       227  
  AR provision     -       69  
  Accrued salary and welfare payable     165       316  
  Property and equipment     14       14  
  Tax losses     14,769       13,478  
  Valuation allowance     (13,714 )     (12,903 )
  Total deferred tax assets     1,463       1,201  
  Deferred tax liabilities                
  Intangible assets     2,004       1,790  
  Deferred cost of revenues     1,551       2,260  
                   
  Total deferred tax liabilities     3,555       4,050  

 

As of June 30, 2018, the Group had net tax operating losses from its PRC subsidiaries and its Consolidated VIEs, as per filed tax returns, of US$32,015, which will expire from 2018 to 2022. The Group has net tax operating loss from its HK subsidiary of US$14,276, which will not expire.

 

As of June 30, 2018, the Group intends to permanently reinvest the undistributed earnings from its foreign subsidiaries and the Consolidated VIEs to fund future operations. The amount of unrecognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries and the Consolidated VIEs is not determined because such a determination is not practicable.

  

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13. TAXATION (CONTINUED)

 

Unrecognized Tax Benefits

 

As of December 31, 2017 and June 30, 2018, the Group recorded unrecognized tax benefits of US$4,547 and US$5,133, respectively, of which, US$2,764 and US$3,531, respectively, are presented on a net basis against the deferred tax assets related to tax loss carry forwards on the consolidated balance sheets. The unrecognized tax benefits and its related interests are primarily related to under-reported intercompany profit. The amount of unrecognized tax benefits will change in the next 12 months, pending clarification of current tax law or audit by the tax authorities, however, an estimate of the range of the possible change cannot be made at this time. As of December 31, 2017 and June 30, 2018, unrecognized tax benefits of US$2,043 and US$2,702, if ultimately recognized, will impact the effective tax rate.

 

A roll-forward of unrecognized tax benefits is as follows:

 

      Six Months Ended
June 30,
 
      2017     2018  
      US$     US$  
               
  Balance at beginning of period     4,053       4,547  
  Additions based on tax positions related to the current year     170       644  
  Foreign currency translation difference     (353 )     (58 )
                   
  Balance at end of period     3,870       5,133  

 

In the six months ended June 30, 2017 and 2018, the Group recorded interest expenses accrued in relation to the unrecognized tax benefits of US$63 and US$181 in income tax expenses, respectively. Accumulated interest expenses recorded by the Group was US$151 and US$519 as of June 30, 2017 and 2018, respectively. As of June 30, 2018, the tax years ended December 31, 2013 through 2018 for the PRC subsidiaries and the VIE remain open for statutory examination by the PRC tax authorities.

 

14. RELATED PARTY TRANSACTIONS

 

(a) Related parties

 

  Names of related parties   Relationship with the Group
  Intel Capital Corporation (“Intel”) and its affiliates   A substantial shareholder of the Group but exited from the mobile chipset activities.
  Qualcomm Global Trading PTE, Ltd (“Qualcomm”) and its affiliates   A substantial shareholder of the Group. *

 

* Upon the consummation of the Merger, the entity ceased to be a substantial shareholder of the Group.

 

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14. RELATED PARTY TRANSACTIONS (CONTINUED)

 

(b) Other than disclosed elsewhere, the Group had the following significant related party transactions for the six months ended June 30, 2017 and 2018:

 

      Six Months Ended
June 30,
 
      2017     2018  
      US$     US$  
  Software services provided to:            
  Intel (China) Co., Ltd.     9       -  
  Intel Asia-Pacific Research and Development Ltd.     65       -  
  Intel (China) Research Center Co., Ltd.     8       -  
  Qualcomm India Private Limited     3,967       *  
                   
  Hardware sold to:                
  Qualcomm India Private Ltd     12       *  
                   
  Purchased from:                
  Qualcomm Incorporated     398       *  
  Qualcomm CDMA Technologies Asia Pacific PTE Ltd.     1,732       *  
  Qualcomm Technologies, Inc.     75       *  

 

15. (LOSS) EARNINGS PER SHARE

 

Basic and diluted (loss) earnings per share for each of the six months presented are calculated as follows:

 

      Three Months Ended
June 30,
   

Six Months Ended

June 30,

 
      2017     2018     2017     2018  
      US$     US$     US$     US$  
  Numerator:                        
  Net (loss) income     (965 )     2,008       (947 )     3,395  
  Less: net income attributable to noncontrolling interests     197       178       119       366  
                                   
  Net (loss) income attributable to Borqs Technologies, Inc.     (1,162 )     1,830       (1,066 )     3,029  
  Accretion to redemption value of Convertible Redeemable Preferred Shares     (150 )     -       (448 )     -  
  Net (loss) income attributable to Borqs Technologies, Inc.’s ordinary shareholders     (1,312 )     1,830       (1,514 )     3,029  
                                   
  Denominator:                                
  Weighted-average number of ordinary shares outstanding—basic     4,259,898       26,830,514       4,243,964       26,613,800  
  Weighted-average number of ordinary shares outstanding—diluted     4,259,898       27,675,005       4,243,964       27,585,851  
                                   
  (Loss) earnings per share—Basic:     (0.31 )     0.07       (0.36 )     0.11  
  (Loss) earnings per share—Diluted:     (0.31 )     0.07       (0.36 )     0.11  

 

For the three months and six months ended June 30, 2017, Convertible Redeemable Preferred Shares, share options and replacement warrants to purchase ordinary shares were anti-dilutive and excluded from the calculation of diluted net loss per share.

 

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16. COMMITMENTS AND CONTINGENCIES

 

Operating lease commitments

 

The Group leases buildings in the PRC and India under non-cancelable operating leases expiring on different dates. For the six months ended June 30, 2017 and June 30, 2018, total rental expenses for all operating leases amounted to US$709 and US$812, respectively.

 

As of June 30, 2018, the Group has future minimum lease payments under non-cancelable operating leases with initial terms in excess of one year in relation to office buildings consisting of the following:

 

      US$  
         
  2019     496  
  2020     1,191  
  2021     788  
  2022     514  
  2022 and thereafter     414  
           
        3,403  

 

Payments under operating leases are expensed on a straight-line basis over the periods of their respective leases.

 

Income Taxes

 

As of June 30, 2018, the Group recognized an accrual of US$2,780 for unrecognized tax benefits and its interest (Note 13). The final outcome of the tax uncertainty is dependent upon various matters including tax examinations, interpretation of tax laws or expiration of statutes of limitation. However, due to the uncertainties associated with the status of examinations, including the protocols of finalizing audits by the relevant tax authorities, there is a high degree of uncertainty regarding the future cash outflows associated with these tax uncertainties. As of June 30, 2018, the Group classified the accrual for unrecognized tax benefits as a non-current liability.

 

Arbitration with Samsung Electronics Co., Ltd. (“Samsung”)

 

The Company is currently in arbitration with Samsung to resolve a dispute regarding royalties payable to the Company under a software license agreement the Company had with Samsung. Samsung alleges that, for the period starting the fourth quarter of 2010 through mid of 2012, the Company was overpaid royalties in the amount of approximately US$1.67 million due to a clerical error in their accounting department that enabled the Company to receive royalties on sales of Samsung handsets that did not contain the Company’s software. Samsung is seeking repayment of the US$1.67 million plus accrued interest of 12% per annum and as well as reimbursements of reasonable fees including attorney fees and arbitration costs. After arbitration hearings that were held in May 2018, the parties are awaiting a ruling from the arbitrator on Samsung’s claim and the result is unpredictable. As of June 30, 2018, neither the Company or management nor the legal counsel can reasonably estimate the result and potential financial impact of this pending claim.

 

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17. SEGMENT REPORTING

 

The operations of the Group are organized into two segments, consisting of Yuantel and Connected Solution.

 

The CODM measures the performance of each segment based on metrics of revenue and earnings from operations and uses these results to evaluate the performance of, and to allocate resources to each of the segments. CODM does not evaluate operating segments using asset information.

 

The CODM evaluates performance based on each reporting segment’s net revenue and operating income. The table below provides a summary of the Group’s operating segment results for the three months and the six months period ended June 30, 2017 and 2018:

 

  Six Months Ended
June 30, 2017
  Yuantel     Connected
Solution
    Total
Segments
    Eliminations     Consolidated  
                                 
  Net revenue                              
  -External customers     13,955       39,384       53,339       -       53,339  
  -Inter-segment     -       921       921       (921 )     -  
  Total net revenue     13,955       40,305       54,260       (921 )     53,339  
                                           
  Operating income     221       1,110       1,331       -       1,331  

  

  Six Months Ended
June 30, 2018
  Yuantel     Connected
Solution
    Total
segments
    Eliminations     Consolidated  
                                 
  Net revenue                              
  -External customers     15,579       99,016       114,595       -       114,595  
  -Inter-segment     -       415       415       (415 )     -  
  Total net revenue     15,579       99,431       115,010       (415 )     114,595  
                                           
  Operating income     1,289       4,232       5,521       -       5,521  

 

  Three Months Ended
June 30, 2017
  Yuantel     Connected
Solution
    Total
segments
    Eliminations     Consolidated  
                                 
  Net revenue                              
  -External customers     7,508       14,621       22,129       -       22,129  
  -Inter-segment     -       472       472       (472 )     -  
  Total net revenue     7,508       15,093       22,601       (472 )     22,129  
                                           
  Operating income     1,343       (1,083 )     260       -       260  

  

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17. SEGMENT REPORTING (CONTINUED)

 

  Three Months Ended
June 30, 2018
  Yuantel     Connected
Solution
    Total
segments
    Eliminations     Consolidated  
                                 
  Net revenue                              
  -External customers     7,697       48,642       56,339       -       56,339  
  -Inter-segment     -       111       111       (111 )     -  
  Total net revenue     7,697       48,753       56,450       (111 )     56,339  
                                           
  Operating income     605       1,727       2,332       -       2,332  

   

      Three Months Ended
June 30,
    Six Months Ended
June 30,
 
      2017     2018     2017     2018  
      US$     US$     US$     US$  
                           
  PRC     14,270       7,146       27,029       18,325  
  Outside PRC:                                
  United States     1,869       3,100       3,422       7,296  
  India     1,932       42,738       4,020       84,812  
  Rest of the world     4,058       3,355       18,868       4,162  
  Total net revenue     22,129       56,339       53,339       114,595  

  

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BORQS TECHNOLOGIES, INC.

 

2,666,667 ORDINARY SHARES

 

 

 

PROSPECTUS

 

 

 

 

 

Sole Book-Running Manager 

 

 

Maxim Group LLC

 

 

Co-Manager

 

The Benchmark Company

 

            , 2018

 

 

 

 

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[Alternate Page for Resale Prospectus]

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Preliminary Prospectus   Subject to Completion, dated September 14, 2018

 

BORQS TECHNOLOGIES, INC.

 

1,807,823 Ordinary Shares

 

This prospectus relates to the offer for sale of up to an aggregate of 1,807,823 ordinary shares, no par value per share, of Borqs Technologies, Inc. consisting of (i) 520,000 ordinary shares (the “founder shares”) which were originally issued to Zhengqi International Holding Limited (“Zhengqi”) prior to the Company’s initial public offering (“IPO”) and subsequently transferred to the Company’s former officers and directors; (ii) 37,624 ordinary shares issued in a private placement that closed contemporaneously with the consummation of the IPO; (iii) 72,115 ordinary shares issued in a private placement that closed contemporaneously with the consummation of the merger on August 18, 2017 of one of our subsidiaries with and into Borqs International Holding Corp. (the “Business Combination”); and (iv) 1,178,084 ordinary shares issued as compensation for certain advisory services rendered to Borqs International in connection with the Business Combination.

 

To the extent the selling stockholders wish to sell their ordinary shares as provided for herein, they may offer and sell such shares on a continuous or delayed basis in the future. We will not receive any proceeds from the resale of any of the ordinary shares being registered hereby.

 

The distribution of securities offered hereby may be effected in one or more transactions that may take place in the NASDAQ Capital Market, including ordinary brokers’ transactions, privately negotiated transactions or through sales to one or more dealers for resale of such securities as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the selling stockholders.

 

The selling stockholders and intermediaries through whom such securities are sold may be deemed “underwriters” within the meaning of the Securities Act of 1933, as amended (which we refer to as the Securities Act), with respect to the securities offered hereby, and any profits realized or commissions received may be deemed underwriting compensation.

 

On            , 2018, a registration statement under the Securities Act with respect to an underwritten public offering by us of $           worth of ordinary shares (which amount includes a potential 15% over-allotment option) was declared effective by the Securities and Exchange Commission. We sold                 ordinary shares (which amount does not include exercise of the 15% over-allotment option). None of the shares being registered for resale by the selling stockholders on this prospectus were sold by the underwriters in the public offering.

 

Investing in our ordinary shares involves a high degree of risk. You should carefully consider the matters discussed under the section entitled “Risk Factors” beginning on page 11 of this prospectus.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is    , 2018.

 

 

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The Offering

 

Ordinary Shares Outstanding: 31,303,350 ordinary shares as of the date of this prospectus.
   
Ordinary Shares Offered by Selling Stockholders: Up to 1,807,823 ordinary shares for sale by the Selling Stockholders for their own account.  These shares include:

 

 

 

(i) up to 520,000 founder shares which were originally issued to Zhengqi prior to the Company’s IPO and subsequently transferred to the Company’s former officers and directors;
     
  (ii) up to 37,624 ordinary shares issued in a private placement that closed contemporaneously with the consummation of the IPO;
     
  (iii) up to 72,115 ordinary shares issued in a private placement that closed contemporaneously with the consummation of the Business Combination; and
     
  (iv) up to 1,178,084 ordinary shares issued as compensation for certain advisory services rendered to Borqs International in connection with the Business Combination.

  

Use of Proceeds: We will not receive any proceeds from the sale of the ordinary shares by the selling stockholders.
   
NASDAQ Capital Market symbol: BRQS
   
Risk Factors: An investment in our company is highly speculative and involves a significant degree of risk.  See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our ordinary shares.

  

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[Alternate Page for Resale Prospectus]

 

USE OF PROCEEDS

 

We will not receive any of the proceeds from the sale of the ordinary shares by the selling stockholders named in this prospectus. All proceeds from the sale of the ordinary shares will be paid directly to the selling stockholders.

 

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[Alternate Page for Resale Prospectus]

 

SELLING STOCKHOLDERS

 

An aggregate of up to 1,807,823 ordinary shares may be offered by certain security holders consisting of: (i) 520,000 founder shares which were originally issued to Zhengqi prior to the Company’s IPO and subsequently transferred to the Company’s former officers and directors; (ii) 37,624 ordinary shares issued in a private placement that closed contemporaneously with the consummation of the IPO; (iii) 72,115 ordinary shares issued in a private placement that closed contemporaneously with the consummation of the Business Combination; and (iv) 1,178,084 ordinary shares issued as compensation for certain advisory services rendered to Borqs International in connection with the Business Combination.

 

629,739 of the 1,807,823 ordinary shares are being registered herein pursuant to certain “piggy-back” registration rights of the selling stockholders with respect to registration statements filed after August 18, 2017.

 

The following table sets forth certain information with respect to each selling stockholder for whom we are registering shares for resale to the public. Other than as disclosed herein, no material relationships exist between any of the selling stockholders and us nor have any such material relationships existed within the past three years.

 

Except for EarlyBird Capital, Inc. (“EBC”), none of the selling stockholders is a broker dealer.

Name of Selling Stockholder   Number of
Ordinary Shares Owned
Prior to
Offering (6)
    Maximum
Number of
Ordinary Shares
to be Sold
Pursuant to this
Prospectus
    Number of
Ordinary Shares
Owned After
Offering Assuming
All Shares are
Sold (1)
    Percentage of
Ordinary Shares
Owned After
Offering Assuming
All Shares are
Sold (1)
 
EarlyBird Capital, Inc. (2)     183,248       109,739       73,509       *  
David Boris (3)(4)     140,000       140,000       -       -  
Honghui Deng (4)(5)     30,000       30,000       -       -  
Yaqi Feng (4)(5)     60,000       60,000       -       -  
Guoxiong Luo (4)     30,000       30,000       -       -  
Zhouhong Peng (4)     80,000       80,000       -       -  
Jason Shen (4)(5)     30,000       30,000       -       -  
Jian Tu (4)     150,000       150,000       -       -  
Hui Liu     150,000       150,000       -       -  
Fengying Ma     144,521       144,521       -       -  
Xuefei Na     294,521       294,521       -       -  
Limiao Ouyang     58,921       58,921       -       -  
Qing Wang     117,800       117,800       -       -  
Jinjin Xu     294,521       294,521       -       -  
Bei Zhang     117,800       117,800       -       -  

* Less than 1%
(1) Assumes the sale of all shares offered pursuant to this prospectus. Applicable percentages based on 31,303,350 ordinary shares outstanding as of this prospectus.
(2) Steven Levine, David Nussbaum and Eileen Moore share voting and investment power over the securities held by EarlyBird Capital, Inc. EarlyBird Capital, Inc. was the lead underwriter in the Company’s IPO. Number of shares owned includes 73,509 shares that the selling shareholder is entitled to vote while held in escrow.
(3) Includes 80,000 shares purchased from Zhengqi International Holding Limited pursuant to a Director’s Agreement, dated January 10, 2017 with effect from December 23, 2016, which shares have not been transferred as of the date hereof.
(4) These individuals served as officers and/or directors of the Company prior to the closing of the Business Combination. Specifically, David Boris, Honghui Deng, Guoxiong Luo and Jason Shen served as directors of the Company, and Jian Tu served as President and Chairman of the Board, Zhouhong Peng served as Chief Executive Officer and Chief Financial Officer, and Yaqi Feng served as Chief Operating Officer and Secretary.
(5) This individuals currently serve as directors of the Company.
(6) Excludes shares underlying any warrants or options held by the holder.

     

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[Alternate Page for Resale Prospectus]

 

PLAN OF DISTRIBUTION

 

The selling stockholders, which as used herein includes donees, pledgees, transferees or other successors-in-interest selling ordinary shares or interests in ordinary shares received after the date of this prospectus from a selling stockholder as a gift, pledge, partnership distribution or other transfer, may, from time to time, sell, transfer or otherwise dispose of any or all of their ordinary shares or interests in ordinary shares on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.

 

The selling stockholders may use any one or more of the following methods when disposing of shares or interests therein:

 

  ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
     
  block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
     
  purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
     
  an exchange distribution in accordance with the rules of the applicable exchange;
     
  privately negotiated transactions;
     
  short sales;
     
  through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
     
 

broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;

     
  a combination of any such methods of sale; and
     
  any other method permitted pursuant to applicable law.

 

The selling stockholders may, from time to time, pledge or grant a security interest in some or all of the ordinary shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the ordinary shares, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer the ordinary shares in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus;  provided however , that prior to any such transfer the following information (or such other information as may be required by the federal securities laws from time to time) with respect to each such selling beneficial owner must be added to the prospectus by way of a prospectus supplement or post-effective amendment, as appropriate: (1) the name of the selling beneficial owner; (2) any material relationship the selling beneficial owner has had within the past three years with us or any of our predecessors or affiliates; (3) the amount of securities of the class owned by such security beneficial owner before the offering; (4) the amount to be offered for the security beneficial owner’s account; and (5) the amount and (if one percent or more) the percentage of the class to be owned by such security beneficial owner after the offering is complete.

 

In connection with the sale of our ordinary shares or interests therein, the selling stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the ordinary shares in the course of hedging the positions they assume. The selling stockholders may also sell our ordinary shares short and deliver these securities to close out their short positions, or loan or pledge the ordinary shares to broker-dealers that in turn may sell these securities. The selling stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

 

  SS- 5  

Table of Contents  

 

[Alternate Page for Resale Prospectus]

 

The aggregate proceeds to the selling stockholders from the sale of the ordinary shares offered by them will be the purchase price of the ordinary shares less discounts or commissions, if any. Each of the selling stockholders reserves the right to accept and, together with their agents from time to time, to reject, in whole or in part, any proposed purchase of ordinary shares to be made directly or through agents. We will not receive any of the proceeds from this offering.

 

The selling stockholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided that they meet the criteria and conform to the requirements of that rule.

 

The selling stockholders and any underwriters, broker-dealers or agents that participate in the sale of the ordinary shares or interests therein may be “underwriters” within the meaning of Section 2(11) of the Securities Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be underwriting discounts and commissions under the Securities Act. Selling stockholders who are “underwriters” within the meaning of Section 2(11) of the Securities Act will be subject to the prospectus delivery requirements of the Securities Act.

 

To the extent required, the ordinary shares to be sold, the names of the selling stockholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.

 

In order to comply with the securities laws of some states, if applicable, the ordinary shares may be sold in these jurisdictions only through registered or licensed brokers or dealers. In addition, in some states the ordinary shares may not be sold unless it has been registered or qualified for sale or an exemption from registration or qualification requirements is available and is complied with.

 

We have advised the selling stockholders that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the activities of the selling stockholders and their affiliates. In addition, we will make copies of this prospectus (as it may be supplemented or amended from time to time) available to the selling stockholders for the purpose of satisfying the prospectus delivery requirements of the Securities Act. The selling stockholders may indemnify any broker-dealer that participates in transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities Act.

 

  SS- 6  

Table of Contents  

 

[Alternate Page for Resale Prospectus]

 

LEGAL MATTERS

 

Maples and Calder, Hong Kong, will pass upon the validity of the issuance of the ordinary shares offered by this prospectus.

 

  SS- 7  

Table of Contents  

 

[Alternate Page for Resale Prospectus]

 

 

BORQS TECHNOLOGIES, INC.

 

1,807,823 ORDINARY SHARES


 
 
 
 
 
 
 
 

 

PROSPECTUS

 

           , 2018

 

 

 

Table of Contents  

 

PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13. Other Expenses of Issuance and Distribution.

 

The following table sets forth the costs and expenses to be paid by the Registrant in connection with the sale of the ordinary shares being registered hereby. All amounts are estimates except for the Securities and Exchange Commission (SEC) registration fee and the Financial Industry Regulatory Authority (FINRA) filing fee.

 

SEC registration fee   $ 3,293  
FINRA filing fee   $ 7,400  
Printing and engraving expenses   $ 30,000  
Legal fees and expenses   $ 600,000  
Accounting fees and expenses   $ 200,000  
Transfer agent and registrar fees and expenses   $ 25,000  
Miscellaneous fees and expenses   $ 202,086  
Total   $ 1,067,779  

  

Item 14. Indemnification of Directors and Officers.

 

British Virgin Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the British Virgin Islands Court to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime.

 

Our amended and restated memorandum and articles of association provide that, subject to certain limitations, the company may indemnify its directors and officers against all costs, fees and expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and actually and reasonably incurred in connection with legal, administrative or investigative proceedings. Such indemnity only applies if the person acted honestly and in good faith with a view to the best interests of the company and, in the case of criminal proceedings, the person had no reasonable cause to believe that their conduct was unlawful.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is theretofore unenforceable.

 

The form of Underwriting Agreement to be filed as Exhibit 1.1 to this registration statement will also provide for indemnification of us and our officers and directors.

 

The Registrant has directors’ and officers’ liability insurance for securities matters.

 

Reference is made to the following documents filed as exhibits to this Registration Statement regarding relevant indemnification provisions described above and elsewhere herein:

 

Exhibit Document   Number  
Underwriting Agreement between the Registrant and Maxim Group LLC     1.1  
Amended and Restated Memorandum and Articles of Association     3.1  
Form of Indemnity Agreement entered into between the Registrant and its directors and executive officers     10.31  

 

II- 1

 

 

Item 15. Recent Sales of Unregistered Securities.

 

Since July 1, 2015 and through the date hereof the Registrant has issued and sold the following unregistered securities:

 

Unregistered Sales of Equity Securities

 

In July 2015, the Registrant’s initial shareholders purchased an aggregate of 1,437,500 ordinary shares (“founder shares”), for an aggregate offering price of $25,000, at an average purchase price of approximately $0.017 per share. The number of founder shares issued was determined based on the expectation that such founder shares would represent 20% of the outstanding shares upon completion of our initial public offering. The founder shares are identical to the public shares (the “Public Shares”) sold in our initial public offering, except that (1) the founder shares are subject to certain transfer restrictions, and (2) the initial shareholders agreed (i) to waive their redemption rights with respect to their founder shares in connection with the consummation of a business combination and (ii) to waive their liquidation rights with respect to their founder shares if we did not complete a business combination within the allotted period.

 

On October 20, 2015, simultaneously with the closing of our initial public offering, we consummated the sale of 252,250 ordinary shares and 477,500 private warrants, of which 497,750 ordinary shares and 452,500 private warrants were purchased by Zhengqi and 27,500 ordinary shares and 25,000 private warrants were purchased by EarlyBirdCapital (“EBC”), in each case, at a price of $10.00 per ordinary share and private warrants combination, in a private placement, generating gross proceeds of $4,775,000.

 

On October 23, 2015, we consummated the sale of an additional 59,813 ordinary shares and 54,375 private warrants at a price of $10.00 per ordinary share and private warrants combination, of which 49,689 ordinary shares and 45,171 private warrants were purchased by Zhengqi and 10,125 ordinary shares and 9,204 private warrants were purchased by EBC, generating gross proceeds of $543,750.

 

On August 18, 2017, the Registrant completed the acquisition of Borqs International Holding Corp. (“Borqs International”) in an all-stock transaction. The Registrant issued 25,913,950 of its ordinary shares, representing approximately $269.5 million in consideration, of which 5,038,686 ordinary shares were purchased by Zhengqi. The Registrant also sold an additional 1,038,251 shares to Zhengqi and EBC, for aggregate consideration of approximately $10.8 million. In addition, the Registrant issued 417,166 assumed warrants to purchase ordinary shares with an exercise price of $5.36 per share. Of the shares issued to Zhengqi and EBC, 2,352,285 ordinary shares were placed in escrow, subject to the achievement of certain performance targets by June 30, 2018, with four percent of these shares deposited in escrow to support indemnification obligations under the Merger Agreement.

 

In connection with the Registrant’s repurchase of 966,136 of its ordinary shares from Zhengqi pursuant to a stock purchase agreement dated January 10, 2018, as of August 3, 2018, 1,278,776 of the escrowed shares were forfeited by Zhengqi, of which 51,151 shares were placed in the indemnity escrow account, and 1,227,625 shares were distributed to the former Borqs International shareholders based on their respective proportionate interests in the merger consideration. Additionally, since the Registrant does not expect to have achieved the required performance targets by June 30, 2018, on August 3, 2018, 1,073,509 escrowed shares were released to Zhengqi and EBC.

 

On January 18, 2018, we entered into an agreement with Crave and Colmei, along with the shareholders of Crave and Colmei (“CC Selling Shareholders”), pursuant to which the CC Selling Shareholders agreed to sell to the Company and the Company agreed to acquire 13.8% of the outstanding shares of Crave and 13.8% of the outstanding shares of Colmei from the CC Selling Shareholders which will not result in the Company’s significant influence in either Colmei or Crave. Under the agreement, on March 22, 2018, the Company issued 473,717 ordinary shares issued to the order of the CC Selling Shareholders and agreed to pay $10.0 million cash to the CC Selling Shareholders over a period of 36 months. Subject to the approval of the Company’s board of directors, the Company agreed to issue 183,342 additional shares to the CC Selling Shareholders if the aggregate value of the Company shares initially issued to the CC Selling Shareholders under this agreement was less than $3.0 million on August 18, 2018 (the “Calculation Date”). We are currently in discussions with the CC Selling Shareholders to extend the Calculation Date to a mutually agreed date.

 

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder) or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.

 

II- 2

 

 

Item 16. Exhibits and Financial Statement Schedules.

 

  (a) Exhibits.

  

        Incorporated by Reference
Exhibit Number   Exhibit Title   Form   File No.   Exhibit   Filing Date   Filed Herewith
1.1****   Underwriting Agreement between the Registrant and Maxim Group LLC                    
2.1+   Merger Agreement dated December 27, 2016, as amended on May 10, 2017 and June 29, 2017, by and among Pacific, Borqs International, Sellers, the Purchaser Representative, the Seller Representative and, for certain limited purposes thereof, Zhengqi (incorporated by reference from Annex A to the Registrant’s Definitive Proxy Statement, filed with the SEC on July 14, 2017)   8-K   001-37593   2.1   8/24/17    
3.1   Amended and Restated Memorandum and Articles of Association   8-K   001-37593   3.1   8/24/17    
4.1*   Form of Representative’s Warrant                    
5.1   Opinion of Maples and Calder regarding the validity of the ordinary shares being registered and certain British Virgin Islands tax matters                    X
5.2   Opinion of Ellenoff Grossman & Schole LLP                  

X

10.1   Registration Rights Agreement, dated August 18, 2017, by and among each of CC Selling Shareholders and the Purchaser Representative   8-K   001-37593   10.1   8/24/17    
10.2   Form of Lock-up Agreement, by and among each of the CC Selling Shareholders, Pacific and the Purchaser Representative   8-K   001-37593   10.2   8/24/17    
10.3   Form of Non-Competition and Non-Solicitation Agreement, dated August 18, 2017, by and among certain shareholders of Pacific, Pacific, Borqs International and the Purchaser Representative   8-K   001-37593   10.3   8/24/17    
10.4   Escrow Agreement, dated August 18, 2017, by and among the Registrant, the Purchaser Representative, Seller Representative and the Escrow Agent   8-K   001-37593   10.4   8/24/17    
10.5   Form of Letter of Transmittal   8-K   001-37593   10.5   8/24/17    
10.6   Backstop and Subscription Agreement, dated May 11, 2017, by and among Pacific and Zhengqi   8-K   001-37593   10.6   8/24/17    
10.7   Employment Contract, dated July 1, 2013, by and between Borqs International and Pat Sek Yuen Chan   8-K   001-37593   10.7   8/24/17    
10.8   Employment Contract, dated July 1, 2013, by and between Borqs International and Bob Xiao Bo Li   8-K   001-37593   10.8   8/24/17    
10.9   Consulting Agreement, dated April 1, 2015, by and between Borqs International and Anthony K. Chan   8-K   001-37593   10.9   8/24/17    
10.10   Borqs Technologies, Inc. 2017 Equity Incentive Plan, as amended   8-K   001-37593   10.10   8/24/17    
10.11   Form of Warrant, dated August 18, 2017, by and between the Company and each of Warrant Holders   8-K   001-37593   10.11   8/24/17    
10.12   Partial Assignment and Amendment of Backstop and Subscription Agreement, dated August 18, 2017, by and between Zhengqi, EarlyBirdCapital, Pacific and Borqs International   8-K   001-37593   10.12   8/24/17    

 

II- 3

 

 

        Incorporated by Reference
Exhibit Number   Exhibit Title   Form   File No.   Exhibit   Filing Date   Filed Herewith
10.13   Amended and Restated Registration Rights Agreement, dated August 18, 2017, by and among Pacific and certain shareholders of Pacific   8-K   001-37593   10.13   8/24/17    
10.14   Share Purchase Agreement, dated January 18, 2018, by and among with Borqs Technologies, Inc. and Colmei Technology International Limited, Shenzhen Crave Communication Company, Limited, and their respective shareholders.   8-K   001-37593   99.1   1/22/18    
10.15   Letter of Intent, dated January 8, 2018, by and between Borqs Technologies, Inc. and Shanghai KADI Technologies Co., Ltd.   10-K   001-37593   10.14   4/2/18    
10.16   Manufacturing & Service Agreement, dated September 1, 2015, by and between Borqs Hong Kong Ltd. And Alpha Network Ltd.   10-K   001-37593   10.16   4/2/18    
10.17   Reliance Retail Limited Form of Purchase Order dated November 23, 2015   10-K   001-37593   10.18   4/2/18    
10.18*   Vendor Master Services Agreement, dated July 5, 2013, by and between Borqs Software Solutions Pvt. Ltd. And Qualcomm India Private Limited                    
10.19   Stock Repurchase Agreement, dated January 10, 2018, by and among Borqs Technologies, Inc., Zhengqi International Holding Limited, Borqs International Holding Corp., Zhengqi International Holding Limited, solely in its capacity as the Issuer Representative and Zhengdong Zou, solely in its capacity as the Seller Representative  

8-K

 

  001-37593   99.1   1/12/18    
10.20*   Loan and Security Agreement, effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners For Growth V, L.P.                    
10.21*   Subordination Agreement, effective as of April 30, 2018, by and between Borqs Hong Kong Limited, Borqs International Holding Corp., SPD Silicon Valley Bank Co., Ltd. and Partners For Growth V, L.P.                    
10.22*   Deed of Guarantee and Indemnity, effective as of April 30, by and between Borqs International Holding Corp. and Partners For Growth V, L.P.                    
10.23*   Debenture, effective as of April 30, 2018, by and between Borqs International Holding Corp. and Partners For Growth V, L.P.                    
10.24*   Deed and Charge of Shares, effective as of April 30, 2018, by and between Borqs International Holding Corp. and Partners For Growth V, L.P.                    
10.25*   Deed of Guarantee and Indemnity, effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners For Growth V., L.P.                    
10.26*   Debenture, effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners For Growth V, L.P.                    
10.27*   Intellectual Property Security Agreement, effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners For Growth V, L.P.                    
10.28*   Intellectual Property Security Agreement, effective as of April 30, 2018, by and between Borqs International Holding Corp. and Partners For Growth V, L.P.                    
10.29*   Equitable Mortgage, effective as of April 30, 2018, by and between Borqs Technologies, Inc., Borqs International Holding Corp. and Partners For Growth V, L.P.                    
10.30*   Waiver and Modification No. 2 to Loan and Security Agreement, effective as of April 30, 2018, by and between Borqs Hong Kong Limited and Partners for Growth IV, L.P.                    
10.31   Form of Indemnity Agreement, by and between Pacific Special Acquisition Corp. and its directors and executive offers    S-1/A    6770   10.10   9/18/15     

 

II- 4

 

 

        Incorporated by Reference
Exhibit Number   Exhibit Title   Form   File No.   Exhibit   Filing Date   Filed Herewith
10.32***   Exclusive Business Cooperation Agreement, effective October 18, 2016,  by and between Borqs Beijing Ltd. and Beijing Big Cloud Century Network Technology Ltd.                    
10.33***   Loan Contract, effective October 18, 2016,  by and between Borqs Beijing Ltd. and Wang Lei                    
10.34***   Loan Contract, effective October 18, 2016,  by and between Borqs Beijing Ltd. and Wang Tun                    
10.35***   Exclusive Option Agreement, effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Lei, and  Beijing Big Cloud Century Network Technology Ltd.                    
10.36***   Exclusive Option Agreement, effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Tun, and  Beijing Big Cloud Century Network Technology Ltd.                    
10.37***   Share Pledge Agreement, effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Lei, and  Beijing Big Cloud Century Network Technology Ltd.                    
10.38***   Share Pledge Agreement, effective October 18, 2016, by and between Borqs Beijing Ltd., Wang Tun, and  Beijing Big Cloud Century Network Technology Ltd.                    
10.39***   Power of Attorney, effective October 18, 2016,  by and between Wang Lei                    
10.40***   Power of Attorney, effective October 18, 2016,  by and between Wang Tun                    
10.41***   Overseas Procurement and Sales Service Agreement, dated November 20, 2017, by and between Borqs International Holding Corp., HHMC Microelectronics Co., Limited and Borqs Technologies, Inc.                    
10.42   Amendment Agreement, effective August 31, 2018, by and between Borqs Hong Kong Limited and SPD Silicon Valley Bank Co., Ltd.                   X
10.43   Amendment Agreement, effective August 31, 2018, by and between Borqs Beijing Ltd. and SPD Silicon Valley Bank Co., Ltd.                   X
10.44   Guarantee Agreement For Corporate Guarantor for Borqs Hong Kong Limited, effective as of August 31, 2018, by and between Borqs Technologies, Inc. and SPD Silicon Valley Bank Co., Ltd.                   X
10.45 Guarantee Agreement For Corporate Guarantor for Borqs Beijing Ltd. effective as of August 31, 2018, by and between Borqs Technologies, Inc. and SPD Silicon Valley Bank Co., Ltd.                   X
10.46   Guarantee Agreement For Corporate Guarantor for Borqs Hong Kong Limited, effective as of August 31, 2018, by and between Borqs International Holding Corp. and SPD Silicon Valley Bank Co., Ltd.                   X
10.47   Guarantee Agreement For Corporate Guarantor for Borqs Beijing Ltd., effective as of August 31, 2018, by and between Borqs International Holding Corp. and SPD Silicon Valley Bank Co., Ltd.                   X
10.48   Loan and Security Agreement, effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners For Growth IV, L.P.                   X
10.49   Deed of Guarantee and Indemnity, effective as of August 26, 2016, by and between Borqs International Holding Corp. and Partners For Growth IV, L.P.                   X
10.50   Debenture, effective as of August 26, 2016, by and between Borqs International Holding Corp. and Partners For Growth IV, L.P.                   X
10.51   Intellectual Property Security Agreement, effective as of August 26, 2016, by and between Borqs International Holding Corp. and Partners For Growth IV, L.P.                   X
10.52   Deed of Guarantee and Indemnity, effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners For Growth IV, L.P.                   X
10.53   Debenture, effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners For Growth IV, L.P.                   X
10.54   Intellectual Property Security Agreement, effective as of August 26, 2016, by and between Borqs Hong Kong Limited and Partners For Growth IV, L.P.                   X

 

II- 5

 

 

        Incorporated by Reference
Exhibit Number   Exhibit Title   Form   File No.   Exhibit   Filing Date   Filed Herewith
10.55   Subordination Agreement, effective as of August 15, 2016, by and between SPD Silicon Valley Bank Co., Ltd. and Partners For Growth IV, L.P.                   X
10.56   Facility Agreement For Working Capital Loans, effective as of August 31, 2015, by and between Borqs Hong Kong Limited and SPD Silicon Valley Bank Co., Ltd.                   X
10.5 7   Guarantee Agreement For Corporate Guarantor, effective as of August 31, 2015, by and between Borqs International Holding Corp. and SPD Silicon Valley Bank Co., Ltd.                   X
10.58   Amendment Agreement, effective July 20, 2016, by and between Borqs Hong Kong Limited and SPD Silicon Valley Bank Co., Ltd.                   X
10.59   Amendment Agreement, effective August 31, 2017, by and between Borqs Hong Kong Limited and SPD Silicon Valley Bank Co., Ltd.                   X
10.60   Facility Agreement For Working Capital Loan, effective as of July 20, 2016, by and between Borqs Beijing Ltd. and SPD Silicon Valley Bank Co., Ltd.                   X
10.61   Pledge Agreement of Accounts Receivable, effective as of July 20, 2016, by and between Borqs Beijing Ltd. and SPD Silicon Valley Bank Co., Ltd.                   X
10.62   Amendment Agreement, effective July 20, 2017, by and between Borqs Beijing Ltd. and SPD Silicon Valley Bank Co., Ltd.                   X
10.63   Amendment Agreement, effective August 31, 2017, by and between Borqs Beijing Ltd. and SPD Silicon Valley Bank Co., Ltd.                   X
21.01**   List of subsidiaries                    
23.01****   Consent of Maples and Calder (Hong Kong) LLP (included in Exhibit 5.1)                    
23.02****   Consent of Independent Registered Public Accounting Firm                  
24.01**   Power of Attorney (included on the signature page to this Registration Statement)                    
101.INS   XBRL Instance Document                    X
101.SCH   XBRL Schema Linkbase Document                    X
101.CAL   XBRL Calculation Linkbase Document                    X
101.DEF   XBRL Definition Linkbase Document                    X
101.EXT   XBRL Extension Label Linkbase Document                    X
101.PRE   XBRL Presentation Linkbase Document                    X

   

+ The disclosure schedules to the Merger Agreement are not being filed herewith. The Company agrees to furnish supplementally a copy of any such schedules to the Securities and Exchange Commission upon request.

 

* Previously included in Amendment No. 2 to the Registration Statement on Form S-1 filed on July 2, 2018

 

** Previously included in the Registration Statement on Form S-1 filed on February 14, 2018.
   

***

Previously included in Amendment No. 4 to the Registration Statement on Form S-1 filed on August 3, 2018

   
**** Previously included in Amendment No. 5 to the Registration Statement on Form S-1 filed on August 28, 2018

 

  (b) Financial Statement Schedules.

 

All other financial statement schedules are omitted because they are not applicable or the information is included in the Registrant’s consolidated financial statements or related notes.

 

II- 6

 

 

Item 17. Undertakings.

 

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to provisions described in Item 14 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

The undersigned Registrant hereby undertakes that:

 

  (1) for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

 

  (2) for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial  bona fide  offering thereof .

 

II- 7

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the Beijing, China, on September 14, 2018.

 

  BORQS TECHNOLOGIES, INC.
     
  By: /s/ Pat Sek Yuen Chan
    Pat Sek Yuen Chan
    Chief Executive Officer

 

Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated:

 

Name   Title   Date
         
/s/ Pat Sek Yuan Chan   Chief Executive Officer and Director   September 14, 2018
Pat Sek Yuen Chan   (Principal Executive Officer)    
         
/s/ Anthony K. Chan   Chief Financial Officer   September 14, 2018
Anthony K. Chan   (Principal Financial Officer,
Principal Accounting Officer)
   
         
*   Director   September 14, 2018
Honghui Deng        
         
*   Director   September 14, 2018
Yaqi Feng        
         
*   Director   September 14, 2018
Bill Huang        
         
*   Director   September 14, 2018
Jason Zexian Shen        
         
*   Director   September 14, 2018
Eric Tao        
         
*   Director   September 14, 2018
Joseph Wai Leung Wong        

 

*By: /s/ Pat Sek Yuan Chan
  Pat Sek Yuan Chan  
  Attorney-in-fact  

 

 

II-8

 

 

Exhibit 5.1

 

Borqs Technologies, Inc.

Building B23-A,

Universal Business Park

No. 10 Jiuxianqiao Road

Chaoyang District, Beijing 100015,

China

 

14 September 2018

 

Dear Sirs

 

Borqs Technologies, Inc.

 

We have acted as British Virgin Islands legal advisers to Borqs Technologies, Inc. (the “ Company ”) in connection with the Company’s registration statement on Form S-1 including all amendments or supplements thereto, (the “ Registration Statement ”), filed with the Securities and Exchange Commission (the “ Commission ”) under the U.S. Securities Act of 1933, as amended to date, relating to (a) the offering, issuance and sale by the Company of up to US$2,496,231 of its ordinary shares of no par value (the “ Offer Shares ”), (b) the offering and sale by certain participating shareholders as identified therein (the “ Participating Shareholders ”) of up to US$7,503,769 of the ordinary shares of the Company of no par value (the “ Participating Shares ”), (c) the resale by certain selling shareholders as identified therein (the “ Selling Shareholders ”) of up to 1,807,823 ordinary shares of the Company of no par value (the “ Selling Shares ”), (d) the issue and sale of warrants by the Company for the purchase of an aggregate of 4% of the ordinary shares in the Company being sold in the Proposed Sale (as defined below) (the “ Warrant Shares ”), and (e) the grant of an option by the Company for the purchase of up to an additional 15% of the ordinary shares in the Company being sold in the Proposed Sale (the “ Option Shares ”, together with the Offer Shares, the Selling Shares, and the Warrant Shares, the “ Shares ”) (collectively the “ Proposed Sale ”).

 

We are furnishing this opinion as Exhibit 5.1 to the Registration Statement.

 

1 Documents Reviewed

 

For the purposes of this opinion, we have reviewed only originals, copies or final drafts of the following documents:

 

1.1 The public records of the Company on file and available for public inspection at the Registry of Corporate Affairs in the British Virgin Islands (the “ Registry of Corporate Affairs ”) on 27 August 2018, including the Company’s Certificate of Incorporation and its Memorandum and Articles of Association (the “ Memorandum and Articles ”).

 

1.2 The minutes of a meeting of the board of directors of the Company held on 6 February 2018 (the “ Resolutions ”).

 

1.3 A certificate from a Director of the Company addressed to this firm, a copy of which is attached hereto (the “ Director’s Certificate ”).

 

1.4 A certificate of good standing dated 27 August 2018, issued by the Registrar of Companies in the British Virgin Islands (the “ Certificate of Good Standing ”).

 

1.5 The Registration Statement.

 

1.6 The document sent to us on 19 July 2018 by the Company to us as the register of members of the Company (the “ Register of Members ”).

 

 

 

 

2 Assumptions

 

The following opinions are given only as to, and based on, circumstances and matters of fact existing and known to us on the date of this opinion letter. These opinions only relate to the laws of the British Virgin Islands which are in force on the date of this opinion letter. In giving the following opinions we have relied (without further verification) upon the completeness and accuracy of the Register of Members, the Director’s Certificate and the Certificate of Good Standing. We have also relied upon the following assumptions, which we have not independently verified:

 

2.1 Copy documents or drafts of documents provided to us are true and complete copies of, or in the final forms of, the originals.

 

2.2 The genuineness of all signatures and seals.

 

2.3 There is nothing under any law (other than the law of the British Virgin Islands) which would or might affect the opinions set out below.

 

3 Opinion

 

Based upon the foregoing and subject to the qualifications set out below and having regard to such legal considerations as we deem relevant, we are of the opinion that:

 

3.1 The Company is a company limited by shares incorporated with limited liability under the BVI Business Companies Act (as amended) of the British Virgin Islands (the “ Act ”), is in good standing at the Registry of Corporate Affairs and validly exists under the laws of the British Virgin Islands.

 

3.2 The Company is authorised to issue an unlimited number of ordinary and preferred shares of no par value.

 

3.3 The issue and allotment of the Offer Shares offered by the Company pursuant to the Proposed Sale have been duly authorised and when allotted, issued and paid for as contemplated in the Registration Statement, such Offer Shares will be legally issued and allotted, fully paid and non-assessable.

 

3.4 The issuance by the Company of the Participating Shares offered by the Participating Shareholders pursuant to the Proposed Sale was duly authorised by the Company and the Participating Shares are fully paid and non-assessable.

 

3.5 The issuance by the Company of the Selling Shares offered by the Selling Shareholders pursuant to the Proposed Sale was duly authorised by the Company and the Selling Shares are fully paid and non-assessable.

 

3.6 The issue and allotment of the Warrant Shares offered by the Company pursuant to the Proposed Sale have been duly authorised and when allotted, issued and paid for as contemplated in the Registration Statement, such Warrant Shares will be legally issued and allotted, fully paid and non-assessable.

 

3.7 The issue and allotment of the Option Shares offered by the Company pursuant to the Proposed Sale have been duly authorised and when allotted, issued and paid for as contemplated in the Registration Statement, such Option Shares will be legally issued and allotted, fully paid and non-assessable.

 

3.8 The statements under the caption “Taxation” in the offering prospectus forming part of the Registration Statement on Form S-1 filed by the Company, to the extent that they constitute statements of British Virgin Islands law, are accurate in all material respects and that such statements constitute our opinion.

 

2

 

 

4 Qualifications

 

Except as specifically stated herein, we make no comment with respect to any representations and warranties which may be made by or with respect to the Company in any of the documents or instruments cited in this opinion or otherwise with respect to the commercial terms of the transactions the subject of this opinion.

 

As a matter of British Virgin Islands law, a share is only issued when it has been entered in the register of members (shareholders). Under section 42 of the Act, the entry of the name of a person in the register of members of a company as a holder of a share in a company is prima facie evidence that legal title in the share vests in that person. A third party interest in the shares in question would not appear. An entry in the register of members may yield to a court order for rectification (for example, in the event of inaccuracy or omission).

 

In this opinion the phrase “non-assessable” means, with respect to the issuance of shares, that a shareholder shall not, in respect of the relevant shares, have any obligation to make further contributions to the Company’s assets (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).

 

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our name under the heading, “Legal Matters” and elsewhere in the prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the U.S. Securities Act of 1933, as amended, or the Rules and Regulations of the Commission thereunder.

 

Yours faithfully

 

/s/ Maples and Calder (Hong Kong) LLP

 

Maples and Calder (Hong Kong) LLP

 

Encl

 

3

 

 

Director’s Certificate

 

Borqs Technologies, Inc.

Building B23-A,

Universal Business Park

No. 10 Jiuxianqiao Road

Chaoyang District, Beijing 100015, China

 

28 August 2018

 

To: Maples and Calder (Hong Kong) LLP
53rd Floor, The Center
99 Queen’s Road Central
Hong Kong

 

Dear Sirs

 

Borqs Technologies, Inc. (the “ Company ”)

 

I, the undersigned, being a director of the Company, am aware that you are being asked to provide a legal opinion in relation to certain aspects of British Virgin Islands law (the “ Opinion ”). Unless otherwise defined herein, capitalised terms used in this certificate have the meaning given to them in the Opinion. I hereby certify that:

 

1 The Memorandum and Articles of Association of the Company registered on 18 August 2017 remain in full force and effect and are unamended.

 

2 The Resolutions were duly passed in the manner prescribed in the Memorandum and Articles of the Company, including as to the disclosure of any director’s interests in the Transaction Documents, and have not been amended, varied or revoked in any respect. The issue and allotment of the Offer Shares, the Warrant Shares and the Option Shares pursuant to the Proposed Sale is appropriate to fulfill the intent of the Resolutions and shall not cause any restriction or limitation set out in the Resolutions to be exceeded.

 

3 The members of the Company (the “ Members ”) have not restricted or limited the powers of the directors of the Company in any way.

 

4 The directors of the Company at the date of the resolutions are as follows:

 

Pat Sek Yuen Chan

Yaqi Feng

Joseph Wai Leung Wong

Jason Zexian Shen

Eric Tao

Honghui Deng

Bill Huang

 

5 There is nothing contained in the Company’s register of members, minute book or other corporate records, which you have not inspected, which would or might affect the Opinion.

 

6 All of the Selling Shares are fully paid and non-assessable.

 

7 The issuance of the Selling Shares by the Company was duly authorised.

 

8 Prior to, at the time of, and immediately following execution of the Transaction Documents the Company was, or will be, able to pay its debts as they fell, or fall, due, and the transactions to which the Transaction Documents relate will not cause the Company to become unable to pay its debts as they fall due. The Company has entered, or will enter, into the Transaction Documents for proper value, not with an intention to defraud or wilfully defeat an obligation owed to any creditor and the transactions contemplated thereby do not and will not give any creditor an unfair preference.

 

9 Neither the Company nor any of its subsidiaries (if any) has an interest in any land in the British Virgin Islands.

 

10 Each director of the Company considers the transactions contemplated by the Transaction Documents to be of commercial benefit to the Company and has acted in good faith in the best interests of the Company, and for a proper purpose of the Company, in relation to the transactions which are the subject of the Opinion.

 

I confirm that you may continue to rely on this certificate as being true and correct on the day that you issue the Opinion, unless I shall have previously notified you in writing personally to the contrary.

 

Signature:   /s/ Pat Sek Yuen Chan  
Name: Pat Sek Yuen Chan  
Title: Director, CEO and Chairman  

 

4

 

Exhibit 5.2

 

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

New York, New York 10105

 

September 14, 2018

         

Borqs Technologies, Inc.

Building B23-A, Universal Business Park

No. 10 Jiuxianqiao Road

Chaoyang District, Beijing 100015, China 

 

Re: Registration Statement of Borqs Technologies, Inc.

 

Ladies and Gentlemen:

 

We have acted as United States counsel to Borqs Technologies, Inc., a British Virgin Islands business company (the “Company”), in connection with the registration by the Company with the United States Securities and Exchange Commission (the “Commission”) of (a) the offering, issuance and sale by the Company of up to US$2,496,231 of its ordinary shares of no par value (the “Offer Shares”), (b) the offering and sale by certain participating shareholders as identified therein (the “Participating Shareholders”) of up to US$7,503,769 of the ordinary shares of the Company of no par value (the “Participating Shares”), (c) the resale by certain selling shareholders as identified therein (the “Selling Shareholders”) of up to 1,807,823 ordinary shares of the Company of no par value (the “Selling Shares”), (d) the issue and sale of warrants (the “Underwriter Warrants”) by the Company for the purchase of an aggregate of 4% of the ordinary shares in the Company being sold in the Proposed Sale (as defined below) (the “Warrant Shares”), and (e) the grant of an option by the Company for the purchase of up to an additional 15% of the ordinary shares in the Company being sold in the Proposed Sale (the “Option Shares”, together with the Offer Shares, the Selling Shares, and the Warrant Shares, the “Shares”) (collectively the “Proposed Sale”), pursuant to a Registration Statement on Form S-1 initially filed by the Company with the Commission on February 14, 2018 (File No. 333-223034) (as amended, the “Registration Statement”). This opinion is being given in accordance with the Legal Matters section of the Registration Statement, as it pertains to the portions of New York law set forth below.

 

We have examined such documents and considered such legal matters as we have deemed necessary and relevant as the basis for the opinion set forth below. With respect to such examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as reproduced or certified copies, and the authenticity of the originals of those latter documents. As to questions of fact material to this opinion, we have, to the extent deemed appropriate, relied upon certain representations of certain officers and employees of the Company.

 

Based upon the foregoing, we are of the opinion that when the Registration Statement becomes effective under the Act and when the Underwriter Warrants are issued, delivered and paid for, as contemplated by the Registration Statement, such Underwriter Warrants will be legally binding obligations of the Company enforceable in accordance with their terms except: (a) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally and by general equitable principles (regardless of whether enforceability is considered in a proceeding in equity or at law); (b) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (c) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 

 

Notwithstanding anything in this letter which might be construed to the contrary, our opinions expressed herein are limited to the laws of the State of New York. We express no opinion with respect to the applicability to, or the effect on, the subject transaction of the laws of any other jurisdiction or as to any matters of municipal law or the laws of any local agencies within any state other than the State of New York. The opinion expressed herein is based upon the law of the State of New York in effect on the date hereof and as of the effective date of the Registration Statement, and we assume no obligation to revise or supplement this opinion after the effective date of the Registration Statement should such law be changed by legislative action, judicial decision, or otherwise. Except as expressly set forth in our opinion above: (i) we express no opinion as to whether the laws of any other jurisdiction are applicable to the subject matter hereof, and (ii) we express no opinion as to compliance with any other federal or state law, rule or regulation relating to securities, or to the sale or issuance thereof.

 

We hereby consent to the use of this opinion as an exhibit to the Registration Statement, to the use of our name as your counsel and to all references made to us in the Registration Statement and in the prospectuses forming a part thereof. In giving this consent, we do not hereby admit that we are in the category of persons whose consent is required under Section 7 of the Act, or the rules and regulations promulgated thereunder. This opinion is given as of the effective date of the Registration Statement, and we are under no duty to update the opinions contained herein. 

 

Very truly yours,

 

/s/ Ellenoff Grossman & Schole LLP

 

Ellenoff Grossman & Schole LLP

 

 

 

 

 

Exhibit 10.42

  

 

 

 

 

 

 

变更协议

Amendment Agreement

 

  

 

 

 

 

 

(修订函编号/Ref. No.: CL201508001-003)

 

 

 

隶属于 /Belonging to: 授信协议/Facility Agreement

(编号/Ref. No.: CL201508001)

 

 

 

 

 

 

 

 

第一部分 签署页 /Part I Execution Page 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

签署页

Execution Page

  

融资行   客户
Financing Bank   Client
     
浦发硅谷银行有限公司   播思微系统香港有限公司
SPD SILICON VALLEY BANK CO., LTD.   BORQS Hong Kong Limited
     
住所地   住所地
with address at   with address at
     
上海市杨浦区大连路 588 号宝地广场 B 座 21 楼    
200082    
     
21/F, Block B, Baoland Plaza,   Office B, 21/F, Legend Tower, 7 Shing Yip
No. 588, Dalian Road, Shanghai 200082   Street, Kwun Tong, Kowloon, Hong Kong
     
以上当事人在本协议中简称为 融资行   以上当事人在本协议中简称为 客户
hereinafter referred to as “Financing Bank”   hereinafter referred to as "Client"

  

上述各方当事人在此同意并接受本变更协议中所述之全部条款;客户特此确认,
就本协议项下有关条件和条款,融资行已向客户作出充分的说明和解释,

客户已理解、同意、承认该等条款。

 

The parties above hereby agree to and accept all terms and conditions set forth in this Amendment Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Financing Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Client completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

   

 

 

 

  1  

 

 

第二部分 正文 /Part II Context 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

变更协议条款

TERMS AND CONDITIONS

 

鉴 于 :
Whereas,

 

浦发硅谷银行有限公司(作为融资行)与客户(作为借款人)于 2015 年 08 月 31 日签署了《流动资金贷款类授 信协议》(协议编号:CL201508001),于 2016 年 07 月 20 日、2017 年 08 月 31 日分别签署了《变更协议》(协议编号:CL201508001-001、CL201508001-002,该等《流动资金贷款类授信协议》和《变更协议》以下合称 “《授信协议》”),以及其他相关文件(连同前述文件的任何变更、修订、补充,下称“融资文件”)。根据融资文件,融资行同意向客户提供金额为美元陆佰万元整之银行授信(下称“授信”)。现经各方协商一致,达成如下增补及变更条款(“本变更协议”),以资协议各方共同恪守:

 

SPD SILICON VALLEY BANK CO., LTD. (as Financing Bank) and the Client (as borrower) have entered into the Facility Agreement for Working Capital Loans dated August 31 st , 2015 (Ref. No.: CL201508001), an Amendment Agreement dated July 20 th , 2016 (Ref. No.: CL201508001-001), an Amendment Agreement dated August 31 st , 2017 (Ref. No.: CL201508001-002) (such Facility Agreement for Working Capital Loans and Amendment Agreements shall be hereinafter collectively referred to as the “ Facility Agreement ”) and other related documents (together with any modification, amendment, supplement of/to the foregoing, hereinafter as the “ Finance Documents ”). Pursuant to the Finance Documents, the Financing Bank agrees to make available to the Client the facility up to USD6,000,000.00 (hereinafter as the “ Facility ”). Based on the foregoing, the parties hereby further agree to reach the amendment and/or supplementary clause as below (hereinafter as the “ Amendment Agreement ”).

   

1. 各方一致不可撤销地确认本变更协议条款如下:

The parties hereby irrevocably confirm the following amendment clauses below:

 

(1) 《授信协议》第二部分“特别条款”中对于“额度期限/最终到期日”中的如下内容:

The contents of Facility Validity Period / Final Maturity Date in Part II Special Provision of the Facility Agreement quoted below:

 

引用 /QUOTE

  

额度期限 / 最终到期日

Facility Validity Period /
Final Maturity Date

 

最终到期日:

2018 年 08 月 31 日

 

Final Maturity Date:

August 31 st , 2018

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

  2  

 

 

第二部分 正文 /Part II Context 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

额度期限 / 最终到期日

Facility Validity Period / Final Maturity Date

 

最终到期日:

2019 年 02 月 28 日

 

Final Maturity Date:

February 28 th , 2019

  

引用结束 /UNQUOTE

 

(2) 《授信协议》第二部分“特别条款”中对于“关于所有业务品种均应遵循的财务约定”中的如下内容:

The contents of “General Financial Covenants for all product-types” in Part II Special Provision of the Facility Agreement quoted below:

 

引用 /QUOTE

 

本协议项下客户应确认在合并报表层面上需维持:

The Client under this Agreement shall confirm to maintain on a consolidated basis:

 

1) 每月最小调整后速动比率:1.25:1.00

Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00

 

调整后速动比率定义为:(非绑定现金 + 应收账款净额) 除以 (流动负债 – 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities – deferred revenue).

 

2) 每 季 度 最 低 EBITDA:USD750,000.00
Minimum Quarterly EBITDA of: USD750,000.00

 

注:该财务约束指标将在收到并审核 2018 年董事会批准的(最新)预算后重新设定。

Note: This financial covenant for 2018 will be adjusted upon receipt and review of 2018 board-approved (updated) plan.

 

客户应确认 BORQS International Holding Corp (注册号:OI-192127, 亦作为本协议之 “保证人”)需满足:

The Client shall confirm that, BORQS International Holding Corp (Registration No. OI-192127, the Guarantor under this agreement) to achieve.

 

1) 在 2017 年 08 月 31 日之前与 Pacific Special Acquisition Corp 完成合并。

To complete the merger with Pacific Special Acquisition Corp by the end of August 31 st , 2017.

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

  3  

 

 

第二部分 正文 /Part II Context 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

本协议项下客户应确认在合并报表层面上需维持:

The Client under this Agreement shall confirm to maintain on a consolidated basis:

 

1) 每月最小调整后速动比率:1.25:1.00

Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00

 

调整后速动比率定义为:(非绑定现金 + 应收账款净额) 除以 (流动负债 – 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities – deferred revenue).

 

2) 每季度最小净利润:

Minimum Quarterly Net Income:

2018 年 2 季度 Q2’2018: (USD500,000.00)

2018 年 3 季度 Q3’2018: USD500,000.00

2018 年 4 季度 Q4’2018: USD500,000.00

 

未免疑义,以上以“()”标记的数字代表负数。

For the avoidance of doubt, the above number marked in column represents negative.

 

3) 新一轮融资:在 2019 年 01 月 31 日之前收到净现金流入不少于美元 20,000,000.00

的新一轮股权融资款或债权融资款。

New Equity Round: To receive no less than USD20,000,000.00 net cash proceeds of equity proceeds or debt proceeds by January 31 st , 2019.

 

注:2019 年度的财务约束指标将在收到并审核 2019 年董事会批准的(最新)预算后重新设定。

Note: Financial covenants for 2019 will be revisited upon receipt and review of 2019 board-approved (updated) plan.

 

引用结束 /UNQUOTE

 

(3) 《授信协议》第二部分“特别条款”中对于“其他”增加如下内容:

The contents of “Others” in Part II Special Provision of the Facility Agreement will be added below:

 

引用 /QUOTE

 

在发生流动性事件时,客户应向融资行支付一笔按照以下公式计算的成功费:

Upon an occurrence of Liquidity Event, the Client need to pay the Financing Bank a Success Fee in the amount calculated as follows:

 

计算方法为:1% × 下一轮定向增发的金额。

The amount of Success Fee is calculated as: 1% * Total equity raise of next private placement.

 

流动性事件系指:完成下一轮定向增发。

Liquidity Event is defined as finish next private placement.

 

客户应支付的成功费总金额应不低于人民币 470,000.00 元或其等值美元金额但不超过人

民币 700,000.00 元或其等值美元金额。

  

  4  

 

 

第二部分 正文 /Part II Context 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

The total payment amount of success fee shall be no less than RMB470,000.00 or its equivalent amount in USD but no more than RMB700,000.00 or its equivalent amount in USD.

 

支付时点:客户应在发生流动性事件时向融资行支付该成功费,但付款日最迟不得晚于本授信协议最终到期日。

Payment Terms: The success fee is payable upon the occurrence of Liquidity Event but the payment date shall be no later than Final Maturity Date of this Facility Agreement.

 

引用结束 /UNQUOTE

 

(4) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“业务额度到期日”中的如下内 容:

The contents of “Maturity Date of the Loan Limit” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用 /QUOTE

 

业务额度到期日   2018 年 08 月 31 日
Maturity Date of the Loan Limit   August 31 st , 2018

  

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

业务额度到期日   2019 年 02 月 28 日
Maturity Date of the Loan Limit   February 28 th , 2019

 

引用结束 /UNQUOTE

 

(5) 《授信协议》第四部分“业务条款”中“业务品种:应收帐池贷款”中“贷款利率”中的如下内容:

The contents of “Interest Rate” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

引用 /QUOTE

 

贷款利率

Interest Rate

LIBOR (☐1 个月 þ 3 个月 ☐6 个月 ☐12 个月)加 3.70%(年利率)利差LIBOR (☐1 month þ 3 months ☐6 months ☐12 months) plus a Margin of 3.70% (p.a.)
   
  ( 利率以融资行的提款确认或书面确认所载为准 )
  (the final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank)

 

引用结束 /UNQUOTE

 

  5  

 

 

第二部分 正文 /Part II Context 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

贷款利率

Interest Rate

LIBOR (☐1 个月 þ 3 个月 ☐6 个月 ☐12 个月)加 4.00%(年利率)利差LIBOR (☐1 month þ 3 months ☐6 months ☐12 months) plus a Margin of 4.00% (p.a.)
 
   
  ( 利率以融资行的提款确认或书面确认所载为准 )
  (the final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank)

  

引用结束 /UNQUOTE

 

(6) 《授信协议》第五部分“附件”中“附件三”将在本变更协议生效后调整为以下内容:

The contents of “Schedule 3” in Part V Schedule of the Facility Agreement shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

附件三:

Schedule 3

 

合规证书

COMPLIANCE CERTIFICATE

 

The Client(s) under this Agreement confirms and undertakes to the Financing Bank that:

本协议中的客户对融资行确认和承诺:

 

a) COMPLIANCE CERTIFICATE(S) would be completed and provided in accordance with the requirements of the Financing Bank during the period of this Agreement;

在本协议期限内,合规证明将根据融资行要求完成并提供;

 

b) any COMPLIANCE CERTIFICATE submitted by the Client(s) shall comply in substance with the format required by the Financing Bank (including the format set forth below or any further version notified by the Financing Bank).

任何客户提交的合规证明将符合融资行要求的格式(包括下述格式和日后融资行修订的格式)

 

  6  

 

 

第二部分 正文 /Part II Context 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

COMPLIANCE CERTIFICATE

 

TO: SPD SILICON VALLEY BANK CO., LTD. Date:
致:浦发硅谷银行有限公司 日期

 

FROM: BORQS Hong Kong Limited

发件人: 播思微系统香港有限公司

 

The undersigned authorized officer of BORQS Hong Kong Limited (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”):

在下文中签字的播思微系统香港有限公司(“借款人”)的被授权人证明,根据借款人与银行之间的贷款协议(“协议”)的条款和条件:

 

(1) Borrower is in complete compliance for the period ending                            with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.

(1)在截至[            ]的期限内,借款人完全遵守了所有要求的承诺(下文另行载明的除外);(2)不存在任何违约事 件;(3)协议下的所有陈述和保证在本证明日期均是真实和正确的(下文另行载明的除外),但前提条件是:上述重大方面标准不适用于那些已符合要求或已被实质性修改的陈述或保证;明示提及某个具体日期的陈述和保证,在 该日期做出时在所有重大方面是真实正确的;(4)借款人及其每一个子公司均及时进行了纳税申报和报告;借款人及时支付了所有海内外税款、征税、保证金和供款;(5)不存在借款人先前未书面通知银行的、就未付员工工资或福利针对借款人或其子公司设定的留置或提出的索赔。

 

Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

请查收附件中的有关上述证明的材料。下文签名者证明:该等材料系按一贯适用的 GAAP 从一个期限到下一期限 所准备的(根据所附信函或脚注另行提供解释的除外)。下文中的签名者确认,借款人申请提款在任何时间或日期 均未违反协议的任何条款,合规性确认,并非仅确认在本证明交付日期合规。本证明中未定义的术语的含义与协 议中所给定义相同。

 

Please indicate compliance status by circling Yes/No under “Complies” column.

请在下表内的 符合 栏内圈明合规状态。

  

Reporting Covenant 报告约定   Required 要求   Complies
合规与否
         
Monthly Company prepared consolidated financial statements
公司准备的合并月度财务报表
 
 
Monthly within 30 days of each month end
于每月结束之后 30 天内
 
 
Yes/No
是/否
         
Account Receivable and Payable Aging Report
应收账款账龄报告及应付账款账龄报告
 
 
Monthly within 30 days of each month end
于每月结束之后 30 天内
 
 
Yes/No
是/否
         
Compliance Certificate
合规证书
 
 
Monthly within 30 days of each month end
于每月结束之后 30 天内
 
 
Yes/No
是/否

  

  7  

 

 

第二部分 正文 /Part II Context 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

Reporting Covenant 报告约定   Required 要求   Complies
合规与否
         
Borrowing Base Certificate
借款基础证书
  Monthly within 30 days of each month end
于每月结束之后 30 天内
    Yes/No
是/否
         
Annual CPA-Audited financial statements
经注册会计师审计的年度财务报表
  Annually within 270 days from year end
于每一年度结束之后 270 天内
  Yes/No
是/否
         
Board-approved consolidated financial projections
经公司董事会通过的合并的年度财务运营计划
  Within 10 days from Board approval but no later than 60 days from year end
在每一年度董事会通过后 10 天内提供经公司董事会通 过的合并的财务运营计划,但最迟不得晚于每一年度结 束之后 60 天
   Yes/No
是/否
         
AR Field Exam
应收账款年审
  Conducted annually and the next AR Field Exam should be completed before September 30 th , 2017
每年对公司的应收账款进行审计,下一次应收账款年审 应于 2017 年 09 月 30 日之前完成
  Yes/No
是/否

 

Financial Covenant 财务约定   Required 要求  

Actual

实际

 

Complies

合规与否

             

本协议项下客户应确认在合并报表层面上需维持:

The Client under this Agreement shall confirm to maintain on a consolidated basis:

 

每月最小调整后速动比率:

Minimum Monthly Adjusted Quick Ratio (AQR) of:

  1.25:1.00      

Yes/No

是/否

             

调整后速动比率定义为:(非绑定现金 + 应收账款净额) 除以 (流动负债 – 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities – deferred revenue).

 

每季度最小净利润:

Minimum Quarterly Net Income:

 

2018 年 2 季度 Q2’2018:

(USD500,000.00)

     

Yes/No

是/否

             
   

2018 年 3 季度 Q3’2018:

USD500,000.00

       
             
   

2018 年 4 季度 Q4’2018:

USD500,000.00

       
             
    未免疑义,以上以“()”标记的数字代        
    表负数。        
   

For the avoidance of doubt, the above number marked in column represents

negative.

       
新一轮融资:   在 2019 年 01 月 31 日之前收到净现金       Yes/No
New Equity Round:   流入不少于美元 20,000,000.00 的新一       是/否
    轮股权融资款或债权融资款。        
    To receive no less than        
    USD20,000,000.00 net cash proceeds        
   

of equity proceeds or debt proceeds

by January 31 st , 2019.

       

 

注:2019 年度的财务约束指标将在收到并审核 2019 年董事会批准的(最新)预算后重新设定。

Note: Financial covenants for 2019 will be revisited upon receipt and review of 2019 board-approved (updated) plan.

 

  8  

 

 

第二部分 正文 /Part II Context 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

The following Intellectual Property was registered (or a registration application submitted) after the Effective Date (if no registrations, state “None”)

请列明已登记(或已提交登记申请)的知识产权信息:(若无此等事项,请注明“无”)

 

 

 

 

 

Other Matters

其他事项

 

Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? (☐Yes        ☐No)

借款人的资本构成表(capitalization table)以及借款人或其任何子公司的运营文件是否发生了修改或变动? (☐是        ☐否)

 

If yes, provide copies of any such amendments or changes with this Compliance Certificate.

若选择“是”,请随本证书一并提供此等修改文件之副本。

 

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

以下是关于上述证明的除外事项:(若无除外事项,请注明“无除外事项可写”)

 

 

 

 

 

 

 

COMPANY   BANK USE ONLY
     
播思微系统香港有限公司   Received by:  
BORQS Hong Kong Limited     AUTHORIZED SIGNER
     
By:     Date:    
           
Name:     Verified:    
        AUTHORIZED SIGNER
         
Title:     Date:  
           
    Compliance Status:    Yes   No
     
签署人:     仅银行填写:
       
姓名:     接收人:    
职务:       授权签字人
    日期:    
         
    审核人:    
      授权签字人
       
    日期:    
    是否符合:是 否

 

引用结束 /UNQUOTE

 

  9  

 

 

第二部分 正文 /Part II Context 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

2.   客户在此确认,至本变更协议签署之日没有发生任何违约事件或潜在违约事件及所有声明保证在任何事实方面仍然保持真实、准确。客户在融资文件项下所述的每一项声明和保证,在本变更协议和担保文件(如有) 签署后均将继续保持真实和准确并被全面遵守。

The Client hereby confirms that, at and until the execution date of the Amendment Agreement, no Events of Default or potential Events of Default are existing or continuing, and all representations and warranties made by any Client remain true and accurate in all material respects. Each representation and warranty made by the Client under the Finance Documents will continue to remain true, accurate and be in complete compliance after the execution of the Amendment Agreement and security documents (if any).

 

3.   本变更协议由封面、第一部分(签署页)和第二部分(正文)组成,并构成不可分割的完整整体。除非另有明确说明,本变更协议中定义和术语与授信协议中具有相同含义。

This Amendment Agreement consists of the cover page, part I (execution page) and part II (context), which shall constitute an integrity. Unless otherwise stated hereunder, terms and definitions defined herein shall bear the same meaning ascribed to it in the Finance Documents.

 

4.   本变更协议是融资文件不可分割的组成部分。本变更协议与融资文件约定不一致的,以本变更协议为准,融资文件其余条款保持不变,本变更协议未涉及事项仍应依照融资文件的约定执行。

This Amendment Agreement shall constitute an integral part of the Finance Documents. In the event of any discrepancy between this Amendment Agreement and the Finance Documents, this Amendment Agreement shall prevail without prejudice to any other provisions of the Finance Documents. Matters not covered in this Amendment Agreement shall still be dealt with by the parties in compliance with the provisions of the Finance Documents.

 

5.   所有与本变更协议有关的费用,无论是法律费用或其它费用,包括(但不限于)就本协议各份正本应付的中国法下的印花税以及与本变更协议的准备、谈判、签署和执行相关的律师费,均应由客户支付。

Any and all costs in relation to this Amendment Agreement including but not limited to legal fee and other cost, such as stamp duty charged under the PRC law for each original copy of this agreement and any attorney fee payable in relation to the planning, negotiation, execution and implementation of this Amendment Agreement, shall be borne by the Client.

 

6.   本协议自融资行与客户有权签字人签字并加盖公章后生效。

This Amendment Agreement shall come into force after it has been duly signed by the authorized person(s) of the Financing Bank and the Client(s) and sealed with common chops by both/all parties.

 

7.  本协议以中文和英文书就,若两种语言版本的内容发生任何不一致,则应以中文为准。

This Amendment Agreement is written in both Chinese and English. In the event of any inconsistency between these two versions, the Chinese version shall prevail.

 

8.  本变更协议一式 贰 份,所有签署方各执 壹 份,均具有同等法律效力。

This Amendment Agreement may be executed in TWO separate counterparts, each of which when so executed shall have equal legal effect. Each party may have one counterpart.

 

-以下无正文-

-END OF AMENDMENT AGREEMENT-

 

  10  

 

 

第二部分 正文 /Part II Context 变更协议编号 /Agreement Ref. No.: CL201508001-003

 

担保人 ( 如有 ) 确认:

Confirmed by the Security Provider(s)(if any):

 

我们已充分阅读和了解原融资文件以及本变更协议内容,且所有相关必要说明已有融资行提供;我们在此确认同意和接受上述变更,并愿就本次变更后的客户债务继续承担担保责任。

We have read and understood fully the contents of the previous Finance Documents and Amendment Agreement, and all related and necessary explanation have been given by the Financing Bank; we hereby confirm that we agree and accept the amendment stipulated above, and would continue to assume the security liabilities for the debts of the Clients after such amendments.

 

 

 

 

  11  

Exhibit 10.43

 

 

 

 

 

 

 

 

变更协议 

Amendment Agreement

 

 

  

 

 

 

( 修订函编号 /Ref. No.: CL201606008-003)

 

 

 

隶属于 /Belonging to: 授信协议 /Facility Agreement

 

( 编号 /Ref. No.: CL201606008)

 

 

 

 

 

 

 

 

 

第一部分 签署页 /Part I Execution Page

变更协议编号 /Agreement Ref. No.: CL201606008-003

 

签署页

Execution Page

 

融资行

Financing Bank

 

客户

Client

     

浦发硅谷银行有限公司

SPD SILICON VALLEY BANK CO., LTD.

 

播思通讯技术(北京)有限公司

BORQS Beijing Ltd.

     

住所地

with address at

 

住所地

with address at

     

上海市杨浦区大连路 588 号宝地广场 B 21

200082

 

北京市海淀区八里庄路 62 号院 1 号楼 8

943

     

21/F, Block B, Baoland Plaza,

No. 588, Dalian Road, Shanghai 200082

  Room 943, 8/F, Building No. 1, No. 62,
Balizhuang Road, Haidian District, Beijing
     

以上当事人在本协议中简称为 融资行

hereinafter referred to as “Financing Bank”

 

以上当事人在本协议中简称为 客户

hereinafter referred to as “Client”

 

上述各方当事人在此同意并接受本变更协议中所述之全部条款;客户特此确认,
就本协议项下有关条件和条款,融资行已向客户作出充分的说明和解释,

客户已理解、同意、承认该等条款。

The parties above hereby agree to and accept all terms and conditions set forth in this Amendment Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Financing Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Client completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

 

 

  1  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

  

变更协议条款

TERMS AND CONDITIONS

 

鉴 于 :
Whereas,

 

浦发硅谷银行有限公司(作为融资行)与客户(作为借款人)于 2016 07 20 日签署了《流动资金贷款类授

信协议》(协议编号: CL201606008 ),于 2017 07 20 日、 2017 08 31 日分别签署了《变更协议》(协议编号: CL201606008-001 CL201606008-002 ,该等《流动资金贷款类授信协议》和《变更协议》以下合称

“《授信协议》”),以及其他相关文件(连同前述文件的任何变更、修订、补充,下称“融资文件”)。根据融资文件,融资行同意向客户提供金额为人民币贰仟伍佰万元整之银行授信(下称“授信”)。现经各方协商一致,达成如下增补及变更条款(“本变更协议”),以资协议各方共同恪守:

SPD SILICON VALLEY BANK CO., LTD. (as Financing Bank) and the Client (as borrower) have entered into the Facility Agreement for Working Capital Loans dated July 20 th , 2016 (Ref. No.: CL201606008), an Amendment Agreement dated July 20 th , 2017 (Ref. No.: CL201606008-001), an Amendment Agreement dated August 31 st , 2017 (Ref. No.: CL201606008-002) (such Facility Agreement for Working Capital Loans and Amendment Agreements shall be hereinafter collectively referred to as the “ Facility Agreement ”) and other related documents (together with any modification, amendment, supplement of/to the foregoing, hereinafter as the “ Finance Documents ”). Pursuant to the Finance Documents, the Financing Bank agrees to make available to the Client the facility up to RMB25,000,000.00 (hereinafter as the “ Facility ”). Based on the foregoing, the parties hereby further agree to reach the amendment and/or supplementary clause as below (hereinafter as the “ Amendment Agreement ”).

 

1. 各方一致不可撤销地确认本变更协议条款如下:
  The parties hereby irrevocably confirm the following amendment clauses below:

 

(1) 《授信协议》第二部分“特别条款”中对于“额度”中的如下内容:
    The contents of Facility Amount in Part II Special Provision of the Facility Agreement quoted below:

 

引用 /QUOTE

 

额度   授信总额度:   Total Facility Amount :
Facility Amount   人民币 25,000,000.00   RMB 25,000,000.00
    大写金额 : 人民币 贰仟伍佰万元整   In words: RMB TWENTY-FIVE MILLION ONLY
    基准币种:人民币   Base Currency: RMB
    可选币种:不适用   Optional Currency: N/A

 

引用结束 /UNQUOTE

 

  2  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

额度   授信总额度:   Total Facility Amount :
Facility Amount   人民币 18,000,000.00   RMB 18,000,000.00
    大写金额 : 人民币 壹仟捌佰万元整   In words: RMB EIGHTEEN MILLION ONLY
    基准币种:人民币   Base Currency: RMB
    可选币种:不适用   Optional Currency: N/A

 

引用结束 /UNQUOTE

 

(2) 《授信协议》第二部分 特别条款 中对于 额度期限/最终到期日”中的如下内容:
    The contents of Facility Validity Period / Final Maturity Date in Part II Special Provision of the Facility Agreement quoted below:

 

引用 /QUOTE

 

额度期限 / 最终到期日 Facility Validity Period / Final Maturity Date  

最终到期日:

2018 08 31

 

Final Maturity Date:

August 31 st , 2018

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

 

额度期限 / 最终到期日 Facility Validity Period / Final Maturity Date  

最终到期日:

2019 02 28

 

Final Maturity Date:

February 28 th , 2019

 

引用结束 /UNQUOTE

 

(3) 《授信协议》第二部分 特别条款 中对于 关于所有业务品种均应遵循的财务约定”中的如下内容:
    The contents of General Financial Covenants for all product-types in Part II Special Provision of the Facility Agreement quoted below:

 

引用 /QUOTE

 

  3  

 

  

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

 

本协议项下客户应确认在合并报表层面上需维持:

The Client under this Agreement shall confirm to maintain on a consolidated basis:

 

1) 每月最小调整后速动比率: 1.25:1.00
    Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00
     
    调整后速动比率定义为:(非绑定现金 + 应收账款净额) 除以 (流动负债 – 递延收入)。
    AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities deferred revenue).

   

2)

每 季 度 最 低 EBITDA USD750,000.00

Minimum Quarterly EBITDA of: USD750,000.00

     
 

注:该财务约束指标将在收到并审核 2018 年董事会批准的 ( 最新 ) 预算后重新设定。

Note: This financial covenant for 2018 will be adjusted upon receipt and review of 2018 board-approved (updated) plan.

     
   
 

客户应确认 BORQS International Holding Corp (注册号: OI-192127 ,亦作为本协议之

“保证人”)需满足:

  The Client shall confirm that, BORQS International Holding Corp (Registration No. OI-192127, the Guarantor under this agreement) to achieve.
   
  1)

2017 08 31 日之前与 Pacific Special Acquisition Corp 完成合并。

To complete the merger with Pacific Special Acquisition Corp by the end of August 31 st , 2017.

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

本协议项下客户应确认在合并报表层面上需维持:

The Client under this Agreement shall confirm to maintain on a consolidated basis:

 

1) 每月最小调整后速动比率:1.25:1.00
    Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00
     
    调整后速动比率定义为:(非绑定现金 + 应收账款净额) 除以 (流动负债 – 递延收入)。
    AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities – deferred revenue).

 

2) 每季度最小净利润:
    Minimum Quarterly Net Income:
    2018 2 季度 Q2 2018: (USD500,000.00)
    2018 3 季度 Q3 2018: USD500,000.00
    2018 4 季度 Q4 2018: USD500,000.00

 

  4  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

 

    未免疑义,以上以“()”标记的数字代表负数。
    For the avoidance of doubt, the above number marked in column represents negative.

 

3) 新一轮融资:在 2019 01 31 日之前收到净现金流入不少于美元 20,000,000.00
    的新一轮股权融资款或债权融资款。
    New Equity Round: To receive no less than USD20,000,000.00 net cash proceeds of equity proceeds or debt proceeds by January 31 st , 2019.
     
  注:2019 年度的财务约束指标将在收到并审核 2019 年董事会批准的 ( 最新 ) 预算后重新设定。
  Note: Financial covenants for 2019 will be revisited upon receipt and review of 2019 board-approved (updated) plan.

 

引用结束 /UNQUOTE

 

(4) 《授信协议》第二部分 特别条款 中对于 其他”增加如下内容:

The contents of Others in Part II Special Provision of the Facility Agreement will be added below:

 

引用 /QUOTE

 

在发生流动性事件时,客户应向融资行支付一笔按照以下公式计算的成功费:

Upon an occurrence of Liquidity Event, the Client need to pay the Financing Bank a Success Fee in the amount calculated as follows:

 

计算方法为: 0.5 % × 下一轮定向增发的金额。

The amount of Success Fee is calculated as: 0.5% * Total equity raise of next private placement.

 

流动性事件系指:完成下一轮定向增发。

Liquidity Event is defined as finish next private placement.

 

客户应支付的成功费总金额应不低于人民币 230,000.00 元但不超过人民币 300,000.00

元。

The total payment amount of success fee shall be no less than RMB230,000.00 but no more than RMB300,000.00.

 

支付时点:客户应在发生流动性事件时向融资行支付该成功费,但付款日最迟不得晚于本授信协议最终到期日。

Payment Terms: The success fee is payable upon the occurrence of Liquidity Event but the payment date shall be no later than Final Maturity Date of this Facility Agreement.

 

  5  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

 

 

引用结束 /UNQUOTE

 

(5) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中 业务额度”中的如下内容:

 

The contents of “Pooled A/R Loan Limit” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用 /QUOTE

 

业务额度   基准币种   可选币种
Pooled A/R Loan Limit   Base Currency   Optional Currency
    金额/Amount:   币种 1   不适用
    人民币/RMB 25,000,000.00   Currency 1   N/A
    大写/in words:        
    币种 2   不适用
    人民币 贰仟伍佰万元整   Currency 2   N/A
    RMB TWENTY-FIVE MILLION ONLY        
         
        币种 3   不适用
        Currency 3   N/A

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

业务额度   基准币种   可选币种
Pooled A/R Loan Limit   Base Currency   Optional Currency
    金额/Amount:   币种 1   不适用
    人民币/RMB 18,000,000.00   Currency 1   N/A
    大写/in words:        
    币种 2   不适用
    人民币 壹仟捌佰万元整   Currency 2   N/A
    RMB EIGHTEEN MILLION ONLY        
         
        币种 3   不适用
        Currency 3   N/A

 

引用结束 /UNQUOTE

 

(6) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中 可动用期”中的如下内容:

 

The contents of “Availability Period “ of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用 /QUOTE

 

可动用期

Availability Period

 

1 段:人民币 15,000,000.00 的授信可于本变更协议相关文件全部签署后即可提款;  

Tranche 1: RMB15,000,000.00 available upon the execution of loan documents of this Amendment Agreement;

 

   

2 段:人民币 10,000,000.00 的授信可于融资行与 Partners for Growth IV, L.P. 签署令其满意的提高债权从属金额的从属协议后方可提款。

Tranche 2: RMB10,000,000.00 available upon the Financing Bank signing updated satisfactory Subordination Agreement with Partners for Growth IV, L.P. to increase the cap of senior debt.

 

  6  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

可动用期

Availability Period  

 

在本业务额度到期日前均可使用 

Available before the Maturity Date of the Loan Limit of the Specification

 

引用结束 /UNQUOTE

   

(7) 《授信协议》第四部分 业务条款 业务品种:应收账池贷款 业务额度到期日 中的如下内 容:

The contents of “Maturity Date of the Loan Limit” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用 /QUOTE

 

业务额度到期日 

Maturity Date of the Loan Limit

 

2018 08 31  

August 31 st , 2018

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

业务额度到期日

Maturity Date of the Loan Limit

 

2019 02 28  

February 28 th , 2019

  

引用结束 /UNQUOTE

 

(8) 《授信协议》第四部分“业务条款”中“业务品种:应收帐池贷款”中“贷款利率”中的如下内容:

The contents of “Interest Rate” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用 /QUOTE

 

贷款利率 

Interest Rate

 

 

 

 

人民银行基准利率加 1.65%( 年利率 ) 利差 ( 但受限于法律或适用政策之允许 )

the PBOC Base Interest Rate plus a Margin of 1.65% (p.a.) (however subject to the permission of laws and applicable regulatory policies)

 

( 利率以融资行的提款确认或书面确认所载为准 )

(the final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank. 

 

  7  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

引用结束 /UNQUOTE

   

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

贷款利率

Interest Rate

 

 

人民银行基准利率加 3.65%( 年利率 ) 利差 ( 但受限于法律或适用政策之允许 )

the PBOC Base Interest Rate plus a Margin of 3.65% (p.a.) (however subject to the permission of laws and applicable regulatory policies)

( 利率以融资行的提款确认或书面确认所载为准 )

(the final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank.

 

引用结束 /UNQUOTE

 

(9) 《授信协议》第五部分“附件 中“附件三”将在本变更协议生效后调整为以下内容:

The contents of “Schedule 3” in Part V Schedule of the Facility Agreement shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

   

附件三:

Schedule 3

  

合规证书

COMPLIANCE CERTIFICATE

 

  

The Client(s) under this Agreement confirms and undertakes to the Financing Bank that: 本协议中的客户对融资行确认和承诺:

 

a) COMPLIANCE CERTIFICATE(S) would be completed and provided in accordance with the requirements of the Financing Bank during the period of this Agreement;

在本协议期限内,合规证明将根据融资行要求完成并提供;

 

b) any COMPLIANCE CERTIFICATE submitted by the Client(s) shall comply in substance with the format required by the Financing Bank (including the format set forth below or any further version notified by the Financing Bank).

任何客户提交的合规证明将符合融资行要求的格式(包括下述格式和日后融资行修订的格式)

 

  8  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

 

COMPLIANCE CERTIFICATE

 

TO: SPD SILICON VALLEY BANK CO., LTD.   Date:

致:浦发硅谷银行有限公司   日期

  

FROM: BORQS Beijing Ltd.

发件人 : 播思通讯技术(北京)有限公司

 

The undersigned authorized officer of BORQS Beijing Ltd. (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”):

在下文中签字的播思通讯技术(北京)有限公司( 借款人 )的被授权人证明,根据借款人与银行之间的贷款协议

协议 )的条款和条件:

 

(1) Borrower is in complete compliance for the period ending ____________ with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.

(1) 在截至 [ ] 的期限内,借款人完全遵守了所有要求的承诺(下文另行载明的除外); (2) 不存在任何违约事

件; (3) 协议下的所有陈述和保证在本证明日期均是真实和正确的(下文另行载明的除外),但前提条件是:上述重大方面标准不适用于那些已符合要求或已被实质性修改的陈述或保证;明示提及某个具体日期的陈述和保证,在 该日期做出时在所有重大方面是真实正确的; (4) 借款人及其每一个子公司均及时进行了纳税申报和报告;借款人及时支付了所有海内外税款、征税、保证金和供款; (5) 不存在借款人先前未书面通知银行的、就未付员工工资或福利针对借款人或其子公司设定的留置或提出的索赔。

 

Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

请查收附件中的有关上述证明的材料。下文签名者证明:该等材料系按一贯适用的 GAAP 从一个期限到下一期限

所准备的(根据所附信函或脚注另行提供解释的除外)。下文中的签名者确认,借款人申请提款在任何时间或日期均未违反协议的任何条款,合规性确认,并非仅确认在本证明交付日期合规。本证明中未定义的术语的含义与协 议中所给定义相同。

 

Please indicate compliance status by circling Yes/No under “Complies” column.

请在下表内的 符合 栏内圈明合规状态。

 

Reporting Covenant 报告约定   Required 要求   Complies
合规与否
Monthly Company prepared consolidated financial statements 公司准备的合并月度财务报表  

Monthly within 30 days of each month end

于每月结束之后 30 天内

  Yes/No
是/否
Account Report Receivable and Payable Aging  

Monthly within 30 days of each month end

于每月结束之后 30 天内

  Yes/No
是/否  

 

  9  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

 

应收账款账龄报告及应付账款账龄报告        
Compliance Certificate 合规证书  

Monthly within 30 days of each month end

于每月结束之后 30 天内

  Yes/No
是/否  
Borrowing Base Certificate 借款基础证书  

Monthly within 30 days of each month end

于每月结束之后 30 天内

  Yes/No
是/否  
Annual CPA-Audited financial statements 经注册会计师审计的年度财务报表  

Annually within 270 days from year end

于每一年度结束之后 270 天内

  Yes/No
是/否  
Board-approved consolidated financial projections 经公司董事会通过的合并的年度财务运营计划  

Within 10 days from Board approval but no later than 60 days from year end

在每一年度董事会通过后 10 天内提供经公司董事会通

过的合并的财务运营计划,但最迟不得晚于每一年度结

  Yes/No
是/否  
    束之后 60 天    
AR Field Exam   Conducted annually and the next AR Field Exam   Yes/No  
应收账款年审   should be completed before September 30 th , 2017   是/否
    每年对公司的应收账款进行审计,下一次应收账款年审    
    应于 2017 年 09 月 30 日之前完成    

 

Financial Covenant 财务约定   Required 要求  

Actual

实际

  Complies 合规与否  
本协议项下客户应确认在合并报表层面上需维持: The Client under this Agreement shall confirm to maintain on a consolidated basis:            

每月最小调整后速动比率:

Minimum Monthly Adjusted Quick Ratio (AQR) of:

  1.25:1.00       Yes/No 是/否  

调整后速动比率定义为:(非绑定现金 + 应收账款净额) 除以 (流动负债 – 递延收入

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities – deferred revenue).

           

每季度最小净利润:

Minimum Quarterly Net Income:

 

2018 年 2 季度 Q2’2018:

(USD500,000.00)

      Yes/No 是/否  
    2018 年 3 季度 Q3’2018: USD500,000.00        
    2018 年 4 季度 Q4’2018: USD500,000.00        
    未免疑义,以上以“()”标记的数字代        
    表负数。        
   

For the avoidance of doubt, the above

number marked in column represents negative.

       
新一轮融资:   在 2019 年 01 月 31 日之前收到净现金       Yes/No  
New Equity Round:   流入不少于美元 20,000,000.00 的新一       是/否
    轮股权融资款或债权融资款。        
    Toreceive no less than        
    USD20,000,000.00 net cash proceeds        
   

of equity proceeds or debt proceeds

by January 31 st , 2019.

       

 

 

  10  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

 

注: 2019 年度的财务约束指标将在收到并审核 2019 年董事会批准的 ( 最新 ) 预算后重新设定。

Note: Financial covenants for 2019 will be revisited upon receipt and review of 2019 board-approved (updated) plan.

 

The following Intellectual Property was registered (or a registration application submitted) after the Effective Date (if no registrations, state “None”) 

请列明已登记(或已提交登记申请)的知识产权信息:(若无此等事项,请注明

 

 

 

 

 

 

 

Other Matters

其他事项

 

Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? □Yes □No

借款人的资本构成表( capitalization table )以及借款人或其任何子公司的运营文件是否发生了修改或变动?

否)  

If yes, provide copies of any such amendments or changes with this Compliance Certificate.

若选择 ,请随本证书一并提供此等修改文件之副本。

 

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”) 

以下是关于上述证明的除外事项:(若无除外事项,请注明 无除外事项可写

 

 

 

 

 

 

 

 

 

 

COMPANY

  BANK USE ONLY
播思通讯技术(北京)有限公司    

BORQS Beijing Ltd.

 

Received by:                                        

 

AUTHORIZED SIGNER 

By:                                            

Date:                                          

     
Name:                                            

Verified:                                        

   

AUTHORIZED SIGNER

Title:                                         

 

Date:                                        

     
    Compliance Status:     Yes     No
     
签署人:                          

仅银行填写: 

     
姓名:                          

接收人:                                        

职务:                      

 

                        授权签字人

     
   

日期:                                          

     
   

审核人:                                    

   

                        授权签字人

     
   

日期:                                         

    是否符合:是 否

 

  11  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

 

  引用结束 /UNQUOTE
2. 客户在此确认,至本变更协议签署之日没有发生任何违约事件或潜在违约事件及所有声明保证在任何事实方面仍然保持真实、准确。客户在融资文件项下所述的每一项声明和保证,在本变更协议和担保文件(如有) 签署后均将继续保持真实和准确并被全面遵守。 The Client hereby confirms that, at and until the execution date of the Amendment Agreement, no Events of Default or potential Events of Default are existing or continuing, and all representations and warranties made by any Client remain true and accurate in all material respects. Each representation and warranty made by the Client under the Finance Documents will continue to remain true, accurate and be in complete compliance after the execution of the Amendment Agreement and security documents (if any).
   
3.

本变更协议由封面、第一部分(签署页)和第二部分(正文)组成,并构成不可分割的完整整体。除非另有明确说明,本变更协议中定义和术语与授信协议中具有相同含义。

This Amendment Agreement consists of the cover page, part I (execution page) and part II (context), which shall constitute an integrity. Unless otherwise stated hereunder, terms and definitions defined herein shall bear the same meaning ascribed to it in the Finance Documents.

   
4.

本变更协议是融资文件不可分割的组成部分。本变更协议与融资文件约定不一致的,以本变更协议为准,融资文件其余条款保持不变,本变更协议未涉及事项仍应依照融资文件的约定执行。

This Amendment Agreement shall constitute an integral part of the Finance Documents. In the event of any discrepancy between this Amendment Agreement and the Finance Documents, this Amendment Agreement shall prevail without prejudice to any other provisions of the Finance Documents. Matters not covered in this Amendment Agreement shall still be dealt with by the parties in compliance with the provisions of the Finance Documents.

   
5.

所有与本变更协议有关的费用,无论是法律费用或其它费用,包括(但不限于)就本协议各份正本应付的中国法下的印花税以及与本变更协议的准备、谈判、签署和执行相关的律师费,均应由客户支付。

Any and all costs in relation to this Amendment Agreement including but not limited to legal fee and other cost, such as stamp duty charged under the PRC law for each original copy of this agreement and any attorney fee payable in relation to the planning, negotiation, execution and implementation of this Amendment Agreement, shall be borne by the Client.

   
6.

本协议自融资行与客户有权签字人签字并加盖公章后生效。

This Amendment Agreement shall come into force after it has been duly signed by the authorized person(s) of the Financing Bank and the Client(s) and sealed with common chops by both/all parties.

   
7.

本协议以中文和英文书就,若两种语言版本的内容发生任何不一致,则应以中文为准。

This Amendment Agreement is written in both Chinese and English. In the event of any inconsistency between these two versions, the Chinese version shall prevail.

   
8.

本变更协议一式 贰 份,所有签署方各执 壹 份,均具有同等法律效力。

This Amendment Agreement may be executed in TWO separate counterparts, each of which when so executed shall have equal legal effect. Each party may have one counterpart.

 

-以下无正文-

-END OF AMENDMENT AGREEMENT-

 

  12  

 

 

第二部分 正文 /Part II Context

变更协议编号 /Agreement Ref. No.: CL201606008-003

 

担保人 ( 如有 ) 确认:

Confirmed by the Security Provider(s)(if any):

 

我们已充分阅读和了解原融资文件以及本变更协议内容,且所有相关必要说明已有融资行提供;我们在此确认同意和接受上述变更,并愿就本次变更后的客户债务继续承担担保责任。

We have read and understood fully the contents of the previous Finance Documents and Amendment Agreement, and all related and necessary explanation have been given by the Financing Bank; we hereby confirm that we agree and accept the amendment stipulated above, and would continue to assume the security liabilities for the debts of the Clients after such amendments.

 

 

 

 

 

13

 

Exhibit 10.44

 

 

 

 

 

 

 

 

 

 

 

保证协议(最高额)

Guarantee Agreement (Maximum Amount)

 

 

公司保证人适用

For Corporate Guarantor

 

(文件编号/Ref No.: CL201508001-GA-3-001)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

第一部分 签署页 /Part I Execution Page 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 

签署页

Execution Page

 

银行   保证人
Bank   Guarantor
     
浦发硅谷银行有限公司    
SPD SILICON VALLEY BANK CO., LTD.   Borqs Technology, Inc.
     
住所地   住所地
with address at   with address at
     
上海市杨浦区大连路 588 号宝地广场 B 座 21 楼    
200082    
     
21/F, Block B, Baoland Plaza,
No. 588, Dalian Road, Shanghai 200082
  Nemours Chambers, Road Town, Tortola,
British Virgin Islands
     
以上当事人在本协议中简称为 银行   以上当事人在本协议中简称为 保证人
hereinafter referred to as “Bank”   hereinafter referred to as “Guarantor”

 

上述各方当事人在此同意并接受本协议中所述之全部条款;保证人特此确认,
就本协议项下有关条件和条款,银行已向保证人作出充分的说明和解释, 

保证人已理解、同意、承认该等条款。

 

The parties above hereby agree to and accept all terms and conditions set forth in this Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Guarantor completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 

正文

Content

 

为确保债务人 ( 定义见下文 ) 全面、及时履行其在主债权债务合同

( 定义见下文 ) 项下各项义务,保障银行债权的实现,本协议项下保证人同意自愿按本协议承担担保责任。

 

为实现上述目的,保证人和银行经协商一致并达成如下条款, 以资各方共同恪守。

 

一、特别条款

 

1 . 保证方式

 

(1) 保证人在本协议项下承担的责任为连带责任保证。

 

(2) 保证人在此无条件且不可撤销地向银行保证,如果债务人未能在到期时支付主合同项下的任何款项,无论银行对主合同项下的债权是否拥有其他担保权利 ( 包括但不限于保证、抵押、质押等担保方式 ) ,银行均有权先要求本协议项下保证人在本协议约定的保证范围内承担保证责任,而无须先要求其他担保人履行担保责任。

 

2 . 保证期间

 

保证期间为:债务人在主债权债务合同下的债务履行期届满之日起二年。

 

为免疑义,本协议所称“到期”、“届满”或类似措辞均包括债权人宣布主债权提前到期的情形。债权人宣布全部或部分主债权提前到期的,以其宣布的提前到期日为该等主债权债务履行期届满日,债权确定期间同时到期。

 

 

For the security of the well performance of the obligations under the Principal Contract (as defined hereunder) by the Debtor (as defined hereunder) and ensuring the recovery of the Bank’s right of credit, the Guarantor hereof agrees to assume the guarantee liability as agreed herein.

 

Therefore, a guarantee agreement (“the Agreement” or “Guarantee”) is reached by and between the Guarantor and the Bank hereof as follows.

 

I SPECIAL PROVISIONS

 

1. Guarantee Obligations

 

(1) The obligations of the Guarantor hereunder are joint and several.

 

(2) The Guarantor hereby irrevocably and unconditionally guarantees to the Bank the due and punctual observance and performance of the payment obligations under the Principal Contract by the Borrower, provided that the Banks has other security rights (by way of, including but not limited to guarantee, mortgage, pledge, etc.), the Bank shall be entitled to first enforce its rights hereunder against the Guarantor within the Secured Extent, and shall not be required to take any steps to first enforce its creditor’s rights against any other security provider.

 

2. Period of Guarantee

 

The period of guarantee shall be: two years after the expiration of the Period for Debt Performance of the Debtor under the Principal Contract.

 

For avoidance of doubt, the “expiration”, “maturity” or such similar wording shall be interpreted as including the circumstance that the creditor declares the early-maturity of any Principal amount, in whole or in part. In the event of the foregoing, the Period for Debt Performance shall be advanced to the date that such declaration of early-maturity is made, and the Period for Claims’ Determination shall mature correspondingly.

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 

3. 主债权债务合同

 

本协议所担保的主债权债务合同为:债务人与本协议银行在债权确定期间内签署或履行的一系列债权债务文件,包括但不限于双方于 2015 08 31 日签署的《授信协议》 ( 编号 :

CL201508001) 2016 07 20 日签署的《变更协议》(编

号: CL201508001-001 ), 2017 08 31 日签署的《变更协

议》(编号: CL201508001-002 )以及 2018 日签署的《变更协议》(编号: CL201508001-003 )。

 

4 . 保证所担保的主债权 / 被担保主债权

 

本协议项下被担保的主债权为:银行在债权确定期间内,向债务人连续提供的一笔或多笔融资余额。

 

5. 债权确定期间

 

(1) 本协议所指债权确定期间为:自 2015 08 31 日至 2019

 

08 27 日止。

 

(2) 为免疑义,前述有关债权,包括以下情形:

 

(a) 任何债权债务文件,只要债务人与银行系在债权确定期间内签署,系视为符合本协议担保要求,该文件项下所有债务均纳入本协议项下最高额保证的担保;及 /

 

(b) 债务人与银行虽未签署有关债权债务文件,但有证据证明其在债权确定期间内实际发生有此等债权的情形。

 

 

3. Principal Contract

 

The Principal Contract hereunder means: a series of documents of claims and liabilities executed or performed between the Debtor and the Bank hereunder within the stipulated Period for Claims’ Determination, including but not limited to Facility Agreement (Agreement No. CL201508001) dated Aug. 31 st , 2015, Amendment Agreement (Agreement No. CL201508001-001) dated Jul. 20 th , 2016, Amendment Agreement (Agreement No. CL201508001-002) dated Aug. 31 st 2017 and Amendment Agreement (Agreement No. CL201508001-003) dated (Month) (Day), 2018.

 

4. Principal Amount secured by the Guarantee

 

The Principal Amount secured by the Guarantee means: the balance of one or several finances, provided by the Bank to the Debtor within the Period for Claims’ Determination specified hereunder.

 

5. Period for Claims’ Determination

 

(1) The Period for Claims’ Determination hereunder refers to: from Aug. (Month) 31 st (Day), 2015 to Aug. (Month) 27 th (Day), 2019.

 

(2) For the avoidance of doubt, the wording of “Claim” in the preceding paragraph, includes the circumstances set forth below:

 

(a) Any document in relation to the creditor’s rights or the debts, if only signed and/or sealed by the Debtor and the Bank within the Period for Claims’ Determination, would be deemed complying with the requirements of this Agreement, and all debts arising therefrom would be secured by the maximum amount guarantee hereunder; and/or

 

(b) Although no written documents in relation to the creditor’s rights or the debts is signed and/or sealed between the Debtor and the Bank, some evidence exists proving the occurrence of such debts within the Period for Claims’ Determination.

 

  3  

 

 

第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 

(3) 为免疑义,对于前款 (a) 项所述之债权债务文件项下的具体债务,即使其实际发生的时间晚于债权确定期间届满日 ( 包括但不限于:有关贷款或贷款额度系在债权确定期间届满后方始提用;有关保函、信用证等表外额度在债权确定期间内提用,银行对外开具了付款承诺性文件,但在债权确定期间届满后发生银行对外垫付的;或有关保函、信用证等表外额度在债权确定期间届满后方始提用对外开具承诺性文件等 ) ,该等债务同样受本协议项下最高额保证的担保。

 

(4) 为免疑义,对于前述第 (2) (a)(b) 项所述情形下的债务,即使系属在债权确定期间届满后产生的部分 ( 例如债权确定期间届满后新产生的利息、罚息或其他费用等 ) ,该等债务均同样受本协议项下最高额保证的担保。

 

(5) 关于在先债务的约定 ( 如适用,请在方框内打钩选择;为免疑义,请务必确保中英文本中本选项的勾选状态保持一致 )

 

银行与保证人特别约定,银行与债务人在本协议确定之债权确定期间之前存在的授信或融资协议项下的债务 ( 如有 ) , 也一并纳入本协议项下最高额保证的担保。

 

 

(3) For the avoidance of doubt, in respect of the debts under the document in relation to the creditor’s rights or the debts stated in item (a) of the preceding paragraph, even if the actual debt occurs practically after the expiry date of the Period for Claims’ Determination, it would also be secured by the maximum amount guarantee hereunder. The aforesaid debts occurred after the expiration date of the Period for Claims’ Determination includes, but not limited to, the circumstance as follows: any loan or credit line of loan is actually requested or drawn down after the expiration date of the Period for Claims’ Determination; any facility for purpose such as the issuance of the guarantee or the letter of credit is requested and utilized within the Period for Claims’ Determination and the bank issues the formal documents with commitment obligation, while the actual payment or advance under such documents occur after the expiration of the Period for Claims’ Determination; or, any facility for purpose such as the issuance of the guarantee or the letter of credit is requested for utilized after the expiration of the Period for Claims’ Determination.

 

(4) For the avoidance of doubt, with respect to any debt under the circumstances stated in both item (a) and (b) of the preceding paragraph (2), even for the part of the debts that occur after the expiration of the Period for Claims’ Determination (e.g. the interest, penalty interest and other fees of an existing debt accrued after the expiration of the Period for Claims’ Determination), such part of the debts would also be secured by the maximum amount guarantee hereunder.

 

(5) Special stipulations on the preceding debts (please check the appropriate box if it’s agreed by both parties; for the avoidance of doubt, please ensure that the selected item is consistent between English and Chinese version ).

 

It is specially agreed between the Guarantor and the Bank that, all the existing and outstanding debts (if any) under any facility or loan agreement(s) which is entered into by both the Debtor and the Bank prior to the Period for Claims’ Determination, would also be secured by the maximum amount guarantee hereunder.

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 
6. 最高债权限额

 

本协议项下保证人责任的最高债权限额为 USD7,200,000.00 元整 ( 大写:美元柒佰贰拾万元整 ) 或等值其他币种。

 

7. 债务人

 

本协议项下所称债务人为:即播思微系统香港有限公司。

 

二、一般条款

 

1. 担保范围 本协议担保范围包括因主债权债务合同而产生的融资本金、利息、罚息、需补足的保证金、复利、违约金、赔偿金、评估费、公证费、手续费、实现债权的费用 ( 包括但不限于诉讼费用、财产保全费、差旅费、拍卖费、律师费用、执行费用等 ) 、因保证人在本协议下违约而给银行造成的损失和债务人在主债权债务合同项下的其它所有应付费用。

 

2. 担保权益之选择 若因债务人发生主债权债务合同项下的违约和 / 或保证人发生本协议项下违约,而造成银行依本协议约定行使担保权益时,若被担保的主债权既有物的担保又有人的担保的,银行可以先就相关担保文件 ( 包括本协议 ) 项下物的担保实现债权,也可以根据相关担保文件的规定先要求实现人的保证责任。保证人同意,在任何情况下, 银行未行使或未及时行使其与债务人在其他任何文件项下的任何权利,包括但不限于债权、担保物权、违约救济权, 均不得被视为银行怠于或放弃行使权利,亦不会影响其充分行使本协议项下的权利。

 

 

6. Maximum Limit of Claiming

 

The Maximum Limit of Claiming to the extent that the Guarantor shall assume as a security liability under this Agreement shall be: USD7,200,000.00 (SAY: USD SEVEN MILLION, TWO HUNDRED THOUSAND ONLY) or its

equivalents in other currency.

 

7. The Debtor

 

The Debtor hereunder, in terms of this Agreement, refers to BORQS Hong Kong Limited.

 

II GENERAL PROVISIONS

 

1. Secured Extent. The Secured Extent of this Guarantee hereunder covers the following items resulting from Principal Contract: the Principal Amount hereof, interest, penalty interest, required cash deposit, compound interest, penalty fine, damage compensation, assessment fees, notarization fees, commission, expenses for realization of the Bank’s rights (including but not limited to litigation fees, property preservation fees, travel fees, auction fees, legal services fees and execution fees), the loss and damage resulting from the defaults of the Guarantor and any other expenses payable by the Debtor under Principal Contract.

 

2. Choice of Security Interests. When the Bank intends to exercise the security interests due to any default of the Debtor under Principal Contract and/or that of the Guarantor hereunder, if the Principal Amount secured hereunder is secured by both property security and non-property guarantee, the Bank shall, at its full discretion, choose the security interest to be first claimed; namely, it may either recover the debts with the property security thereunder (including this Agreement) first, or require the guarantor to assume guaranteed liability thereunder first. The Guarantor agrees that in any case, the Bank’s failure to promptly exercise or Bank’s delay in exercising any of its right under the other agreements to which the Debtor is a party, such rights including but not limited to right of claiming, right of security interest, right of relief under breach of contract, shall not be deemed as the Bank’s intention to forego such rights to exercise or as a waiver thereof, and shall not preclude the exercise of any right hereunder.

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 

3. 保证人的陈述与保证 保证人向银行作出如下陈述与保证 , 并确认银行系依赖于该等陈述与保证而签署和履行本协议:

 

(1) 保证人系依据其当地法律成立并有效存续之法人。

 

(2) 保证人根据中国法律有权签署本协议,以及行使其在本协议项下的权利及履行其在本协议项下的义务,并已完成签署本协议及履行其在本协议项下的义务所需的一切授权及 / 或批准。

 

(3) 本协议的签署和履行不违反保证人所应遵守的法律、法规、规章、判决、裁决,也不与保证人的章程或其签署的任何合同、协议或承担的任何其他义务相抵触。

 

(4) 本协议各条款均是保证人的真实意思表示,对保证人具有法律约束力。

 

(5) 保证人保证其向银行出具的所有财务报表是按照其适用的会计准则编制的,真实、公正地表明了保证人的财务状况,并且本协议所涉及的全部资料、文件均是真实、有效、准确、完整而无任何隐瞒的。

 

(6) 保证人保证完成应由其作出的为本协议的有效并能合法履行所需的备案、记录或登记,并支付所有税项。

 

(7) 保证人保证本协议履行期间不存在任何由法院或行政部门或任何相关方提起或将提起可能会对保证人的业务或财务状况造成重大不利影响的行动或任何法律程序的情况,包 括但不限于破产、清算等。

 

 

3. Representations and warranties. The Guarantor represents and warrants to the Bank as follows; the Guarantor confirms its understanding that the performance of any obligation hereunder by the Bank is totally based on such Representations and Warranties.

 

(1) The Guarantor guarantees it is a legal person duly incorporated and validly existing under the laws of its jurisdiction of incorporation.

 

(2) The Guarantor, according to PRC laws, has full power to enter into this Agreement and exercise/perform rights and obligations hereunder, and has all necessary authorization and ratification in respect of the execution of this Agreement and the performance of the obligations hereunder.

 

(3) The execution of this Agreement will neither constitute any breach of the laws, regulations, rules, judicial decisions, and awards that the Guarantor shall abide by, nor conflict with its articles of association, any contracts/agreements it signed and any other obligations assumed by it.

 

(4) All the provisions hereunder are the expression of true intention and interest made by the Guarantor, and shall be legally binding thereupon.

 

(5) All the financial statements provided by the Guarantor to the Bank are prepared in accordance with the general accounting standards, which indicate the financial status of the Guarantor truly and fairly; all the materials and documents in relation to this Agreement are truthful, effective, accurate, integral without any hidden facts purposely undisclosed to Bank..

 

(6) The Guarantor guarantees it shall duly complete all the formalities of filing, recording or registration that it shall assume to ensure the validity of this Agreement and its performance; it shall also bear all the taxes thereof.

 

(7) The Guarantor guarantees no any action or legal procedure is (or is to be) brought forward by any court, administration authorities or other concerned party, which may induce material adverse effects upon its business or financial status, including but not limited to the bankruptcy and liquidation.

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 

4. 约定事项

 

保证人向银行承诺,并同意在本协议有效期间内,除非银行事先书面同意,保证人应:

 

(1) 应向银行提供:

 

(a) 一经获得,但不迟于保证人每一会计年度结束后 180 天之日,银行可接受的一国际公认的独立的会计师事务所或者在中国注册的注册会计师出具的经审计和核实的该年度的财务报表的副本 ( 包括损益表和资产负债表 )

 

(b) 一经获得,但不迟于保证人每半个会计年度结束后 90 天之日,在经审计的财务报表的基础上编制的中期财务报表副本 ( 包括损益表和资产负债表 ) 以及由保证人财务负责人签署的证书,以证明该等财务报表在所有实质性方面是真实的,并清楚地反映了保证人在该等半年内的经营结果和财务状况;

 

(c) 一经请求,银行不时合理要求的有关保证人的财务信息或其他信息;

 

(2) 应妥善保存与其经营有关的记录和会计账簿,允许银行和 / 或由银行指定的任何专业顾问在任何合理时间检查保证人的该等记录和会计账簿;

 

(3) 一经发生任何诉讼、仲裁或行政诉讼程序,应立即通知银行;

 

 

4. Covenants.

 

The Guarantor undertakes and agrees with the Bank throughout the continuance of this Guarantee that the Guarantor will, unless the Bank otherwise agrees in writing:

 

(1) supply to the Bank:

 

(a) as soon as they are available, but in any event within one hundred and eighty (180) days after the end of each financial year of the Guarantor copies of its financial statements in respect of such financial year (including a profit and loss account and balance sheet) audited by an internationally recognized firm of independent accountants or a certified public accountant registered in the PRC acceptable to the Bank;

 

(b) as soon as they are available, but in any event within ninety (90) days after the end of each half of each financial year of the Guarantor, copies of its interim financial statements (including a profit and loss account and balance sheet) prepared on a basis consistent with the audited financial statements of the Guarantor together with a certificate signed by the principal financial officer of the Guarantor to the effect that such financial statements are true in all material respects and present fairly the financial position of the Guarantor as at the end of, and the results of its operations for, such half-year period;

 

(c) promptly on request, such additional financial or other information relating to the Guarantor as the Bank may from time to time reasonably request;

 

(2) keep proper records and books of account in respect of its business and permit the Bank and/or any professional consultants appointed by the Bank at all reasonable times to inspect and examine the records and account books of the Guarantor;

 

(3) promptly inform the Bank of any litigation, arbitration or administrative proceeding;

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 

(4) 应维持其公司法人地位合法有效,应适当并有效地开展其业务,应遵守所有适用于其的法律、法规、授权、协议和义务,并应缴纳所有应缴税款;

 

(5) 应确保未经银行事先书面同意,保证人的股权或所有权或控制权 ( 直接或间接 ) 不发生变化;

 

(6) 应确保未经银行事先书面同意,不对保证人的章程做出任何修改或补充;

 

(7) 除非法律另有规定,应确保其在本协议项下的义务在任何时候与其所有其他无担保债务处于至少相同的清偿顺序;

 

(8) 应确保未经银行事先书面同意,不得与任何其他实体合并或兼并或采取任何措施进行分立、歇业、整顿、清算、破产或解散;

 

(9) 应确保未经银行事先书面同意,不得在其全部或任何资产或收益上设定或允许存在以任何人为受益人 ( 银行除外 ) 的任何担保;

 

(10) 未经银行事先书面同意,无论通过单个的交易还是一系列的交易 ( 无论与否为关联交易 ) ,不得出售、转移或以其他方式转让、处理或处置其业务、资产或收益的全部或任何部分 ( 但正常业务过程中按公平原则转让、处理或处置的除外 )

 

(11) 不得签署或承担可能对其财务或其他状况有重大不利影响的任何协议或义务;

 

(12) 应确保未经银行事先书面同意,不得新增向其他第三方的负债 ( 包括融资租赁 )

 

 

(4) maintain its corporate existence and conduct its business in a proper and efficient manner and in compliance with all laws, regulations, authorizations, agreements and obligations applicable to it and pay all taxes imposed on it when due;

 

(5) procure that there is no change of the shareholdings in or ownership or control (direct or indirect) of the Guarantor without the prior written consent of the Bank;

 

(6) procure that no amendment or supplement is made to the articles of association of the Guarantor without the prior written consent of the Bank;

 

(7) ensure that its obligations under this Guarantee at all times rank at least pari passu with all other unsecured obligations of the Guarantor unless otherwise provided by law;

 

(8) ensure that not merge or consolidate with any other entity or take any step with a view to demerger, winding-up, administration, liquidation, bankruptcy or dissolution without the prior written consent of the Bank;

 

(9) ensure that not create or attempt or agree to create or permit to arise or exist any charge over all or any part of its property, assets or revenues in favor of any person except for the Bank written consent of the Bank;

 

(10) subjected to the written consent of the Bank, not sell, transfer or otherwise assign, deal with or dispose of all or any part of its business or (except for good consideration in the ordinary course of its business) its assets or revenues, whether by a single transaction or by a number of transactions whether related or not;

 

(11) not enter into any agreement or obligation which might materially and adversely affect its financial or other condition;

 

(12) without the prior written consent of the Bank, the Guarantor hereof shall not increase its indebtedness (including finance leasing) from any third party .

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 

5. 费用和开支

 

(1) 保证人在此承诺,一经要求,即将银行为行使或保护银行在本协议项下的各项权利及权力而产生的、或因本协议所引起的应归咎于保证人的任何争议或因保证人对本协议的任何违反而使银行合理地产生的所有成本、开支及费用 ( 包括诉讼费、律师费等法律费用 ) 立即支付或偿付给银行。

 

(2) 保证人须支付与本协议或与本协议项下的转让有关的依法应由保证人承担的所有印花税或类似其它税项, 并在未能支付或延误支付该等税费而导致银行发生任何责任、费用、索赔和开支时向银行作出赔偿。

 

6. 授权扣款与抵消 保证人不可撤销的授权银行,在保证人对于银行有任何到期未清偿债务的时候,银行均有权在任何时间无需通知保证人,即可将保证人在银行任何账户中的款项(不论币种、期限如何)直接用于偿付上述债务;为本协议目的,保证人确认银行有权自行决定相关货币兑换的适用汇率,因此导致的任何存款损失或汇率风险均由保证人承担。

 

7. 独立性 本协议的效力独立于主债权债务合同的效力,不因主债权债务合同的无效或被撤销或未成立而无效或可被撤销或未成立;本协议部分条款被宣告无效或被撤销,不影响其余条款的效力。

 

8. 违约事件及违约责任 下列任一事件均构成保证人在本协议项下的违约事件 (“ 违约事件 ”)

 

(1) 债务人在主债权债务合同项下的任一违约事件;

 

 

5. Expense and Fees.

 

(1) The Guarantor undertakes hereby, once requested, it shall immediately pay to the Bank the related costs, expenses and fees (including litigation fee, reasonable attorney’s fee and other legal service fees) resulting from the exertion or protection of the rights/powers hereunder, or from any dispute in relation to this Agreement which is ascribed to the Guarantor, or from any default by the Guarantor hereunder.

 

(2) The Guarantor shall assume all of the stamp duty or any other taxes in relation to this Agreement or the transfer hereunder; in case of any failure or delay of the said payment which leads to the occurrence of any liability, fee, claiming and expense of the Bank, the Guarantor shall compensate for it.

 

6. Deduction Authorization and Set-off. The Guarantor hereby irrevocably authorizes, in case of any failure by the Guarantor to pay the debts due and payable to the Bank, the Bank shall have the right to deduct corresponding amount directly (regardless of the currency and deposit term) in any account of the Guarantor opened at the Bank to repay the debt, without any prior notice; for the purpose of this Agreement, the Guarantor confirms the Bank shall, at its sole discretion, decide the applicable exchange rate of currency conversion, and any deposit loss or exchange risk resulting from such conversion shall be borne by the Guarantor.

 

7. Independence. The effectiveness of this Agreement is independent from that of the Principal Contract, and it will not be invalid or revocable due to the invalidity or revocation of Principal Contract. The invalidity or revocation of any term or condition hereunder shall not affect the validity of the other terms and conditions hereunder.

 

8. Events of default. Each of the following circumstances shall constitute an event of default hereunder with respect to the Guarantor:

 

(1) Any default by the Debtor under Principal Contract;

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 

(2) 保证人在本协议中所作的任何陈述、保证或承诺在任何重要方面被证明是不正确的或是具有误导性的;

 

(3) 保证人违反本协议下的其他任何义务;

 

(4) 保证人发生严重影响其本协议项下履约能力的其他情形的。

 

9. 违约处理 发生前述任一违约事件时,银行有权宣布主债权及 / 或债权确定期间提前到期,及 / 或采取以下所述之一种或多种措施:

 

(1) 宣布保证人已构成本协议项下违约,并要求限期整改;

 

(2) 要求保证人依本协议承担保证责任;

 

(3) 要求债务人或保证人提供新的担保;

 

(4) 向有管辖权的人民法院提起诉讼;

 

(5) 采取在中国法律最大范围内所允许的其他措施。

 

10. 通知

 

(1) 本协议一方发往另一方的任何其他通知,均应发往本协议开头列明的地址,直到另一方书面通知更改该地址为止。只要按上述地址发送,则视为在下列日期送达:如是信函, 则按营业地址挂号寄发后的第七个营业日;如果是专程送达,则为收件人签收之日;如果为传真或电子邮件,则为传真或电子邮件发送之日。但向银行发出或交付的所有通知、要求或其它通讯均须在银行实际收到时被视为已经送达。且以传真方式向银行发出的所有通知、要求须于事后将原件以当面送交或邮寄于银行的方式加以确认。

 

 

(2) Any presentation and warranty made by the Guarantor is or proves to be incorrect or misleading in any material aspect, or the Guarantor fails to perform or comply with any stipulations hereunder in any material aspect;

 

(3) Any other default by the Guarantor hereunder;

 

(4) Any other circumstances occurred by the Guarantor that have material negative effect on the Guarantor’s ability to fulfill its obligation under this Agreement..

 

9. Disposal of Default. In case of any of the aforesaid events of default, the Bank shall have the right to declare the early-maturity of the Principal Amount under the Principal Contract and/or the Period for Claims’ Determination, and/or adopt one or several measures below:-

 

(1) Declare the default of the Guarantor under this Agreement, and require the Guarantor to make prompt correction within designated correction period;

 

(2) Require the Guarantor to assume the guarantee obligations as provided in this Agreement;

 

(3) Require the Debtor or the Guarantor to provide new security;

 

(4) File an action to competent People’s Court;

 

(5) Take any other measure which is to the fullest extent allowed by PRC laws.

 

10. Notice.

 

(1) Any notice from one party to the other party shall be delivered to the address stated at the beginning of this Agreement, unless such address is changed with written notice by the other party. Any notice delivered to the above address shall be deemed to have been received:- for mail, on the 7 th business day following the registered delivery date to the main business address; for express, on the signing date of the receiver; for fax or E-mail, on the delivering date of the fax or E-mail. All the notices, requirements or any other communications shall be deemed to be received as they are actually received by the Bank. The originals of the said notices and requirements delivered via fax shall be sent to the Bank via express or mail after the said fax.

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201508001-GA-3-001

 

(2) 保证人同意,提起任何诉讼、仲裁的传票或通知可交付或留置到本协议开头约定的地址即视为已经送达保证人。保证人放弃一切抗辩权。

 

11. 其他

 

(1) 本协议自保证人和银行双方签署之日起生效,至本协议所担保的全部债务被完全清偿后终止。

 

(2) 本协议的签订和履行均适用中国法律。

 

(3) 有关本协议的一切争议应通过友好协商解决;协商不成的,应向银行住所地有管辖权的人民法院提起诉讼。争议期间,各方仍应继续履行未涉争议的条款。

 

(4) 本协议需要变更或补充的,双方另行达成书面协议,作为本协议的附件。本协议附件是本协议不可分割的组成部分,与本协议正文具有同等的法律效力。

 

(5) 本协议同时配有英文文本供参考。如中英文本存在差异, 应以中文本的约定为准。

 

(6) 除非在本协议中另有特别说明,本协议中相关用语和表述与主债权债务合同具有相同的含义。

 

(7) 本协议一式贰份,具有同等效力。保证人、银行各执一份。

 

-         本担保协议末尾         -

 

 

(2) The Guarantor consents and agrees, any summon or notice in relation to litigations/arbitrations shall be delivered or left to the address listed at the beginning of this Agreement. Once delivered or left to the said address, it shall be deemed as received by the Guarantor. The Guarantor undertakes to forego all claims of defense.

 

11. Miscellaneous.

 

(1) This Agreement will come into force upon the seal and signature of both parties, and will terminate when all the secured debts hereunder have been fully and completely repaid.

 

(2) This Agreement shall be governed by and construed in accordance with the laws of P.R. China.

 

(3) All disputes under or relating to this Agreement shall be settled through friendly negotiations; in case of any failure of negotiation, the dispute shall be referred to the jurisdiction of competent people’s court of the place where the Bank is located. During the period of dispute, each party shall continue executing the clauses prescribed under the agreement which are not involved in the dispute.

 

(4) This Agreement may be amended during the duration of this Agreement by the Parties, provided that such amendment shall be in writing and be drawn up in Schedules. Any Schedule is the integral part of this Agreement, all of which are of the same effect.

 

(5) This Agreement shall be formed with both Chinese and English. In case of any discrepancy between the said versions, the Chinese version shall prevail.

 

(6) Unless otherwise defined in this Agreement, the relevant words and phrases shall have the same meaning as in the Principal Contract.

 

(7) This Agreement is made in TWO originals with equivalent legal effect; the Guarantor and the Bank keep one of them respectively.

 

-         End of this Guarantee         -

 

11

 

Exhibit 10.45

 

 

 

 

 

 

 

 

 

 

 

保证协议(最高额)

Guarantee Agreement (Maximum Amount)

 

 

公司保证人适用

For Corporate Guarantor

 

(文件编号/Ref No.: CL201606008-GA-2-001)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

第一部分 签署页 /Part I Execution Page 协议编号 /Agreement Ref. No.: CL201606008-GA-2-001

 

签署页

Execution Page

 

银行   保证人
Bank   Guarantor
     
浦发硅谷银行有限公司    
SPD SILICON VALLEY BANK CO., LTD.   Borqs Technology, Inc.
     
住所地   住所地
with address at   with address at
     
上海市杨浦区大连路 588 号宝地广场 B 座 21 楼    
200082    
     
21/F, Block B, Baoland Plaza,
No. 588, Dalian Road, Shanghai 200082
  Nemours Chambers, Road Town, Tortola,
British Virgin Islands
     
以上当事人在本协议中简称为 银行   以上当事人在本协议中简称为 保证人
hereinafter referred to as “Bank”   hereinafter referred to as “Guarantor”

 

上述各方当事人在此同意并接受本协议中所述之全部条款;保证人特此确认,
就本协议项下有关条件和条款,银行已向保证人作出充分的说明和解释, 

保证人已理解、同意、承认该等条款。

 

The parties above hereby agree to and accept all terms and conditions set forth in this Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Guarantor completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

   

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第二部分 正文 /Part II Content

协议编号 /Agreement Ref. No.: CL201606008-GA-2-001

 

正文

Content

 

为确保债务人 ( 定义见下文 ) 全面、及时履行其在主债权债务合同

( 定义见下文 ) 项下各项义务,保障银行债权的实现,本协议项下保证人同意自愿按本协议承担担保责任。

 

为实现上述目的,保证人和银行经协商一致并达成如下条款, 以资各方共同恪守。

 

一、特别条款

 

1 . 保证方式

 

(1) 保证人在本协议项下承担的责任为连带责任保证。

 

(2) 保证人在此无条件且不可撤销地向银行保证,如果债务人未能在到期时支付主合同项下的任何款项,无论银行对主合同项下的债权是否拥有其他担保权利 ( 包括但不限于保证、抵押、质押等担保方式 ) ,银行均有权先要求本协议项下保证人在本协议约定的保证范围内承担保证责任,而无须先要求其他担保人履行担保责任。

 

2 . 保证期间

 

保证期间为:债务人在主债权债务合同下的债务履行期届满之日起二年。

 

为免疑义,本协议所称“到期”、“届满”或类似措辞均包括债权人宣布主债权提前到期的情形。债权人宣布全部或部分主债权提前到期的,以其宣布的提前到期日为该等主债权债务履行期届满日,债权确定期间同时到期。

 

 

For the security of the well performance of the obligations under the Principal Contract (as defined hereunder) by the Debtor (as defined hereunder) and ensuring the recovery of the Bank’s right of credit, the Guarantor hereof agrees to assume the guarantee liability as agreed herein.

 

Therefore, a guarantee agreement (“the Agreement” or “Guarantee”) is reached by and between the Guarantor and the Bank hereof as follows.

 

I SPECIAL PROVISIONS

 

1. Guarantee Obligations

 

(1) The obligations of the Guarantor hereunder are joint and several.

 

(2) The Guarantor hereby irrevocably and unconditionally guarantees to the Bank the due and punctual observance and performance of the payment obligations under the Principal Contract by the Borrower, provided that the Banks has other security rights (by way of, including but not limited to guarantee, mortgage, pledge, etc.), the Bank shall be entitled to first enforce its rights hereunder against the Guarantor within the Secured Extent, and shall not be required to take any steps to first enforce its creditor’s rights against any other security provider.

 

2. Period of Guarantee

 

The period of guarantee shall be: two years after the expiration of the Period for Debt Performance of the Debtor under the Principal Contract.

 

For avoidance of doubt, the “expiration”, “maturity” or such similar wording shall be interpreted as including the circumstance that the creditor declares the early-maturity of any Principal amount, in whole or in part. In the event of the foregoing, the Period for Debt Performance shall be advanced to the date that such declaration of early-maturity is made, and the Period for Claims’ Determination shall mature correspondingly.

 

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第二部分 正文 /Part II Content

协议编号 /Agreement Ref. No.: CL201606008-GA-2-001

 

 

3. 主债权债务合同

 

本协议所担保的主债权债务合同为:债务人与本协议银行在债权确定期间内签署或履行的一系列债权债务文件,包括但不限于双方于 2016 07 20 日签署的《授信协议》 ( 编号 :

CL201606008) 2017 07 20 日签署的《变更协议》(编

号: CL201606008-001 ), 2017 08 31 日签署的《变更协

议》(编号: CL201606008-002 )以及 2018 日签署的《变更协议》(编号: CL201606008-003 )。

 

4 . 保证所担保的主债权 / 被担保主债权

 

本协议项下被担保的主债权为:银行在债权确定期间内,向债务人连续提供的一笔或多笔融资余额。

 

5. 债权确定期间

 

(1) 本协议所指债权确定期间为:自 2016 07 20 日至 2019

 

         08 27 日止。

 

(2) 为免疑义,前述有关债权,包括以下情形:

 

(a) 任何债权债务文件,只要债务人与银行系在债权确定期间内签署,系视为符合本协议担保要求,该文件项下所有债务均纳入本协议项下最高额保证的担保;及 /

 

(b) 债务人与银行虽未签署有关债权债务文件,但有证据证明其在债权确定期间内实际发生有此等债权的情形。

 

 

3. Principal Contract

 

The Principal Contract hereunder means: a series of documents of claims and liabilities executed or performed between the Debtor and the Bank hereunder within the stipulated Period for Claims’ Determination, including but not limited to Facility Agreement (Agreement No. CL201606008) dated Jul. 20 th , 2016, Amendment Agreement (Agreement No. CL201606008-001) dated Jul. 20 th , 2017, Amendment Agreement (Agreement No. CL201606008-002) dated Aug. 31 st 2017 and Amendment Agreement (Agreement No. CL201606008-003) dated (Month) (Day), 2018.

 

4. Principal Amount secured by the Guarantee

 

The Principal Amount secured by the Guarantee means: the balance of one or several finances, provided by the Bank to the Debtor within the Period for Claims’ Determination specified hereunder.

 

5. Period for Claims’ Determination

 

(1) The Period for Claims’ Determination hereunder refers to: from Jul. (Month) 20 th (Day), 2016 to Aug. (Month) 27 th (Day), 2019.

 

(2) For the avoidance of doubt, the wording of “Claim” in the preceding paragraph, includes the circumstances set forth below:

 

(a) Any document in relation to the creditor’s rights or the debts, if only signed and/or sealed by the Debtor and the Bank within the Period for Claims’ Determination, would be deemed complying with the requirements of this Agreement, and all debts arising therefrom would be secured by the maximum amount guarantee hereunder; and/or

 

(b) Although no written documents in relation to the creditor’s rights or the debts is signed and/or sealed between the Debtor and the Bank, some evidence exists proving the occurrence of such debts within the Period for Claims’ Determination.

 

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第二部分 正文 /Part II Content

协议编号 /Agreement Ref. No.: CL201606008-GA-2-001

 

 

(3) 为免疑义,对于前款 (a) 项所述之债权债务文件项下的具体债务,即使其实际发生的时间晚于债权确定期间届满日 ( 包括但不限于:有关贷款或贷款额度系在债权确定期间届满后方始提用;有关保函、信用证等表外额度在债权确定期间内提用,银行对外开具了付款承诺性文件,但在债权确定期间届满后发生银行对外垫付的;或有关保函、信用证等表外额度在债权确定期间届满后方始提用对外开具承诺性文件等 ) ,该等债务同样受本协议项下最高额保证的担保。

 

 

 

 

 

(4) 为免疑义,对于前述第 (2) (a)(b) 项所述情形下的债务,即使系属在债权确定期间届满后产生的部分 ( 例如债权确定期间届满后新产生的利息、罚息或其他费用等 ) ,该等债务均同样受本协议项下最高额保证的担保。

 

 

 

 

(5) 关于在先债务的约定 ( 如适用,请在方框内打钩选择;为免疑义,请务必确保中英文本中本选项的勾选状态保持一致 )

 

 

银行与保证人特别约定,银行与债务人在本协议确定之债权确定期间之前存在的授信或融资协议项下的债务 ( 如有 ) , 也一并纳入本协议项下最高额保证的担保。

 

 

(3) For the avoidance of doubt, in respect of the debts under the document in relation to the creditor’s rights or the debts stated in item (a) of the preceding paragraph, even if the actual debt occurs practically after the expiry date of the Period for Claims’ Determination, it would also be secured by the maximum amount guarantee hereunder. The aforesaid debts occurred after the expiration date of the Period for Claims’ Determination includes, but not limited to, the circumstance as follows: any loan or credit line of loan is actually requested or drawn down after the expiration date of the Period for Claims’ Determination; any facility for purpose such as the issuance of the guarantee or the letter of credit is requested and utilized within the Period for Claims’ Determination and the bank issues the formal documents with commitment obligation, while the actual payment or advance under such documents occur after the expiration of the Period for Claims’ Determination; or, any facility for purpose such as the issuance of the guarantee or the letter of credit is requested for utilized after the expiration of the Period for Claims’ Determination.

 

(4) For the avoidance of doubt, with respect to any debt under the circumstances stated in both item (a) and (b) of the preceding paragraph (2), even for the part of the debts that occur after the expiration of the Period for Claims’ Determination (e.g. the interest, penalty interest and other fees of an existing debt accrued after the expiration of the Period for Claims’ Determination), such part of the debts would also be secured by the maximum amount guarantee hereunder.

 

(5) Special stipulations on the preceding debts (please check the appropriate box if it’s agreed by both parties; for the avoidance of doubt, please ensure that the selected item is consistent between English and Chinese version ).

 

It is specially agreed between the Guarantor and the Bank that, all the existing and outstanding debts (if any) under any facility or loan agreement(s) which is entered into by both the Debtor and the Bank prior to the Period for Claims’ Determination, would also be secured by the maximum amount guarantee hereunder.

 

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协议编号 /Agreement Ref. No.: CL201606008-GA-2-001

 

 
6. 最高债权限额

 

本协议项下保证人责任的最高债权限额为 RMB21,600,000.00 元整 ( 大写:人民币贰仟壹佰陆拾万元整 ) 或等值其他币种。

 

7. 债务人

 

本协议项下所称债务人为:即播思通讯技术(北京)有限公司。

 

二、一般条款

 

1. 担保范围 本协议担保范围包括因主债权债务合同而产生的融资本金、利息、罚息、需补足的保证金、复利、违约金、赔偿金、评估费、公证费、手续费、实现债权的费用 ( 包括但不限于诉讼费用、财产保全费、差旅费、拍卖费、律师费用、执行费用等 ) 、因保证人在本协议下违约而给银行造成的损失和债务人在主债权债务合同项下的其它所有应付费用。

 

 

 

2. 担保权益之选择 若因债务人发生主债权债务合同项下的违约和 / 或保证人发生本协议项下违约,而造成银行依本协议约定行使担保权益时,若被担保的主债权既有物的担保又有人的担保的,银行可以先就相关担保文件 ( 包括本协议 ) 项下物的担保实现债权,也可以根据相关担保文件的规定先要求实现人的保证责任。保证人同意,在任何情况下, 银行未行使或未及时行使其与债务人在其他任何文件项下的任何权利,包括但不限于债权、担保物权、违约救济权, 均不得被视为银行怠于或放弃行使权利,亦不会影响其充分行使本协议项下的权利。

 

 

6. Maximum Limit of Claiming

 

The Maximum Limit of Claiming to the extent that the Guarantor shall assume as a security liability under this Agreement shall be: RMB21,600,000.00 (SAY: RMB TWENTY-ONE MILLION, SIX HUNDRED THOUSAND ONLY) or its equivalents in other currency.

 

7. The Debtor

 

The Debtor hereunder, in terms of this Agreement, refers to BORQS Beijing Ltd.

 

II GENERAL PROVISIONS

 

1. Secured Extent. The Secured Extent of this Guarantee hereunder covers the following items resulting from Principal Contract: the Principal Amount hereof, interest, penalty interest, required cash deposit, compound interest, penalty fine, damage compensation, assessment fees, notarization fees, commission, expenses for realization of the Bank’s rights (including but not limited to litigation fees, property preservation fees, travel fees, auction fees, legal services fees and execution fees), the loss and damage resulting from the defaults of the Guarantor and any other expenses payable by the Debtor under Principal Contract.

 

2. Choice of Security Interests. When the Bank intends to exercise the security interests due to any default of the Debtor under Principal Contract and/or that of the Guarantor hereunder, if the Principal Amount secured hereunder is secured by both property security and non-property guarantee, the Bank shall, at its full discretion, choose the security interest to be first claimed; namely, it may either recover the debts with the property security thereunder (including this Agreement) first, or require the guarantor to assume guaranteed liability thereunder first. The Guarantor agrees that in any case, the Bank’s failure to promptly exercise or Bank’s delay in exercising any of its right under the other agreements to which the Debtor is a party, such rights including but not limited to right of claiming, right of security interest, right of relief under breach of contract, shall not be deemed as the Bank’s intention to forego such rights to exercise or as a waiver thereof, and shall not preclude the exercise of any right hereunder.

 

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3. 保证人的陈述与保证 保证人向银行作出如下陈述与保证 , 并确认银行系依赖于该等陈述与保证而签署和履行本协议:

 

 

(1) 保证人系依据其当地法律成立并有效存续之法人。

 

(2) 保证人根据中国法律有权签署本协议,以及行使其在本协议项下的权利及履行其在本协议项下的义务,并已完成签署本协议及履行其在本协议项下的义务所需的一切授权及 / 或批准。

 

 

(3) 本协议的签署和履行不违反保证人所应遵守的法律、法规、规章、判决、裁决,也不与保证人的章程或其签署的任何合同、协议或承担的任何其他义务相抵触。

 

 

(4) 本协议各条款均是保证人的真实意思表示,对保证人具有法律约束力。

 

 

(5) 保证人保证其向银行出具的所有财务报表是按照其适用的会计准则编制的,真实、公正地表明了保证人的财务状况,并且本协议所涉及的全部资料、文件均是真实、有效、准确、完整而无任何隐瞒的。

 

 

(6) 保证人保证完成应由其作出的为本协议的有效并能合法履行所需的备案、记录或登记,并支付所有税项。

 

 

(7) 保证人保证本协议履行期间不存在任何由法院或行政部门或任何相关方提起或将提起可能会对保证人的业务或财务状况造成重大不利影响的行动或任何法律程序的情况,包 括但不限于破产、清算等。

 

 

3. Representations and warranties. The Guarantor represents and warrants to the Bank as follows; the Guarantor confirms its understanding that the performance of any obligation hereunder by the Bank is totally based on such Representations and Warranties.

 

(1) The Guarantor guarantees it is a legal person duly incorporated and validly existing under the laws of its jurisdiction of incorporation.

 

(2) The Guarantor, according to PRC laws, has full power to enter into this Agreement and exercise/perform rights and obligations hereunder, and has all necessary authorization and ratification in respect of the execution of this Agreement and the performance of the obligations hereunder.

 

(3) The execution of this Agreement will neither constitute any breach of the laws, regulations, rules, judicial decisions, and awards that the Guarantor shall abide by, nor conflict with its articles of association, any contracts/agreements it signed and any other obligations assumed by it.

 

(4) All the provisions hereunder are the expression of true intention and interest made by the Guarantor, and shall be legally binding thereupon.

 

(5) All the financial statements provided by the Guarantor to the Bank are prepared in accordance with the general accounting standards, which indicate the financial status of the Guarantor truly and fairly; all the materials and documents in relation to this Agreement are truthful, effective, accurate, integral without any hidden facts purposely undisclosed to Bank..

 

(6) The Guarantor guarantees it shall duly complete all the formalities of filing, recording or registration that it shall assume to ensure the validity of this Agreement and its performance; it shall also bear all the taxes thereof.

 

(7) The Guarantor guarantees no any action or legal procedure is (or is to be) brought forward by any court, administration authorities or other concerned party, which may induce material adverse effects upon its business or financial status, including but not limited to the bankruptcy and liquidation.

 

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4. 约定事项

 

保证人向银行承诺,并同意在本协议有效期间内,除非银行事先书面同意,保证人应:

 

(1) 应向银行提供:

 

(a) 一经获得,但不迟于保证人每一会计年度结束后 180 天之日,银行可接受的一国际公认的独立的会计师事务所或者在中国注册的注册会计师出具的经审计和核实的该年度的财务报表的副本 ( 包括损益表和资产负债表 )

 

(b) 一经获得,但不迟于保证人每半个会计年度结束后 90 天之日,在经审计的财务报表的基础上编制的中期财务报表副本 ( 包括损益表和资产负债表 ) 以及由保证人财务负责人签署的证书,以证明该等财务报表在所有实质性方面是真实的,并清楚地反映了保证人在该等半年内的经营结果和财务状况;

 

(c) 一经请求,银行不时合理要求的有关保证人的财务信息或其他信息;

 

(2) 应妥善保存与其经营有关的记录和会计账簿,允许银行和 / 或由银行指定的任何专业顾问在任何合理时间检查保证人的该等记录和会计账簿;

 

(3) 一经发生任何诉讼、仲裁或行政诉讼程序,应立即通知银行;

 

 

4. Covenants.

 

The Guarantor undertakes and agrees with the Bank throughout the continuance of this Guarantee that the Guarantor will, unless the Bank otherwise agrees in writing:

 

(1) supply to the Bank:

 

(a) as soon as they are available, but in any event within one hundred and eighty (180) days after the end of each financial year of the Guarantor copies of its financial statements in respect of such financial year (including a profit and loss account and balance sheet) audited by an internationally recognized firm of independent accountants or a certified public accountant registered in the PRC acceptable to the Bank;

 

(b) as soon as they are available, but in any event within ninety (90) days after the end of each half of each financial year of the Guarantor, copies of its interim financial statements (including a profit and loss account and balance sheet) prepared on a basis consistent with the audited financial statements of the Guarantor together with a certificate signed by the principal financial officer of the Guarantor to the effect that such financial statements are true in all material respects and present fairly the financial position of the Guarantor as at the end of, and the results of its operations for, such half-year period;

 

(c) promptly on request, such additional financial or other information relating to the Guarantor as the Bank may from time to time reasonably request;

 

(2) keep proper records and books of account in respect of its business and permit the Bank and/or any professional consultants appointed by the Bank at all reasonable times to inspect and examine the records and account books of the Guarantor;

 

(3) promptly inform the Bank of any litigation, arbitration or administrative proceeding;

 

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(4) 应维持其公司法人地位合法有效,应适当并有效地开展其业务,应遵守所有适用于其的法律、法规、授权、协议和义务,并应缴纳所有应缴税款;

 

(5) 应确保未经银行事先书面同意,保证人的股权或所有权或控制权 ( 直接或间接 ) 不发生变化;

 

(6) 应确保未经银行事先书面同意,不对保证人的章程做出任何修改或补充;

 

(7) 除非法律另有规定,应确保其在本协议项下的义务在任何时候与其所有其他无担保债务处于至少相同的清偿顺序;

 

(8) 应确保未经银行事先书面同意,不得与任何其他实体合并或兼并或采取任何措施进行分立、歇业、整顿、清算、破产或解散;

 

(9) 应确保未经银行事先书面同意,不得在其全部或任何资产或收益上设定或允许存在以任何人为受益人 ( 银行除外 ) 的任何担保;

 

(10) 未经银行事先书面同意,无论通过单个的交易还是一系列的交易 ( 无论与否为关联交易 ) ,不得出售、转移或以其他方式转让、处理或处置其业务、资产或收益的全部或任何部分 ( 但正常业务过程中按公平原则转让、处理或处置的除外 )

 

(11) 不得签署或承担可能对其财务或其他状况有重大不利影响的任何协议或义务;

 

(12) 应确保未经银行事先书面同意,不得新增向其他第三方的负债 ( 包括融资租赁 )

 

 

(4) maintain its corporate existence and conduct its business in a proper and efficient manner and in compliance with all laws, regulations, authorizations, agreements and obligations applicable to it and pay all taxes imposed on it when due;

 

(5) procure that there is no change of the shareholdings in or ownership or control (direct or indirect) of the Guarantor without the prior written consent of the Bank;

 

(6) procure that no amendment or supplement is made to the articles of association of the Guarantor without the prior written consent of the Bank;

 

(7) ensure that its obligations under this Guarantee at all times rank at least pari passu with all other unsecured obligations of the Guarantor unless otherwise provided by law;

 

(8) ensure that not merge or consolidate with any other entity or take any step with a view to demerger, winding-up, administration, liquidation, bankruptcy or dissolution without the prior written consent of the Bank;

 

(9) ensure that not create or attempt or agree to create or permit to arise or exist any charge over all or any part of its property, assets or revenues in favor of any person except for the Bank written consent of the Bank;

 

(10)  subjected to the written consent of the Bank, not sell, transfer or otherwise assign, deal with or dispose of all or any part of its business or (except for good consideration in the ordinary course of its business) its assets or revenues, whether by a single transaction or by a number of transactions whether related or not;

 

(11)  not enter into any agreement or obligation which might materially and adversely affect its financial or other condition;

 

(12)  without the prior written consent of the Bank, the Guarantor hereof shall not increase its indebtedness (including finance leasing) from any third party .

 

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5. 费用和开支

 

(1) 保证人在此承诺,一经要求,即将银行为行使或保护银行在本协议项下的各项权利及权力而产生的、或因本协议所引起的应归咎于保证人的任何争议或因保证人对本协议的任何违反而使银行合理地产生的所有成本、开支及费用 ( 包括诉讼费、律师费等法律费用 ) 立即支付或偿付给银行。

 

(2) 保证人须支付与本协议或与本协议项下的转让有关的依法应由保证人承担的所有印花税或类似其它税项, 并在未能支付或延误支付该等税费而导致银行发生任何责任、费用、索赔和开支时向银行作出赔偿。

 

6. 授权扣款与抵消 保证人不可撤销的授权银行,在保证人对于银行有任何到期未清偿债务的时候,银行均有权在任何时间无需通知保证人,即可将保证人在银行任何账户中的款项(不论币种、期限如何)直接用于偿付上述债务;为本协议目的,保证人确认银行有权自行决定相关货币兑换的适用汇率,因此导致的任何存款损失或汇率风险均由保证人承担。

 

 

 

 

 

 

7. 独立性 本协议的效力独立于主债权债务合同的效力,不因主债权债务合同的无效或被撤销或未成立而无效或可被撤销或未成立;本协议部分条款被宣告无效或被撤销,不影响其余条款的效力。

 

8. 违约事件及违约责任 下列任一事件均构成保证人在本协议项下的违约事件 (“ 违约事件 ”)

 

(1) 债务人在主债权债务合同项下的任一违约事件;

 

 

5. Expense and Fees.

 

(1) The Guarantor undertakes hereby, once requested, it shall immediately pay to the Bank the related costs, expenses and fees (including litigation fee, reasonable attorney’s fee and other legal service fees) resulting from the exertion or protection of the rights/powers hereunder, or from any dispute in relation to this Agreement which is ascribed to the Guarantor, or from any default by the Guarantor hereunder.

 

(2) The Guarantor shall assume all of the stamp duty or any other taxes in relation to this Agreement or the transfer hereunder; in case of any failure or delay of the said payment which leads to the occurrence of any liability, fee, claiming and expense of the Bank, the Guarantor shall compensate for it.

 

6. Deduction Authorization and Set-off. The Guarantor hereby irrevocably authorizes, in case of any failure by the Guarantor to pay the debts due and payable to the Bank, the Bank shall have the right to deduct corresponding amount directly (regardless of the currency and deposit term) in any account of the Guarantor opened at the Bank to repay the debt, without any prior notice; for the purpose of this Agreement, the Guarantor confirms the Bank shall, at its sole discretion, decide the applicable exchange rate of currency conversion, and any deposit loss or exchange risk resulting from such conversion shall be borne by the Guarantor.

 

7. Independence. The effectiveness of this Agreement is independent from that of the Principal Contract, and it will not be invalid or revocable due to the invalidity or revocation of Principal Contract. The invalidity or revocation of any term or condition hereunder shall not affect the validity of the other terms and conditions hereunder.

 

8. Events of default. Each of the following circumstances shall constitute an event of default hereunder with respect to the Guarantor:

 

(1) Any default by the Debtor under Principal Contract;

 

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(2) 保证人在本协议中所作的任何陈述、保证或承诺在任何重要方面被证明是不正确的或是具有误导性的;

 

(3) 保证人违反本协议下的其他任何义务;

 

(4) 保证人发生严重影响其本协议项下履约能力的其他情形的。

 

9. 违约处理 发生前述任一违约事件时,银行有权宣布主债权及 / 或债权确定期间提前到期,及 / 或采取以下所述之一种或多种措施:

 

(1) 宣布保证人已构成本协议项下违约,并要求限期整改;

 

(2) 要求保证人依本协议承担保证责任;

 

(3) 要求债务人或保证人提供新的担保;

 

(4) 向有管辖权的人民法院提起诉讼;

 

(5) 采取在中国法律最大范围内所允许的其他措施。

 

10. 通知

 

(1) 本协议一方发往另一方的任何其他通知,均应发往本协议开头列明的地址,直到另一方书面通知更改该地址为止。只要按上述地址发送,则视为在下列日期送达:如是信函, 则按营业地址挂号寄发后的第七个营业日;如果是专程送达,则为收件人签收之日;如果为传真或电子邮件,则为传真或电子邮件发送之日。但向银行发出或交付的所有通知、要求或其它通讯均须在银行实际收到时被视为已经送达。且以传真方式向银行发出的所有通知、要求须于事后将原件以当面送交或邮寄于银行的方式加以确认。

 

 

(2) Any presentation and warranty made by the Guarantor is or proves to be incorrect or misleading in any material aspect, or the Guarantor fails to perform or comply with any stipulations hereunder in any material aspect;

 

(3) Any other default by the Guarantor hereunder;

 

(4) Any other circumstances occurred by the Guarantor that have material negative effect on the Guarantor’s ability to fulfill its obligation under this Agreement..

 

9. Disposal of Default. In case of any of the aforesaid events of default, the Bank shall have the right to declare the early-maturity of the Principal Amount under the Principal Contract and/or the Period for Claims’ Determination, and/or adopt one or several measures below:-

 

(1) Declare the default of the Guarantor under this Agreement, and require the Guarantor to make prompt correction within designated correction period;

 

(2) Require the Guarantor to assume the guarantee obligations as provided in this Agreement;

 

(3) Require the Debtor or the Guarantor to provide new security;

 

(4) File an action to competent People’s Court;

 

(5) Take any other measure which is to the fullest extent allowed by PRC laws.

 

10. Notice.

 

(1) Any notice from one party to the other party shall be delivered to the address stated at the beginning of this Agreement, unless such address is changed with written notice by the other party. Any notice delivered to the above address shall be deemed to have been received:- for mail, on the 7 th business day following the registered delivery date to the main business address; for express, on the signing date of the receiver; for fax or E-mail, on the delivering date of the fax or E-mail. All the notices, requirements or any other communications shall be deemed to be received as they are actually received by the Bank. The originals of the said notices and requirements delivered via fax shall be sent to the Bank via express or mail after the said fax.

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201606008-GA-2-001

 

(2) 保证人同意,提起任何诉讼、仲裁的传票或通知可交付或留置到本协议开头约定的地址即视为已经送达保证人。保证人放弃一切抗辩权。

 

11. 其他

 

(1) 本协议自保证人和银行双方签署之日起生效,至本协议所担保的全部债务被完全清偿后终止。

 

(2) 本协议的签订和履行均适用中国法律。

 

(3) 有关本协议的一切争议应通过友好协商解决;协商不成的,应向银行住所地有管辖权的人民法院提起诉讼。争议期间,各方仍应继续履行未涉争议的条款。

 

(4) 本协议需要变更或补充的,双方另行达成书面协议,作为本协议的附件。本协议附件是本协议不可分割的组成部分,与本协议正文具有同等的法律效力。

 

(5) 本协议同时配有英文文本供参考。如中英文本存在差异, 应以中文本的约定为准。

 

(6) 除非在本协议中另有特别说明,本协议中相关用语和表述与主债权债务合同具有相同的含义。

 

(7) 本协议一式贰份,具有同等效力。保证人、银行各执一份。

 

-         本担保协议末尾         -

 

 

(2) The Guarantor consents and agrees, any summon or notice in relation to litigations/arbitrations shall be delivered or left to the address listed at the beginning of this Agreement. Once delivered or left to the said address, it shall be deemed as received by the Guarantor. The Guarantor undertakes to forego all claims of defense.

 

11. Miscellaneous.

 

(1) This Agreement will come into force upon the seal and signature of both parties, and will terminate when all the secured debts hereunder have been fully and completely repaid.

 

(2) This Agreement shall be governed by and construed in accordance with the laws of P.R. China.

 

(3) All disputes under or relating to this Agreement shall be settled through friendly negotiations; in case of any failure of negotiation, the dispute shall be referred to the jurisdiction of competent people’s court of the place where the Bank is located. During the period of dispute, each party shall continue executing the clauses prescribed under the agreement which are not involved in the dispute.

 

(4) This Agreement may be amended during the duration of this Agreement by the Parties, provided that such amendment shall be in writing and be drawn up in Schedules. Any Schedule is the integral part of this Agreement, all of which are of the same effect.

 

(5) This Agreement shall be formed with both Chinese and English. In case of any discrepancy between the said versions, the Chinese version shall prevail.

 

(6) Unless otherwise defined in this Agreement, the relevant words and phrases shall have the same meaning as in the Principal Contract.

 

(7) This Agreement is made in TWO originals with equivalent legal effect; the Guarantor and the Bank keep one of them respectively.

 

-         End of this Guarantee         -

 

 

 

11

 

Exhibit 10.46

 

 

 

 

 

 

 

保证协议(最高额) 

Guarantee Agreement (Maximum Amount)

 

 

公司保证人适用

For Corporate Guarantor

 

(文件编号/Ref No.: CL201508001-GA-2-003)

 

 

 

 

 

 

 

 

 

 

 

 

第一部分 签署页 /Part I Execution Page

 

协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

 

签署页

Execution Page

 

银行   保证人

Bank

 

Guarantor

     

浦发硅谷银行有限公司

   
SPD SILICON VALLEY BANK CO., LTD.   BORQS International Holding Corp
     
住所地   住所地

with address at

 

with address at

     
上海市杨浦区大连路 588 号宝地广场 B 座 21 楼 200082    
     

21/F, Block B, Baoland Plaza,

No. 588, Dalian Road, Shanghai 200082

  PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands
     

以上当事人在本协议中简称为 银行

 

以上当事人在本协议中简称为 “保证人”

hereinafter referred to as “Bank”   hereinafter referred to as "Guarantor"

  

上述各方当事人在此同意并接受本协议中所述之全部条款;保证人特此确认, 就本协议项下有关条件和条款,银行已向保证人作出充分的说明和解释,

保证人已理解、同意、承认该等条款。

 

The parties above hereby agree to and accept all terms and conditions set forth in this Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Guarantor completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

  

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第二部分 正文 /Part II Content

 

协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

  

正文

Content

 

为确保债务人 ( 定义见下文 ) 全面、及时履行其在主债权债务合同(定义见下文)项下各项义务,保障银行债权的实现,本协议项下保证人同意自愿按本协议承担担保责任。

For the security of the well performance of the obligations under the Principal Contract (as defined hereunder) by the Debtor (as defined hereunder) and ensuring the recovery of the Bank’s right of credit, the Guarantor hereof agrees to assume the guarantee liability as agreed herein.

 

为实现上述目的,保证人和银行经协商一致并达成如下条款, 以资各方共同恪守。

Therefore, a guarantee agreement (“the Agreement” or “Guarantee”) is reached by and between the Guarantor and the Bank hereof as follows.

 

一、特别条款

I SPECIAL PROVISIONS

 

1. 保证方式
1. Guarantee Obligations

  

(1) 保证人在本协议项下承担的责任为连带责任保证。
(1) The obligations of the Guarantor hereunder are joint and several.

 

(2) 保证人在此无条件且不可撤销地向银行保证,如果债务人未能在到期时支付主合同项下的任何款项,无论银行对主合同项下的债权是否拥有其他担保权利 ( 包括但不限于保证、抵押、质押等担保方式 ) ,银行均有权先要求本协议项下保证人在本协议约定的保证范围内承担保证责任,而无须先要求其他担保人履行担保责任。
(2) The Guarantor hereby irrevocably and unconditionally guarantees to the Bank the due and punctual observance and performance of the payment obligations under the Principal Contract by the Borrower, provided that the Banks has other security rights (by way of, including but not limited to guarantee, mortgage, pledge, etc.), the Bank shall be entitled to first enforce its rights hereunder against the Guarantor within the Secured Extent, and shall not be required to take any steps to first enforce its creditor’s rights against any other security provider.

  

2. 保证期间
2. Period of Guarantee

 

保证期间为:债务人在主债权债务合同下的债务履行期届满之日起二年。

The period of guarantee shall be: two years after the expiration of the Period for Debt Performance of the Debtor under the Principal Contract.

 

为免疑义,本协议所称“到期”、“届满”或类似措辞均包括债权人宣布主债权提前到期的情形。债权人宣布全部或部分主债权提前到期的,以其宣布的提前到期日为该等主债权债务履行期届满日,债权确定期间同时到期。

For avoidance of doubt, the “expiration”, “maturity” or such similar wording shall be interpreted as including the circumstance that the creditor declares the early-maturity of any Principal amount, in whole or in part. In the event of the foregoing, the Period for Debt Performance shall be advanced to the date that such declaration of early-maturity is made, and the Period for Claims’ Determination shall mature correspondingly. 

 

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第二部分 正文 /Part II Content

 

协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

 

3. 主债权债务合同
3. Principal Contract

 

本协议所担保的主债权债务合同为:债务人与本协议银行在债权确定期间内签署或履行的一系列债权债务文件,包括但不限于双方于 2015 08 31 日签署的《授信协议》 ( 编号 : CL201508001) 2016 07 20 日签署的《变更协议》(编 号: CL201508001-001 ), 2017 08 31 日签署的《变更协 议》(编号: CL201508001-002 )以及 2018 日签署的《变更协议》(编号: CL201508001-003 )。

The Principal Contract hereunder means: a series of documents of claims and liabilities executed or performed between the Debtor and the Bank hereunder within the stipulated Period for Claims’ Determination, including but not limited to Facility Agreement (Agreement No. CL201508001) dated Aug. 31 st , 2015, Amendment Agreement (Agreement No. CL201508001-001) dated Jul. 20 th , 2016, Amendment Agreement (Agreement No. CL201508001-002) dated Aug. 31 st 2017 and Amendment Agreement (Agreement No. CL201508001-003) dated (Month) (Day), 2018.

  

4. 保证所担保的主债权 / 被担保主债权
4. Principal Amount secured by the Guarantee

 

本协议项下被担保的主债权为:银行在债权确定期间内,向债务人连续提供的一笔或多笔融资余额。

The Principal Amount secured by the Guarantee means: the balance of one or several finances, provided by the Bank to the Debtor within the Period for Claims’ Determination specified hereunder.

 

5. 债权确定期间
5. Period for Claims’ Determination

  

(1) 本协议所指债权确定期间为:自 2015 年 08 月31 日至 2019 年 08 月 27 日止。
(1) The Period for Claims’ Determination hereunder refers to: from Aug. (Month) 31 st (Day), 2015 to Aug. (Month) 27 th (Day), 2019.

  

(2) 为免疑义,前述有关债权,包括以下情形:
(2) For the avoidance of doubt, the wording of “Claim” in the preceding paragraph, includes the circumstances set forth below:

  

(a) 任何债权债务文件,只要债务人与银行系在债权确定期间内签署,系视为符合本协议担保要求,该文件项下所有债务均纳入本协议项下最高额保证的担保;及 /
(a) Any document in relation to the creditor’s rights or the debts, if only signed and/or sealed by the Debtor and the Bank within the Period for Claims’ Determination, would be deemed complying with the requirements of this Agreement, and all debts arising therefrom would be secured by the maximum amount guarantee hereunder; and/or

  

(b) 债务人与银行虽未签署有关债权债务文件,但有证据证明其在债权确定期间内实际发生有此等债权的情形。
(b) Although no written documents in relation to the creditor’s rights or the debts is signed and/or sealed between the Debtor and the Bank, some evidence exists proving the occurrence of such debts within the Period for Claims’ Determination.

  

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第二部分 正文 /Part II Content

 

协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

 

(3) 为免疑义,对于前款 (a) 项所述之债权债务文件项下的具体债务,即使其实际发生的时间晚于债权确定期间届满日 ( 包括但不限于:有关贷款或贷款额度系在债权确定期间届满后方始提用;有关保函、信用证等表外额度在债权确定期间内提用,银行对外开具了付款承诺性文件,但在债权确定期间届满后发生银行对外垫付的;或有关保函、信用证等表外额度在债权确定期间届满后方始提用对外开具承诺性文件等 ) ,该等债务同样受本协议项下最高额保证的担保。
(3) For the avoidance of doubt, in respect of the debts under the document in relation to the creditor’s rights or the debts stated in item (a) of the preceding paragraph, even if the actual debt occurs practically after the expiry date of the Period for Claims’ Determination, it would also be secured by the maximum amount guarantee hereunder. The aforesaid debts occurred after the expiration date of the Period for Claims’ Determination includes, but not limited to, the circumstance as follows: any loan or credit line of loan is actually requested or drawn down after the expiration date of the Period for Claims’ Determination; any facility for purpose such as the issuance of the guarantee or the letter of credit is requested and utilized within the Period for Claims’ Determination and the bank issues the formal documents with commitment obligation, while the actual payment or advance under such documents occur after the expiration of the Period for Claims’ Determination; or, any facility for purpose such as the issuance of the guarantee or the letter of credit is requested for utilized after the expiration of the Period for Claims’ Determination.

  

(4) 为免疑义,对于前述第 (2) (a)(b) 项所述情形下的债务,即使系属在债权确定期间届满后产生的部分 ( 例如债权确定期间届满后新产生的利息、罚息或其他费用等 ) ,该等债务均同样受本协议项下最高额保证的担保。
(4) For the avoidance of doubt, with respect to any debt under the circumstances stated in both item (a) and (b) of the preceding paragraph (2), even for the part of the debts that occur after the expiration of the Period for Claims’ Determination (e.g. the interest, penalty interest and other fees of an existing debt accrued after the expiration of the Period for Claims’ Determination), such part of the debts would also be secured by the maximum amount guarantee hereunder.

 

(5) 关于在先债务的约定 ( 如适用,请在方框内打钩选择;为免疑义,请务必确保中英文本中本选项的勾选状态保持一致 )
(5) Special stipulations on the preceding debts (please check the appropriate box if it’s agreed by both parties; for the avoidance of doubt, please ensure that the selected item is consistent between English and Chinese version ).

 

银行与保证人特别约定,银行与债务人在本协议确定之债权确定期间之前存在的授信或融资协议项下的债务 ( 如有 ) , 也一并纳入本协议项下最高额保证的担保。
It is specially agreed between the Guarantor and the Bank that, all the existing and outstanding debts (if any) under any facility or loan agreement(s) which is entered into by both the Debtor and the Bank prior to the Period for Claims’ Determination, would also be secured by the maximum amount guarantee hereunder.

 

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第二部分 正文 /Part II Content

 

协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

   

6. 最高债权限额
6. Maximum Limit of Claiming

 

本协议项下保证人责任的最高债权限额为 USD7,200,000.00 元整 ( 大写:美元柒佰贰拾万元整 ) 或等值其他币种。

The Maximum Limit of Claiming to the extent that the Guarantor shall assume as a security liability under this Agreement shall be: USD7,200,000.00 (SAY: USD SEVEN MILLION, TWO HUNDRED THOUSAND ONLY) or its equivalents in other currency.

 

7. 债务人
7. The Debtor

 

本协议项下所称债务人为:即播思微系统香港有限公司。

The Debtor hereunder, in terms of this Agreement, refers to BORQS Hong Kong Limited.

 

二、一般条款

II GENERAL PROVISIONS

 

1. 担保范围 本协议担保范围包括因主债权债务合同而产生的融资本金、利息、罚息、需补足的保证金、复利、违约金、赔偿金、评估费、公证费、手续费、实现债权的费用 ( 包括但不限于诉讼费用、财产保全费、差旅费、拍卖费、律师费用、执行费用等 ) 、因保证人在本协议下违约而给银行造成的损失和债务人在主债权债务合同项下的其它所有应付费用。
1. Secured Extent. The Secured Extent of this Guarantee hereunder covers the following items resulting from Principal Contract: the Principal Amount hereof, interest, penalty interest, required cash deposit, compound interest, penalty fine, damage compensation, assessment fees, notarization fees, commission, expenses for realization of the Bank’s rights (including but not limited to litigation fees, property preservation fees, travel fees, auction fees, legal services fees and execution fees), the loss and damage resulting from the defaults of the Guarantor and any other expenses payable by the Debtor under Principal Contract.

  

2. 担保权益之选择 若因债务人发生主债权债务合同项下的违约和 / 或保证人发生本协议项下违约,而造成银行依本协议约定行使担保权益时,若被担保的主债权既有物的担保又有人的担保的,银行可以先就相关担保文件 ( 包括本协议 ) 项下物的担保实现债权,也可以根据相关担保文件的规定 先要求实现人的保证责任。保证人同意,在任何情况下,银行未行使或未及时行使其与债务人在其他任何文件项下的任何权利,包括但不限于债 权、担保物权、违约救济权, 均不得被视为银行怠于或放弃行使权利,亦不会影响其充分行使本协议项下的权利。
2. Choice of Security Interests. When the Bank intends to exercise the security interests due to any default of the Debtor under Principal Contract and/or that of the Guarantor hereunder, if the Principal Amount secured hereunder is secured by both property security and non-property guarantee, the Bank shall, at its full discretion, choose the security interest to be first claimed; namely, it may either recover the debts with the property security thereunder (including this Agreement) first, or require the guarantor to assume guaranteed liability thereunder first. The Guarantor agrees that in any case, the Bank's failure to promptly exercise or Bank’s delay in exercising any of its right under the other agreements to which the Debtor is a party, such rights including but not limited to right of claiming, right of security interest, right of relief under breach of contract, shall not be deemed as the Bank’s intention to forego such rights to exercise or as a waiver thereof, and shall not preclude the exercise of any right hereunder.

 

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协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

 

3. 保证人的陈述与保证 保证人向银行作出如下陈述与保证 , 并确认银行系依赖于该等陈述与保证而签署和履行本协议:
3. Representations and warranties. The Guarantor represents and warrants to the Bank as follows; the Guarantor confirms its understanding that the performance of any obligation hereunder by the Bank is totally based on such Representations and Warranties.

 

(1) 保证人系依据其当地法律成立并有效存续之法人。
(1) The Guarantor guarantees it is a legal person duly incorporated and validly existing under the laws of its jurisdiction of incorporation.

  

(2) 保证人根据中国法律有权签署本协议,以及行使其在本协议项下的权利及履行其在本协议项下的义务,并已完成签署本协议及履行其在本协议项下的义务所需的一切授权及 / 或批准。
(2) The Guarantor, according to PRC laws, has full power to enter into this Agreement and exercise/perform rights and obligations hereunder, and has all necessary authorization and ratification in respect of the execution of this Agreement and the performance of the obligations hereunder.

 

(3) 本协议的签署和履行不违反保证人所应遵守的法律、法规、规章、判决、裁决,也不与保证人的章程或其签署的任何合同、协议或承担的任何其他义务相抵触。
(3) The execution of this Agreement will neither constitute any breach of the laws, regulations, rules, judicial decisions, and awards that the Guarantor shall abide by, nor conflict with its articles of association, any contracts/agreements it signed and any other obligations assumed by it.

  

(4) 本协议各条款均是保证人的真实意思表示,对保证人具有法律约束力。
(4) All the provisions hereunder are the expression of true intention and interest made by the Guarantor, and shall be legally binding thereupon.

  

(5) 保证人保证其向银行出具的所有财务报表是按照其适用的会计准则编制的,真实、公正地表明了保证人的财务状况,并且本协议所涉及的全部资料、文件均是真实、有效、准确、完整而无任何隐瞒的。
(5) All the financial statements provided by the Guarantor to the Bank are prepared in accordance with the general accounting standards, which indicate the financial status of the Guarantor truly and fairly; all the materials and documents in relation to this Agreement are truthful, effective, accurate, integral without any hidden facts purposely undisclosed to Bank..

 

(6) 保证人保证完成应由其作出的为本协议的有效并能合法履行所需的备案、记录或登记,并支付所有税项。
(6) The Guarantor guarantees it shall duly complete all the formalities of filing, recording or registration that it shall assume to ensure the validity of this Agreement and its performance; it shall also bear all the taxes thereof.

 

(7) 保证人保证本协议履行期间不存在任何由法院或行政部门或任何相关方提起或将提起可能会对保证人的业务或财务状况造成重大不利影响的行动或任何法律程序的情况,包

括但不限于破产、清算等。

(7) The Guarantor guarantees no any action or legal procedure is (or is to be) brought forward by any court, administration authorities or other concerned party, which may induce material adverse effects upon its business or financial status, including but not limited to the bankruptcy and liquidation.

 

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协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

 

4. 约定事项
4. Covenants.

 

保证人向银行承诺,并同意在本协议有效期间内,除非银行事先书面同意,保证人应:

The Guarantor undertakes and agrees with the Bank throughout the continuance of this Guarantee that the Guarantor will, unless the Bank otherwise agrees in writing:

 

(1) 应向银行提供:
(1) supply to the Bank:

  

(a) 一经获得,但不迟于保证人每一会计年度结束后 180 天之日,银行可接受的一国际公认的独立的会计师事务所或者在中国注册的注册会计师出具的经审计和核实的该年度的财务报表的副本 ( 包括损益表和资产负债表 )
(a) as soon as they are available, but in any event within one hundred and eighty (180) days after the end of each financial year of the Guarantor copies of its financial statements in respect of such financial year (including a profit and loss account and balance sheet) audited by an internationally recognized firm of independent accountants or a certified public accountant registered in the PRC acceptable to the Bank;

  

(b) 一经获得,但不迟于保证人每半个会计年度结束后 0 天之日,在经审计的财务报表的基础上编制的中期财务报表副本 ( 包括损益表和资产负债表 ) 以及由保证人财务负责人签署的证书,以证明该等财务报表在所有实质性方面是真实的,并清楚地反映了保证人在该等半年内的经营结果和财务状况;
(b) as soon as they are available, but in any event within ninety (90) days after the end of each half of each financial year of the Guarantor, copies of its interim financial statements (including a profit and loss account and balance sheet) prepared on a basis consistent with the audited financial statements of the Guarantor together with a certificate signed by the principal financial officer of the Guarantor to the effect that such financial statements are true in all material respects and present fairly the financial position of the Guarantor as at the end of, and the results of its operations for, such half-year period;

  

(c) 一经请求,银行不时合理要求的有关保证人的财务信息或其他信息;
(c) promptly on request, such additional financial or other information relating to the Guarantor as the Bank may from time to time reasonably request;

  

(2) 应妥善保存与其经营有关的记录和会计账簿,允许银行和 / 或由银行指定的任何专业顾问在任何合理时间检查保证人的该等记录和会计账簿;
(2) keep proper records and books of account in respect of its business and permit the Bank and/or any professional consultants appointed by the Bank at all reasonable times to inspect and examine the records and account books of the Guarantor;

  

(3) 一经发生任何诉讼、仲裁或行政诉讼程序,应立即通知银行;
(3) promptly inform the Bank of any litigation, arbitration or administrative proceeding;

  

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第二部分 正文 /Part II Content

 

协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

 

(4) 应维持其公司法人地位合法有效,应适当并有效地开展其业务,应遵守所有适用于其的法律、法规、授权、协议和义务,并应缴纳所有应缴税款;
(4) maintain its corporate existence and conduct its business in a proper and efficient manner and in compliance with all laws, regulations, authorizations, agreements and obligations applicable to it and pay all taxes imposed on it when due;

 

(5) 应确保未经银行事先书面同意,保证人的股权或所有权或控制权 ( 直接或间接 ) 不发生变化;
(5) procure that there is no change of the shareholdings in or ownership or control (direct or indirect) of the Guarantor without the prior written consent of the Bank;

  

(6) 应确保未经银行事先书面同意,不对保证人的章程做出任何修改或补充;
(6) procure that no amendment or supplement is made to the articles of association of the Guarantor without the prior written consent of the Bank;

  

(7) 除非法律另有规定,应确保其在本协议项下的义务在任何时候与其所有其他无担保债务处于至少相同的清偿顺序;
(7) ensure that its obligations under this Guarantee at all times rank at least pari passu with all other unsecured obligations of the Guarantor unless otherwise provided by law;

  

(8) 应确保未经银行事先书面同意,不得与任何其他实体合并或兼并或采取任何措施进行分立、歇业、整顿、清算、破产或解散;
(8) ensure that not merge or consolidate with any other entity or take any step with a view to demerger, winding-up, administration, liquidation, bankruptcy or dissolution without the prior written consent of the Bank;

 

(9) 应确保未经银行事先书面同意,不得在其全部或任何资产或收益上设定或允许存在以任何人为受益人 ( 银行除外 ) 的任何担保;
(9) ensure that not create or attempt or agree to create or permit to arise or exist any charge over all or any part of its property, assets or revenues in favor of any person except for the Bank written consent of the Bank;

  

(10) 未经银行事先书面同意,无论通过单个的交易还是一系列的交易 ( 无论与否为关联交易 ) ,不得出售、转移或以其他方式转让、处理或处置其业务、资产或收益的全部或任何部分 ( 但正常业务过程中按公平原则转让、处理或处置的除外 )
(10) subjected to the written consent of the Bank, not sell, transfer or otherwise assign, deal with or dispose of all or any part of its business or (except for good consideration in the ordinary course of its business) its assets or revenues, whether by a single transaction or by a number of transactions whether related or not;

  

(11) 不得签署或承担可能对其财务或其他状况有重大不利影响的任何协议或义务;
(11) not enter into any agreement or obligation which might materially and adversely affect its financial or other condition;

  

(12) 应确保未经银行事先书面同意,不得新增向其他第三方的负 债 ( 包括融资租赁 )
(12) without the prior written consent of the Bank, the Guarantor hereof shall not increase its indebtedness (including finance leasing) from any third party .

 

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第二部分 正文 /Part II Content

 

协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

 
5. 费用和开支
5. Expense and Fees.

  

(1) 保证人在此承诺,一经要求,即将银行为行使或保护银行在本协议项下的各项权利及权力而产生的、或因本协议所引起的应归咎于保证人的任何争议或因保证人对本协议的任何违反而使银行合理地产生的所有成本、开支及费用 ( 包括诉讼费、律师费等法律费用 ) 立即支付或偿付给银行。
(1) The Guarantor undertakes hereby, once requested, it shall immediately pay to the Bank the related costs, expenses and fees (including litigation fee, reasonable attorney’s fee and other legal service fees) resulting from the exertion or protection of the rights/powers hereunder, or from any dispute in relation to this Agreement which is ascribed to the Guarantor, or from any default by the Guarantor hereunder.

  

(2) 保证人须支付与本协议或与本协议项下的转让有关的依法应由保证人承担的所有印花税或类似其它税项 并在未能支付或延误支付该等税费而导致银行发生任何责任、费用、索赔和开支时向银行作出赔偿。
(2) The Guarantor shall assume all of the stamp duty or any other taxes in relation to this Agreement or the transfer hereunder; in case of any failure or delay of the said payment which leads to the occurrence of any liability, fee, claiming and expense of the Bank, the Guarantor shall compensate for it.

 

6. 授权扣款与抵消 保证人不可撤销的授权银行,在保证人对于银行有任何到期未清偿债务的时候,银行均有权在任何时间无需通知保证人,即可将保证人在银行任何账户中的款项(不论币种、期限如何)直接用于偿付上述债务;为本协议目的,保证人确认银行有权自行决定相关货币兑换的适用汇率,因此导致的任何存款损失或汇率风险均由保证人承担。
6. Deduction Authorization and Set-off. The Guarantor hereby irrevocably authorizes, in case of any failure by the Guarantor to pay the debts due and payable to the Bank, the Bank shall have the right to deduct corresponding amount directly (regardless of the currency and deposit term) in any account of the Guarantor opened at the Bank to repay the debt, without any prior notice; for the purpose of this Agreement, the Guarantor confirms the Bank shall, at its sole discretion, decide the applicable exchange rate of currency conversion, and any deposit loss or exchange risk resulting from such conversion shall be borne by the Guarantor.

 

7. 独立性 本协议的效力独立于主债权债务合同的效力,不因主债权债务合同的无效或被撤销或未成立而无效或可被撤销或未成立;本协议部分条款被宣告无效或被撤销,不影响其余条款的效力。
7. Independence. The effectiveness of this Agreement is independent from that of the Principal Contract, and it will not be invalid or revocable due to the invalidity or revocation of Principal Contract. The invalidity or revocation of any term or condition hereunder shall not affect the validity of the other terms and conditions hereunder.

 

8. 违约事件及违约责任 下列任一事件均构成保证人在本协议项下的违约事件 (“ 违约事件 ”)
8. Events of default. Each of the following circumstances shall constitute an event of default hereunder with respect to the Guarantor:

 

(1) 债务人在主债权债务合同项下的任一违约事件;
(1) Any default by the Debtor under Principal Contract;

 

  9  

第二部分 正文 /Part II Content

 

协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

  

(2) 保证人在本协议中所作的任何陈述、保证或承诺在任何重要方面被证明是不正确的或是具有误导性的;
(2) Any presentation and warranty made by the Guarantor is or proves to be incorrect or misleading in any material aspect, or the Guarantor fails to perform or comply with any stipulations hereunder in any material aspect;

  

(3) 保证人违反本协议下的其他任何义务;
(3) Any other default by the Guarantor hereunder;

 

(4) 保证人发生严重影响其本协议项下履约能力的其他情形的。
(4) Any other circumstances occurred by the Guarantor that have material negative effect on the Guarantor’s ability to fulfill its obligation under this Agreement..

  

9. 违约处理 发生前述任一违约事件时,银行有权宣布主债 权及 / 或债权确定期间提前到期,及 / 或采取以下所述之一种或多种措施:
9. Disposal of Default. In case of any of the aforesaid events of default, the Bank shall have the right to declare the early-maturity of the Principal Amount under the Principal Contract and/or the Period for Claims’ Determination, and/or adopt one or several measures below:-

 

(1) 宣布保证人已构成本协议项下违约,并要求限期整改;
(1) Declare the default of the Guarantor under this Agreement, and require the Guarantor to make prompt correction within designated correction period;

 

(2) 要求保证人依本协议承担保证责任;
(2) Require the Guarantor to assume the guarantee obligations as provided in this Agreement;

 

(3) 要求债务人或保证人提供新的担保;
(3) Require the Debtor or the Guarantor to provide new security;

 

(4) 向有管辖权的人民法院提起诉讼;
(4) File an action to competent People’s Court;

  

(5) 采取在中国法律最大范围内所允许的其他措施。
(5) Take any other measure which is to the fullest extent allowed by PRC laws.

 

10. 通知
10. Notice.

 

(1) 本协议一方发往另一方的任何其他通知,均应发往本协议开头列明的地址,直到另一方书面通知更改该地址为止。只要按上述地址发送,则视为在下列日期送达:如是信函,则按营业地址挂号寄发后的第七个营业日;如果是专程送达, 则为收件人签收之日;如果为传真或电子邮件,则为传真或电子邮件发送之日。但向银行发出或交付的所有通知、要求或其它通讯均须在银行实际收到时被视为已经送达。且以传真方式向银行发出的所有通知、要求须于事后将原件以当面送交或邮寄于银行的方式加以确认。
(1) Any notice from one party to the other party shall be delivered to the address stated at the beginning of this Agreement, unless such address is changed with written notice by the other party. Any notice delivered to the above address shall be deemed to have been received:- for mail, on the 7 th business day following the registered delivery date to the main business address; for express, on the signing date of the receiver; for fax or E-mail, on the delivering date of the fax or E-mail. All the notices, requirements or any other communications shall be deemed to be received as they are actually received by the Bank. The originals of the said notices and requirements delivered via fax shall be sent to the Bank via express or mail after the said fax.

 

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第二部分 正文 /Part II Content

 

协议编号 /Agreement Ref. No.: CL201508001-GA-2-003

 

(2) 保证人同意,提起任何诉讼、仲裁的传票或通知可交付或留置到本协议开头约定的地址即视为已经送达保证人。保证人放弃一切抗辩权。
(2) The Guarantor consents and agrees, any summon or notice in relation to litigations/arbitrations shall be delivered or left to the address listed at the beginning of this Agreement. Once delivered or left to the said address, it shall be deemed as received by the Guarantor. The Guarantor undertakes to forego all claims of defense.

 

11. 其他
11. Miscellaneous.

 

(1) 本协议自保证人和银行双方签署之日起生效,至本协议所担保的全部债务被完全清偿后终止。
(1) This Agreement will come into force upon the seal and signature of both parties, and will terminate when all the secured debts hereunder have been fully and completely repaid.

 

(2) 本协议的签订和履行均适用中国法律。
(2) This Agreement shall be governed by and construed in accordance with the laws of P.R. China.

 

(3) 有关本协议的一切争议应通过友好协商解决;协商不成的, 应向银行住所地有管辖权的人民法院提起诉讼。争议期间, 各方仍应继续履行未涉争议的条款。
(3) All disputes under or relating to this Agreement shall be settled through friendly negotiations; in case of any failure of negotiation, the dispute shall be referred to the jurisdiction of competent people’s court of the place where the Bank is located. During the period of dispute, each party shall continue executing the clauses prescribed under the agreement which are not involved in the dispute.

  

(4) 本协议需要变更或补充的,双方另行达成书面协议,作为本协议的附件。本协议附件是本协议不可分割的组成部分, 与本协议正文具有同等的法律效力。
(4) This Agreement may be amended during the duration of this Agreement by the Parties, provided that such amendment shall be in writing and be drawn up in Schedules. Any Schedule is the integral part of this Agreement, all of which are of the same effect.

  

(5) 本协议同时配有英文文本供参考。如中英文本存在差异, 应以中文本的约定为准。
(5) This Agreement shall be formed with both Chinese and English. In case of any discrepancy between the said versions, the Chinese version shall prevail.

  

(6) 除非在本协议中另有特别说明,本协议中相关用语和表述与主债权债务合同具有相同的含义。
(6) Unless otherwise defined in this Agreement, the relevant words and phrases shall have the same meaning as in the Principal Contract.

 

(7) 本协议一式贰份,具有同等效力。保证人、银行各执一份。
(7) This Agreement is made in TWO originals with equivalent legal effect; the Guarantor and the Bank keep one of them respectively.

  

- 本担保协议末尾 -

- End of this Guarantee -

 

11

 

 

Exhibit 10.47

 

 

 

 

 

 

 

 

 

 

保证协议(最高额)

Guarantee Agreement (Maximum Amount)

 

 

 

公司保证人适用

For Corporate Guarantor

 

(文件编号/Ref No.: CL201606008-GA-002)

 

 

 

 

 

 

 

 

 

 

 

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第一部分 签署页 /Part I Execution Page 协议编号 /Agreement Ref. No.: CL201606008-GA-002

 

签署页

Execution Page

 

银行

Bank

 

保证人

Guarantor

     

浦发硅谷银行有限公司

SPD SILICON VALLEY BANK CO., LTD.

  BORQS International Holding Corp
     

住所地

with address at

 

住所地

with address at

     

上海市杨浦区大连路 588 号宝地广场 B 21

200082

   

21/F, Block B, Baoland Plaza,

No. 588, Dalian Road, Shanghai 200082

 

PO Box 309, Ugland House, Grand

Cayman, KY1-1104, Cayman Islands

     

以上当事人在本协议中简称为 银行

hereinafter referred to as “Bank”

 

以上当事人在本协议中简称为 保证人

hereinafter referred to as "Guarantor"

 

上述各方当事人在此同意并接受本协议中所述之全部条款;保证人特此确认, 就本协议项下有关条件和条款,银行已向保证人作出充分的说明和解释,保证人已理解、同意、承认该等条款。

The parties above hereby agree to and accept all terms and conditions set forth in this Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Guarantor completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201606008-GA-002

 

正文

Content

 

为确保债务人 ( 定义见下文 ) 全面、及时履行其在主债权债务合同 ( 定义见下文 ) 项下各项义务,保障银行债权的实现,本协议项下保证人同意自愿按本协议承担担保责任。

For the security of the well performance of the obligations under the Principal Contract (as defined hereunder) by the Debtor (as defined hereunder) and ensuring the recovery of the Bank’s right of credit, the Guarantor hereof agrees to assume the guarantee liability as agreed herein.

 

为实现上述目的,保证人和银行经协商一致并达成如下条款, 以资各方共同恪守。

Therefore, a guarantee agreement (“the Agreement” or “Guarantee”) is reached by and between the Guarantor and the Bank hereof as follows.

 

一、特别条款

I SPECIAL PROVISIONS

 

1. 保证方式
1. Guarantee Obligations

 

(1) 保证人在本协议项下承担的责任为连带责任保证。
(1) The obligations of the Guarantor hereunder are joint and several.

 

(2) 保证人在此无条件且不可撤销地向银行保证,如果债务人未能在到期时支付主合同项下的任何款项,无论银行对主合同项下的债权是否拥有其他担保权利 ( 包括但不限于保证、抵押、质押等担保方式 ) ,银行均有权先要求本协议项下保证人在本协议约定的保证范围内承担保证责任,而无须先要求其他担保人履行担保责任。
(2) The Guarantor hereby irrevocably and unconditionally guarantees to the Bank the due and punctual observance and performance of the payment obligations under the Principal Contract by the Borrower, provided that the Banks has other security rights (by way of, including but not limited to guarantee, mortgage, pledge, etc.), the Bank shall be entitled to first enforce its rights hereunder against the Guarantor within the Secured Extent, and shall not be required to take any steps to first enforce its creditor’s rights against any other security provider.

 

2. 保证期间
2. Period of Guarantee

 

保证期间为:债务人在主债权债务合同下的债务履行期届满之日起二年。

The period of guarantee shall be: two years after the expiration of the Period for Debt Performance of the Debtor under the Principal Contract.

 

为免疑义,本协议所称“到期”、“届满”或类似措辞均包括债权人宣布主债权提前到期的情形。债权人宣布全部或部分主债权提前到期的,以其宣布的提前到期日为该等主债权债务履行期届满日,债权确定期间同时到期。

For avoidance of doubt, the “expiration”, “maturity” or such similar wording shall be interpreted as including the circumstance that the creditor declares the early-maturity of any Principal amount, in whole or in part. In the event of the foregoing, the Period for Debt Performance shall be advanced to the date that such declaration of early-maturity is made, and the Period for Claims’ Determination shall mature correspondingly.

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201606008-GA-002

 

3. 主债权债务合同
3. Principal Contract

 

本协议所担保的主债权债务合同为:债务人与本协议银行在债权确定期间内签署或履行的一系列债权债务文件,包括但不限于双方于 2016 07 20 日签署的《授信协议》 ( 编号 : CL201606008) 2017 07 20 日签署的《变更协议》(编 号: CL201606008-001 ), 2017 08 31 日签署的《变更协 议》(编号: CL201606008-002 )以及 2018 ____ ____ 日签署的《变更协议》(编号: CL201606008-003 )。

The Principal Contract hereunder means: a series of documents of claims and liabilities executed or performed between the Debtor and the Bank hereunder within the stipulated Period for Claims’ Determination, including but not limited to Facility Agreement (Agreement No. CL201606008) dated Jul. 20 th , 2016, Amendment Agreement (Agreement No. CL201606008-001) dated Jul. 20 th , 2017, Amendment Agreement (Agreement No. CL201606008-002) dated Aug. 31 st 2017 and Amendment Agreement (Agreement No. CL201606008-003) dated (Month) (Day), 2018.

 

4. 保证所担保的主债权 / 被担保主债权
4. Principal Amount secured by the Guarantee

 

本协议项下被担保的主债权为:银行在债权确定期间内,向债务人连续提供的一笔或多笔融资余额。

The Principal Amount secured by the Guarantee means: the balance of one or several finances, provided by the Bank to the Debtor within the Period for Claims’ Determination specified hereunder.

 

5. 债权确定期间
5. Period for Claims’ Determination

 

(1) 本协议所指债权确定期间为:自 2016 07 20 日至 2019 08 27 日止。
(1) The Period for Claims’ Determination hereunder refers to: from Jul. (Month) 20 th (Day), 2016 to Aug. (Month) 27 th (Day), 2019.

 

(2) 为免疑义,前述有关债权,包括以下情形:
(2) For the avoidance of doubt, the wording of “Claim” in the preceding paragraph, includes the circumstances set forth below:

 

(a) 任何债权债务文件,只要债务人与银行系在债权确定期间内签署,系视为符合本协议担保要求,该文件项下所有债务均纳入本协议项下最高额保证的担保;及 /
(a) Any document in relation to the creditor’s rights or the debts, if only signed and/or sealed by the Debtor and the Bank within the Period for Claims’ Determination, would be deemed complying with the requirements of this Agreement, and all debts arising therefrom would be secured by the maximum amount guarantee hereunder; and/or

 

(b) 债务人与银行虽未签署有关债权债务文件,但有证据证明其在债权确定期间内实际发生有此等债权的情形。
(b) Although no written documents in relation to the creditor’s rights or the debts is signed and/or sealed between the Debtor and the Bank, some evidence exists proving the occurrence of such debts within the Period for Claims’ Determination.

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201606008-GA-002

 

(3) 为免疑义,对于前款 (a) 项所述之债权债务文件项下的具体债务,即使其实际发生的时间晚于债权确定期间届满日 ( 包括但不限于:有关贷款或贷款额度系在债权确定期间届满后方始提用;有关保函、信用证等表外额度在债权确定期间内提用,银行对外开具了付款承诺性文件,但在债权确定期间届满后发生银行对外垫付的;或有关保函、信用证等表外额度在债权确定期间届满后方始提用对外开具承诺性文件等 ) ,该等债务同样受本协议项下最高额保证的担保。
(3) For the avoidance of doubt, in respect of the debts under the document in relation to the creditor’s rights or the debts stated in item (a) of the preceding paragraph, even if the actual debt occurs practically after the expiry date of the Period for Claims’ Determination, it would also be secured by the maximum amount guarantee hereunder. The aforesaid debts occurred after the expiration date of the Period for Claims’ Determination includes, but not limited to, the circumstance as follows: any loan or credit line of loan is actually requested or drawn down after the expiration date of the Period for Claims’ Determination; any facility for purpose such as the issuance of the guarantee or the letter of credit is requested and utilized within the Period for Claims’ Determination and the bank issues the formal documents with commitment obligation, while the actual payment or advance under such documents occur after the expiration of the Period for Claims’ Determination; or, any facility for purpose such as the issuance of the guarantee or the letter of credit is requested for utilized after the expiration of the Period for Claims’ Determination.

 

(4) 为免疑义,对于前述第 (2) (a)(b) 项所述情形下的债务,即使系属在债权确定期间届满后产生的部分 ( 例如债权确定期间届满后新产生的利息、罚息或其他费用等 ) ,该等债务均同样受本协议项下最高额保证的担保。
(4) For the avoidance of doubt, with respect to any debt under the circumstances stated in both item (a) and (b) of the preceding paragraph (2), even for the part of the debts that occur after the expiration of the Period for Claims’ Determination (e.g. the interest, penalty interest and other fees of an existing debt accrued after the expiration of the Period for Claims’ Determination), such part of the debts would also be secured by the maximum amount guarantee hereunder.

 

(5) 关于在先债务的约定 ( 如适用,请在方框内打钩选择;为免疑义,请务必确保中英文本中本选项的勾选状态保持一致 )
(5) Special stipulations on the preceding debts (please check the appropriate box if it’s agreed by both parties; for the avoidance of doubt, please ensure that the selected item is consistent between English and Chinese version ).

 

银行与保证人特别约定,银行与债务人在本协议确定之债权确定期间之前存在的授信或融资协议项下的债务 ( 如有 ) , 也一并纳入本协议项下最高额保证的担保。
It is specially agreed between the Guarantor and the Bank that, all the existing and outstanding debts (if any) under any facility or loan agreement(s) which is entered into by both the Debtor and the Bank prior to the Period for Claims’ Determination, would also be secured by the maximum amount guarantee hereunder.

 

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6. 最高债权限额
6. Maximum Limit of Claiming

 

本协议项下保证人责任的最高债权限额为 RMB21,600,000.00 元整 ( 大写:人民币贰仟壹佰陆拾万元整 ) 或等值其他币种。

The Maximum Limit of Claiming to the extent that the Guarantor shall assume as a security liability under this Agreement shall be: RMB21,600,000.00 (SAY: RMB TWENTY-ONE MILLION,SIX HUNDRED THOUSAND ONLY) or its equivalents in other currency.

 

7. 债务人
7. The Debtor

 

本协议项下所称债务人为:即播思通讯技术(北京)有限公司。

The Debtor hereunder, in terms of this Agreement, refers to BORQS Beijing Ltd.

 

二、一般条款

II GENERAL PROVISIONS

 

1. 担保范围 本协议担保范围包括因主债权债务合同而产生的融资本金、利息、罚息、需补足的保证金、复利、违约金、赔偿金、评估费、公证费、手续费、实现债权的费用 ( 包括但不限于诉讼费用、财产保全费、差旅费、拍卖费、律师费用、执行费用等 ) 、因保证人在本协议下违约而给银行造成的损失和债务人在主债权债务合同项下的其它所有应付费用。
1. Secured Extent. The Secured Extent of this Guarantee hereunder covers the following items resulting from Principal Contract: the Principal Amount hereof, interest, penalty interest, required cash deposit, compound interest, penalty fine, damage compensation, assessment fees, notarization fees, commission, expenses for realization of the Bank’s rights (including but not limited to litigation fees, property preservation fees, travel fees, auction fees, legal services fees and execution fees), the loss and damage resulting from the defaults of the Guarantor and any other expenses payable by the Debtor under Principal Contract.

 

2. 担保权益之选择 若因债务人发生主债权债务合同项下的违约和 / 或保证人发生本协议项下违约,而造成银行依本协议约定行使担保权益时,若被担保的主债权既有物的担保又有人的担保的,银行可以先就相关担保文件 ( 包括本协议 ) 项下物的担保实现债权,也可以根据相关担保文件的规定 先要求实现人的保证责任。保证人同意,在任何情况下, 银行未行使或未及时行使其与债务人在其他任何文件项下的任何权利,包括但不限于债权、担保物权、违约救济权, 均不得被视为银行怠于或放弃行使权利,亦不会影响其充分行使本协议项下的权利。
2. Choice of Security Interests. When the Bank intends to exercise the security interests due to any default of the Debtor under Principal Contract and/or that of the Guarantor hereunder, if the Principal Amount secured hereunder is secured by both property security and non-property guarantee, the Bank shall, at its full discretion, choose the security interest to be first claimed; namely, it may either recover the debts with the property security thereunder (including this Agreement) first, or require the guarantor to assume guaranteed liability thereunder first. The Guarantor agrees that in any case, the Bank's failure to promptly exercise or Bank’s delay in exercising any of its right under the other agreements to which the Debtor is a party, such rights including but not limited to right of claiming, right of security interest, right of relief under breach of contract, shall not be deemed as the Bank’s intention to forego such rights to exercise or as a waiver thereof, and shall not preclude the exercise of any right hereunder.

 

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3. 保证人的陈述与保证 保证人向银行作出如下陈述与保证 , 并确认银行系依赖于该等陈述与保证而签署和履行本协议:
3. Representations and warranties. The Guarantor represents and warrants to the Bank as follows; the Guarantor confirms its understanding that the performance of any obligation hereunder by the Bank is totally based on such Representations and Warranties.

 

(1) 保证人系依据其当地法律成立并有效存续之法人。
(1) The Guarantor guarantees it is a legal person duly incorporated and validly existing under the laws of its jurisdiction of incorporation.

 

(2) 保证人根据中国法律有权签署本协议,以及行使其在本协议项下的权利及履行其在本协议项下的义务,并已完成签署本协议及履行其在本协议项下的义务所需的一切授权及 / 或批准。
(2) The Guarantor, according to PRC laws, has full power to enter into this Agreement and exercise/perform rights and obligations hereunder, and has all necessary authorization and ratification in respect of the execution of this Agreement and the performance of the obligations hereunder.

 

(3) 本协议的签署和履行不违反保证人所应遵守的法律、法规、规章、判决、裁决,也不与保证人的章程或其签署的任何合同、协议或承担的任何其他义务相抵触。
(3) The execution of this Agreement will neither constitute any breach of the laws, regulations, rules, judicial decisions, and awards that the Guarantor shall abide by, nor conflict with its articles of association, any contracts/agreements it signed and any other obligations assumed by it.

 

(4) 本协议各条款均是保证人的真实意思表示,对保证人具有法律约束力。
(4) All the provisions hereunder are the expression of true intention and interest made by the Guarantor, and shall be legally binding thereupon.

 

(5) 保证人保证其向银行出具的所有财务报表是按照其适用的会计准则编制的,真实、公正地表明了保证人的财务状况, 并且本协议所涉及的全部资料、文件均是真实、有效、准确、完整而无任何隐瞒的。
(5) All the financial statements provided by the Guarantor to the Bank are prepared in accordance with the general accounting standards, which indicate the financial status of the Guarantor truly and fairly; all the materials and documents in relation to this Agreement are truthful, effective, accurate, integral without any hidden facts purposely undisclosed to Bank..

 

(6) 保证人保证完成应由其作出的为本协议的有效并能合法履行所需的备案、记录或登记,并支付所有税项。
(6) The Guarantor guarantees it shall duly complete all the formalities of filing, recording or registration that it shall assume to ensure the validity of this Agreement and its performance; it shall also bear all the taxes thereof.

 

(7) 保证人保证本协议履行期间不存在任何由法院或行政部门或任何相关方提起或将提起可能会对保证人的业务或财务状况造成重大不利影响的行动或任何法律程序的情况,包括但不限于破产、清算等。
(7) The Guarantor guarantees no any action or legal procedure is (or is to be) brought forward by any court, administration authorities or other concerned party, which may induce material adverse effects upon its business or financial status, including but not limited to the bankruptcy and liquidation.

 

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4. 约定事项
4. Covenants.

 

保证人向银行承诺,并同意在本协议有效期间内,除非银行事先书面同意,保证人应:

The Guarantor undertakes and agrees with the Bank throughout the continuance of this Guarantee that the Guarantor will, unless the Bank otherwise agrees in writing:

 

(1) 应向银行提供:
(1) supply to the Bank:

 

(a) 一经获得,但不迟于保证人每一会计年度结束后 180 天之日,银行可接受的一国际公认的独立的会计师事务所或者在中国注册的注册会计师出具的经审计和核实的该年度的财务报表的副本 ( 包括损益表和资产负债表 )
(a) as soon as they are available, but in any event within one hundred and eighty (180) days after the end of each financial year of the Guarantor copies of its financial statements in respect of such financial year (including a profit and loss account and balance sheet) audited by an internationally recognized firm of independent accountants or a certified public accountant registered in the PRC acceptable to the Bank;

 

(b) 一经获得,但不迟于保证人每半个会计年度结束后 90 天之日,在经审计的财务报表的基础上编制的中期财务报表副本 ( 包括损益表和资产负债表 ) 以及由保证人财务负责人签署的证书,以证明该等财务报表在所有实质性方面是真实的,并清楚地反映了保证人在该等半年内的经营结果和财务状况;
(b) as soon as they are available, but in any event within ninety (90) days after the end of each half of each financial year of the Guarantor, copies of its interim financial statements (including a profit and loss account and balance sheet) prepared on a basis consistent with the audited financial statements of the Guarantor together with a certificate signed by the principal financial officer of the Guarantor to the effect that such financial statements are true in all material respects and present fairly the financial position of the Guarantor as at the end of, and the results of its operations for, such half-year period;

 

(c) 一经请求,银行不时合理要求的有关保证人的财务信息或其他信息;
(c) promptly on request, such additional financial or other information relating to the Guarantor as the Bank may from time to time reasonably request;

 

(2) 应妥善保存与其经营有关的记录和会计账簿,允许银行和 / 或由银行指定的任何专业顾问在任何合理时间检查保证人的该等记录和会计账簿;
(2) keep proper records and books of account in respect of its business and permit the Bank and/or any professional consultants appointed by the Bank at all reasonable times to inspect and examine the records and account books of the Guarantor;

 

(3) 一经发生任何诉讼、仲裁或行政诉讼程序,应立即通知银行;
(3) promptly inform the Bank of any litigation, arbitration or administrative proceeding;

 

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(4) 应维持其公司法人地位合法有效,应适当并有效地开展其业务,应遵守所有适用于其的法律、法规、授权、协议和义务,并应缴纳所有应缴税款;
(4) maintain its corporate existence and conduct its business in a proper and efficient manner and in compliance with all laws, regulations, authorizations, agreements and obligations applicable to it and pay all taxes imposed on it when due;

 

(5) 应确保未经银行事先书面同意,保证人的股权或所有权或控制权 ( 直接或间接 ) 不发生变化;
(5) procure that there is no change of the shareholdings in or ownership or control (direct or indirect) of the Guarantor without the prior written consent of the Bank;

 

(6) 应确保未经银行事先书面同意,不对保证人的章程做出任何修改或补充;
(6) procure that no amendment or supplement is made to the articles of association of the Guarantor without the prior written consent of the Bank;

 

(7) 除非法律另有规定,应确保其在本协议项下的义务在任何时候与其所有其他无担保债务处于至少相同的清偿顺序;
(7) ensure that its obligations under this Guarantee at all times rank at least pari passu with all other unsecured obligations of the Guarantor unless otherwise provided by law;

 

(8) 应确保未经银行事先书面同意,不得与任何其他实体合并或兼并或采取任何措施进行分立、歇业、整顿、清算、破产或解散;
(8) ensure that not merge or consolidate with any other entity or take any step with a view to demerger, winding-up, administration, liquidation, bankruptcy or dissolution without the prior written consent of the Bank;

 

(9) 应确保未经银行事先书面同意,不得在其全部或任何资产或收益上设定或允许存在以任何人为受益人 ( 银行除外 ) 的任何担保;
(9) ensure that not create or attempt or agree to create or permit to arise or exist any charge over all or any part of its property, assets or revenues in favor of any person except for the Bank written consent of the Bank;

 

(10) 未经银行事先书面同意,无论通过单个的交易还是一系列的交易 ( 无论与否为关联交易 ) ,不得出售、转移或以其他方式转让、处理或处置其业务、资产或收益的全部或任何部分 ( 但正常业务过程中按公平原则转让、处理或处置的除外 )
(10) subjected to the written consent of the Bank, not sell, transfer or otherwise assign, deal with or dispose of all or any part of its business or (except for good consideration in the ordinary course of its business) its assets or revenues, whether by a single transaction or by a number of transactions whether related or not;

 

(11) 不得签署或承担可能对其财务或其他状况有重大不利影响的任何协议或义务;
(11) not enter into any agreement or obligation which might materially and adversely affect its financial or other condition;

 

(12) 应确保未经银行事先书面同意,不得新增向其他第三方的负 债 ( 包括融资租赁 )
(12) without the prior written consent of the Bank, the Guarantor hereof shall not increase its indebtedness (including finance leasing) from any third party .

 

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5. 费用和开支
5. Expense and Fees.

 

(1) 保证人在此承诺,一经要求,即将银行为行使或保护银行在本协议项下的各项权利及权力而产生的、或因本协议所引起的应归咎于保证人的任何争议或因保证人对本协议的任何违反而使银行合理地产生的所有成本、开支及费用 ( 包括诉讼费、律师费等法律费用 ) 立即支付或偿付给银行。
(1) The Guarantor undertakes hereby, once requested, it shall immediately pay to the Bank the related costs, expenses and fees (including litigation fee, reasonable attorney’s fee and other legal service fees) resulting from the exertion or protection of the rights/powers hereunder, or from any dispute in relation to this Agreement which is ascribed to the Guarantor, or from any default by the Guarantor hereunder.

 

(2) 保证人须支付与本协议或与本协议项下的转让有关的依法应由保证人承担的所有印花税或类似其它税项, 并在未能支付或延误支付该等税费而导致银行发生任何责任、费用、索赔和开支时向银行作出赔偿。
(2) The Guarantor shall assume all of the stamp duty or any other taxes in relation to this Agreement or the transfer hereunder; in case of any failure or delay of the said payment which leads to the occurrence of any liability, fee, claiming and expense of the Bank, the Guarantor shall compensate for it.

 

6. 授权扣款与抵消 保证人不可撤销的授权银行,在保证人对于银行有任何到期未清偿债务的时候,银行均有权在任何 时间无需通知保证人,即可将保证人在银行任何账户中 的款项(不论币种、期限如何)直接用于偿付上述债务;为本协议目的,保证人确认银行有权自行决定相关货币兑换的适用汇率,因此导致的任何存款损失或汇率风险均由保证人承担。
6. Deduction Authorization and Set-off. The Guarantor hereby irrevocably authorizes, in case of any failure by the Guarantor to pay the debts due and payable to the Bank, the Bank shall have the right to deduct corresponding amount directly (regardless of the currency and deposit term) in any account of the Guarantor opened at the Bank to repay the debt, without any prior notice; for the purpose of this Agreement, the Guarantor confirms the Bank shall, at its sole discretion, decide the applicable exchange rate of currency conversion, and any deposit loss or exchange risk resulting from such conversion shall be borne by the Guarantor.

 

7. 独立性 本协议的效力独立于主债权债务合同的效力,不因主债权债务合同的无效或被撤销或未成立而无效或可被撤销或未成立;本协议部分条款被宣告无效或被撤销,不影响其余条款的效力。
7. Independence. The effectiveness of this Agreement is independent from that of the Principal Contract, and it will not be invalid or revocable due to the invalidity or revocation of Principal Contract. The invalidity or revocation of any term or condition hereunder shall not affect the validity of the other terms and conditions hereunder.

 

8. 违约事件及违约责任 下列任一事件均构成保证人在本协议项下的违约事件 (“ 违约事件 ”)
8. Events of default. Each of the following circumstances shall constitute an event of default hereunder with respect to the Guarantor:

 

(1) 债务人在主债权债务合同项下的任一违约事件;
(1) Any default by the Debtor under Principal Contract;

 

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(2) 保证人在本协议中所作的任何陈述、保证或承诺在任何重要方面被证明是不正确的或是具有误导性的;
(2) Any presentation and warranty made by the Guarantor is or proves to be incorrect or misleading in any material aspect, or the Guarantor fails to perform or comply with any stipulations hereunder in any material aspect;

 

(3) 保证人违反本协议下的其他任何义务;
(3) Any other default by the Guarantor hereunder;

 

(4) 保证人发生严重影响其本协议项下履约能力的其他情形的。
(4) Any other circumstances occurred by the Guarantor that have material negative effect on the Guarantor’s ability to fulfill its obligation under this Agreement..

 

9. 违约处理 发生前述任一违约事件时,银行有权宣布主债 权及/或债权确定期间提前到期,及/或采取以下所述之一种或多种措施:
9. Disposal of Default. In case of any of the aforesaid events of default, the Bank shall have the right to declare the early-maturity of the Principal Amount under the Principal Contract and/or the Period for Claims’ Determination, and/or adopt one or several measures below:-

 

(1) 宣布保证人已构成本协议项下违约,并要求限期整改;
(1) Declare the default of the Guarantor under this Agreement, and require the Guarantor to make prompt correction within designated correction period;

 

(2) 要求保证人依本协议承担保证责任;
(2) Require the Guarantor to assume the guarantee obligations as provided in this Agreement;

 

(3) 要求债务人或保证人提供新的担保;
(3) Require the Debtor or the Guarantor to provide new security;

 

(4) 向有管辖权的人民法院提起诉讼;
(4) File an action to competent People’s Court;

 

(5) 采取在中国法律最大范围内所允许的其他措施。
(5) Take any other measure which is to the fullest extent allowed by PRC laws.

 

10. 通知
10. Notice.

 

(1) 本协议一方发往另一方的任何其他通知,均应发往本协议开头列明的地址,直到另一方书面通知更改该地址为止。只要按上述地址发送,则视为在下列日期送达:如是信函,则按营业地址挂号寄发后的第七个营业日;如果是专程送达,则为收件人签收之日;如果为传真或电子邮件,则为传真或电子邮件发送之日。但向银行发出或交付的所有通知、要求或其它通讯均须在银行实际收到时被视为已经送达。且以传真方式向银行发出的所有通知、要求须于事后将原件以当面送交或邮寄于银行的方式加以确认。
(1) Any notice from one party to the other party shall be delivered to the address stated at the beginning of this Agreement, unless such address is changed with written notice by the other party. Any notice delivered to the above address shall be deemed to have been received:- for mail, on the 7 th business day following the registered delivery date to the main business address; for express, on the signing date of the receiver; for fax or E-mail, on the delivering date of the fax or E-mail. All the notices, requirements or any other communications shall be deemed to be received as they are actually received by the Bank. The originals of the said notices and requirements delivered via fax shall be sent to the Bank via express or mail after the said fax.

 

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第二部分 正文 /Part II Content 协议编号 /Agreement Ref. No.: CL201606008-GA-002

 

(2) 保证人同意,提起任何诉讼、仲裁的传票或通知可交付或留置到本协议开头约定的地址即视为已经送达保证人。保证人放弃一切抗辩权。
(2) The Guarantor consents and agrees, any summon or notice in relation to litigations/arbitrations shall be delivered or left to the address listed at the beginning of this Agreement. Once delivered or left to the said address, it shall be deemed as received by the Guarantor. The Guarantor undertakes to forego all claims of defense.

 

11. 其他
11. Miscellaneous.

 

(1) 本协议自保证人和银行双方签署之日起生效,至本协议所担保的全部债务被完全清偿后终止。
(1) This Agreement will come into force upon the seal and signature of both parties, and will terminate when all the secured debts hereunder have been fully and completely repaid.

 

(2) 本协议的签订和履行均适用中国法律。
(2) This Agreement shall be governed by and construed in accordance with the laws of P.R. China.

 

(3) 有关本协议的一切争议应通过友好协商解决;协商不成的, 应向银行住所地有管辖权的人民法院提起诉讼。争议期间, 各方仍应继续履行未涉争议的条款。
(3) All disputes under or relating to this Agreement shall be settled through friendly negotiations; in case of any failure of negotiation, the dispute shall be referred to the jurisdiction of competent people’s court of the place where the Bank is located. During the period of dispute, each party shall continue executing the clauses prescribed under the agreement which are not involved in the dispute.

 

(4) 本协议需要变更或补充的,双方另行达成书面协议,作为本协议的附件。本协议附件是本协议不可分割的组成部分, 与本协议正文具有同等的法律效力。
(4) This Agreement may be amended during the duration of this Agreement by the Parties, provided that such amendment shall be in writing and be drawn up in Schedules. Any Schedule is the integral part of this Agreement, all of which are of the same effect.

 

(5) 本协议同时配有英文文本供参考。如中英文本存在差异, 应以中文本的约定为准。
(5) This Agreement shall be formed with both Chinese and English. In case of any discrepancy between the said versions, the Chinese version shall prevail.

 

(6) 除非在本协议中另有特别说明,本协议中相关用语和表述与主债权债务合同具有相同的含义。
(6) Unless otherwise defined in this Agreement, the relevant words and phrases shall have the same meaning as in the Principal Contract.

 

(7) 本协议一式贰份,具有同等效力。保证人、银行各执一份。
(7) This Agreement is made in TWO originals with equivalent legal effect; the Guarantor and the Bank keep one of them respectively.

 

-    本担保协议末尾     -

-    End of this Guarantee    -

 

  12  

 

Exhibit 10.48

 

Partners for Growth

 

Loan and Security Agreement

 

Borrower: BORQS Hong Kong Limited , a private company limited by shares under Hong Kong law, registered with the Companies Registry under number 1151010

Address: Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong
   
Date: August 26, 2016

 

THIS LOAN AND SECURITY AGREEMENT (“Agreement”) is entered into on the above date (the “Effective Date”) between PARTNERS FOR GROWTH IV, L.P. (“PFG”), whose address is 1660 Tiburon Blvd., Suite D, Tiburon, CA 94920 and Borrower(s) named above (jointly and severally, the “Borrower”), whose registered offices are located at the above addresses (“Borrower’s Address”). The Schedule to this Agreement (the “Schedule”) being signed by the parties concurrently, is an integral part of this Agreement. (Definitions of certain terms used in this Agreement are set forth in Section 7 below.)

 

1. LOANS.

 

1.1 Loans. PFG will make loans to Borrower (the “Loan” or “Loans”) in the amount (s) shown on the Schedule subject at all times to, and notwithstanding any other provision of this Agreement, no Default or Event of Default having occurred and being continuing at any time a Loan is requested or made.

 

1.2 Interest. All Loans and all other monetary Obligations shall bear interest at the rates shown on the Schedule, except where expressly set forth to the contrary in this Agreement. Interest shall be payable monthly, on the first day of each month for interest accrued during the prior month.

 

1.3 Fees. Borrower shall pay PFG the fees shown on the Schedule, which are in addition to all interest, Lender Expenses and other sums payable to PFG and are not refundable.

 

1.4 Loan Requests. To obtain a Loan, Borrower shall make a Qualifying Request to PFG compliant with Section 8.5. Loan Requests are not deemed made until PFG acknowledges receipt of the same by electronic mail or otherwise in writing. Without limiting the effect of Section 8.22, each Borrower appoints the Responsible Officer(s) as its authorized agent to make Loan Requests and any Loan Request made by such Responsible Officer(s) shall be binding on each Borrower as if made by its own respective directors or officers who are duly authorized to bind such Borrower in respect of this Agreement. PFG’s obligation to fund a Loan Request shall be subject to its receipt of such reports, certificates and other information as may be set forth in the Schedule. Loan Requests received after 12:00 Noon Pacific time will not be deemed to have been received by PFG until the next Business Day. PFG may rely on any Loan Request given by a person whom PFG believes in good faith is a Responsible Officer, and Borrower will indemnify PFG for any loss PFG suffers as a result of such reliance.

 

1.5 Late Fee. If any payment of accrued interest for any month is not made within three business days after the later of the date a bill therefor is sent by PFG or three business days after the due date therefor, or if any payment of principal or any other payment is not made within three Business Days after the date due, then Borrower shall pay PFG a one-time late payment fee equal to 5% of the amount of each such late payment. The provisions of this paragraph shall not be construed as PFG’s consent to Borrower’s failure to pay any amounts when due, and PFG’s acceptance of any such late payments shall not restrict PFG’s exercise of any remedies arising out of any such failure. Unless expressly waived in writing by PFG in its sole discretion, interest at the Default Rate shall commence to apply to outstanding monetary Obligations as from the date the above grace periods expire.

 

2. SECURITY INTEREST.

 

2.1 Grant of Security Interest. To secure the payment and performance of all of the Obligations when due, Borrower hereby grants to PFG and agrees to procure that each Guarantor grant to PFG a continuing security interest in, and pledges to PFG, all of the following (collectively, the “Collateral”): all right, title and interest of Borrower and any Guarantor in and to all of the following, whether now owned or hereafter arising or acquired and wherever in the world located: all Accounts; all Inventory; all Equipment; all Collateral Accounts (including Deposit Accounts); all General Intangibles (including without limitation all Intellectual Property); all Investment Property; all Other Property; and any and all claims, rights and interests in any of the above, and all guaranties and security for any of the above, and all substitutions and replacements for, additions, accessions, attachments, accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties) of, any and all of the above and all Borrower’s and Guarantor’s books relating to any and all of the above, and provided that if any asset cannot be secured without consent of a third party (and such consent is not given), this Agreement will constitute security over all proceeds and other amounts receivable from such asset.

 

 

Partners for Growth Loan and Security Agreement

 

2.2 Execution of Debentures; Creation of Charges . Borrower and Guarantor shall concurrently enter into Security Instruments for the benefit PFG under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China (“Hong Kong”), a First Ranking floating charge over all of the present and future assets of Borrower and Guarantor (including Intellectual Property) whether now existing or hereafter created, subject to any carve-out or exception provided therein. Notwithstanding anything else to the contrary set forth herein or in any other Loan Document, including governing law, jurisdiction or enforcement and rights and remedies available thereunder, the Security Instruments are intended to be independent of and supplemental to the security interests, Liens, rights and remedies of PFG under this Agreement and the other Loan Documents.

 

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

 

In order to induce PFG to enter into this Agreement and to make Loans, subject to such exceptions as are set forth with specificity in Exhibit A , Borrower represents and warrants to PFG as follows, and Borrower covenants that the following representations will continue to be true, except for representations expressly specified to be made as of a particular date, and that Borrower will at all times comply with all of the following covenants, throughout the term of this Agreement and thereafter until all Obligations (other than inchoate indemnity obligations) have been paid and performed in full:

 

3.1 Corporate Existence, Authority and Consents. Borrower is and will continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has in full force and effect all material Governmental Authorizations required for Borrower to lawfully conduct its business as conducted on the Effective Date. Any change to Borrower’s or any Guarantor’s jurisdiction or form or organization is subject to PFG’s prior consent, which consent shall not be unreasonably withheld if, in PFG’s judgment, its security interest, Collateral, priority of Lien and remedies remain unimpaired and unprejudiced by such change. Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so could result in an adverse effect on Borrower or its business or result in a monetary or non-monetary obligation with a value in excess of $50,000. The execution, delivery and performance by Borrower of this Agreement, and all other documents contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar Legal Requirements relating to creditors’ rights generally, and subject to any Governmental Authorization to be obtained in connection with the granting of security interest hereunder), and (iii) do not violate Borrower’s Constitutional Documents, or any Legal Requirement or any material agreement or instrument of Borrower or relating to its property, (iv) do not require any action by, filing, registration or qualification with, or Governmental Authorization from, any Governmental Body (except such Governmental Authorizations which have already been obtained and are in full force and effect, and such actions, filings, registrations specifically listed in this Agreement or the documents contemplated hereby, including without limitation the registration of security interest with the Hong Kong Companies Registry), and (v) do not constitute grounds for acceleration of any material Indebtedness or obligation under any agreement or instrument of Borrower or relating to its property. Without limiting the foregoing: (A) the Board has the authority under Borrower’s Constitutional Documents to enter into and cause Borrower to perform, or to delegate such authority to a Responsible Officer to enter into and cause Borrower to perform, its Obligations, and (B) other than the approval of the requisite members of the Board, no consent is required of any Person to make the representation set forth in clause (A) absolutely true in all respects (except for such consents that have already been obtained and are in full force and effect).

 

3.2 Name; Trade Names and Styles. As of the Effective Date, the name of Borrower set forth in the heading to this Agreement is its correct name, as set forth in its Constitutional Documents. Listed in the Representations are all prior names of Borrower and all of Borrower’s present and prior trade names as of the Effective Date. Borrower shall give PFG 30 days’ prior written notice before changing its name or doing business under any other name. Borrower has complied, and will in the future comply, in all material respects, with all laws relating to the conduct of business under a fictitious business name, if applicable to Borrower.

 

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Partners for Growth Loan and Security Agreement

 

3.3 Place of Business; Location of Collateral. As of the Effective Date, the address set forth in the heading to this Agreement is Borrower’s chief executive or registered office. In addition, as of the Effective Date, Borrower has places of business and Collateral is located only at the locations set forth in the Representations. Borrower will give PFG at least 30 days prior written notice before opening any additional place of business. In addition, any relocation of its chief executive office or movement of any Collateral valued at greater than $50,000 to a non-PRC location other than Borrower’s Address or one of the non-PRC locations set forth in the Representations shall require PFG’s prior written consent, which consent shall not unreasonably be withheld if, in PFG’s judgment, its security interest, Collateral, priority of Lien and remedies remain unimpaired and unprejudiced by such change(s). Notwithstanding the foregoing, Borrower may maintain sales offices in the ordinary course of business at which not more than a total of $50,000 fair market value of Collateral is located.

 

3.4 Title to Collateral; Perfection; Permitted Liens.

 

(a) Borrower is as of the Effective Date, and will at all times in the future be, the sole owner of its Collateral, except for Collateral which is leased or licensed to Borrower. The Collateral is as of the Effective Date and will remain free and clear of any and all liens, charges, security interests, encumbrances and adverse claims, except for Permitted Liens. As of the Effective Date, PFG will have, and will continue to have, a First-Priority perfected and enforceable security interest in all of the Collateral and Borrower will at all times defend PFG and the Collateral against all claims of others.

 

(b) Borrower has set forth in the Representations all of Borrower’s Collateral Accounts as of the Effective Date, and Borrower shall (i) give PFG ten (10) Business Days advance written notice before establishing any new Collateral Accounts or (ii) depositing any Cash or Cash Equivalents or Investment Property into any new Collateral Account and (iii) shall cause the institution where any such new Collateral Account is maintained to execute and deliver to PFG a Control Agreement in form sufficient to perfect PFG’s security interest in the Collateral Account and otherwise satisfactory to PFG in its good faith business judgment.

 

(c) In the event that Borrower shall at any time after the Effective Date have any commercial tort claims against others, which it is asserting, and in which the potential recovery exceeds $100,000, Borrower shall promptly notify PFG thereof in writing and provide PFG with such information regarding the same as PFG shall request (unless providing such information would waive Borrower’s attorney-client privilege). Such notification to PFG shall constitute a grant of a security interest in the commercial tort claim and all proceeds thereof to PFG, and Borrower shall execute and deliver all such documents and take all such actions as PFG shall request in connection therewith.

 

(d)  No Collateral with a value in excess of $250,000 is affixed to any real property in such a manner or with such intent as to become a fixture, except as disclosed in detail in Exhibit A . From and after the Effective Date, without PFG’s consent in each instance, no material part of the Collateral will be affixed to any real property in such a manner, or with such intent, as to become a fixture. Borrower is not, except as set forth in Exhibit A , and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral and no such lease now prohibits, restrains, impairs or will prohibit, restrain or impair Borrower’s right to remove any Collateral from the leased premises. Whenever any Collateral is located upon premises in which any third party has an interest, Borrower shall, whenever requested by PFG, use commercially reasonable efforts to cause such third party to execute and deliver to PFG, in form acceptable to PFG, such waivers and subordinations as PFG shall specify in its good faith business judgment. Borrower will keep in full force and effect, and will comply with all material terms of, any lease of real property where any of the Collateral now or in the future may be located.

 

(e) Except as specified in the Representations, Borrower is not party to, nor is it bound by, any Restricted License.

 

3.5 Maintenance of Collateral. Borrower will maintain the Collateral in good working condition (ordinary wear and tear excepted), and Borrower will not use the Collateral for any unlawful purpose. Borrower will promptly advise PFG in writing of any material loss or damage to the Collateral.

 

3.6 Books and Records. Borrower has maintained and will maintain at Borrower’s Address complete and accurate books and records, comprising an accounting system in accordance with IFRS or other generally acceptable accounting method (such as GAAP) as Borrower may adopt with notice to PFG.

 

3.7 Financial Condition, Statements and Reports. All Financial Statements now or in the future delivered to PFG have been, and will be, prepared in conformity with IFRS or such other generally acceptable accounting method as Borrower may adopt and now and in the future will fairly present the results of operations and financial condition of Borrower in all material respects, in accordance with IFRS or such other generally acceptable accounting method as Borrower may adopt, at the times and for the periods therein stated. Between the last date covered by any such statement provided to PFG and the Effective Date, there has been no Material Adverse Change.

 

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Partners for Growth Loan and Security Agreement

 

3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely filed, and will timely file, all required Tax Returns, and Borrower has timely paid, and will timely pay, all Taxes now or in the future owed by Borrower. Borrower may, however, defer payment of any of the foregoing which are contested by Borrower in good faith, provided that Borrower (i) contests the same by appropriate proceedings promptly and diligently instituted and conducted, (ii) notifies PFG in writing of the commencement of, and any material development in, the contesting proceedings initiated by the Borrower, and (iii) posts bonds or takes any other steps required to keep the same from becoming a lien upon any of the Collateral. Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could result in additional Taxes becoming due and payable by Borrower. Borrower has paid, and shall continue to pay all amounts necessary to fund all present and future pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not and will not withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other Governmental Body.

 

3.9 Compliance with Law. Borrower has, to the best of its knowledge, complied, and will comply, in all material respects, with all provisions of all Legal Requirements applicable to Borrower, including, but not limited to, those relating to Borrower’s ownership of real or personal property, the conduct and licensing of Borrower’s business, and all environmental matters.

 

3.10 Litigation. There is no claim, suit, litigation, proceeding or investigation pending or (to the best of Borrower’s Knowledge) threatened against or affecting Borrower in any court or before any Governmental Body (or any basis therefor known to Borrower) (i) involving any single claim of $100,000 or more, or involving $250,000 or more in the aggregate, or (ii) which could reasonably be expected to result, either separately or in the aggregate, in any Material Adverse Change. Borrower will promptly inform PFG in writing of any claim, proceeding, litigation or investigation in the future about which it has Knowledge threatened or instituted against Borrower involving any single claim of $100,000 or more, or involving $250,000 or more in the aggregate.

 

3.11 Use of Proceeds. All proceeds of all Loans shall be used solely for lawful business purposes, including any purposes detailed in the Schedule. Borrower is not purchasing or carrying any “margin stock” (as defined in Regulation U of the Board of Governors of the Federal Reserve System of the United States) and no part of the proceeds of any Loan will be used to purchase or carry any “margin stock” or to extend credit to others for the purpose of purchasing or carrying any “margin stock.”

 

3.12 No Default. At the Effective Date, no Default or Event of Default has occurred, and no Default or Event of Default will have occurred after giving effect to any Loans being made concurrently herewith.

 

3.13 Protection and Registration of Intellectual Property Rights . Borrower owns or otherwise holds the right to use all Intellectual Property rights material to Borrower’s business or necessary for the conduct of its business as currently conducted and reflected in any Borrower’s financial plans covering future periods. Borrower shall: (a) protect, defend and maintain the validity and enforceability of its Intellectual Property, other than Intellectual Property that is not material to Borrower’s business, has a fair value of less than $50,000 and that Borrower has affirmatively determined not to maintain or to abandon; (b) promptly advise PFG in writing of Known third-party infringements of its Intellectual Property material to its business; (c) not allow any Intellectual Property material to Borrower’s business to be abandoned, forfeited or dedicated to the public without PFG’s written consent, (d) (i) provide written notice to PFG at least ten (10) days prior to entering into or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public and licenses or agreements of Borrower with customers in which Borrower is an original equipment manufacturer), and (ii) use all commercially reasonable efforts to obtain the consent or waiver of any Person whose consent or waiver is necessary for (A) any Restricted License to be deemed “Collateral” and for PFG to have a Lien in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (B) PFG to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with PFG’s rights and remedies under this Agreement and the other Loan Documents, and (e) while any Obligations are outstanding, shall not Transfer any Intellectual Property without PFG’s consent, which consent shall not be unreasonably withheld if no Default or Event of Default has occurred and is then continuing, the Transfer of such Intellectual Property would not give rise to such a Default or Event of Default, and if such Intellectual Property meets the three criteria set forth as the exceptions to Borrower’s duties to protect, defend and maintain under clause (a), above. If, before the Obligations have been paid and/or performed in full, Borrower shall (i) adopt, use, acquire or apply for registration of any trademark, service mark or trade name, (ii) apply for registration of any patent or obtain any patent or patent application; (iii) create or acquire any published or material unpublished works of authorship material to the business that is or is to be registered with the U.S. Copyright Office or any non-U.S. jurisdiction registry; or (iv) register or acquire any domain name or domain name rights, then the provisions of Section 2.1 shall automatically apply thereto, and Borrower shall use all commercially reasonable efforts to give PFG advance written notice thereof and in any event shall thereafter give PFG prompt written notice thereof (which for purposes hereof shall be deemed to be not more than ten (10) Business Days from the occurrence of each and any of the foregoing). Borrower shall further provide PFG with all information and details relating to the foregoing and take such further actions as PFG may reasonably request from time to time to enable PFG to perfect or continue the perfection of PFG’s interest in such Collateral.

 

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Partners for Growth Loan and Security Agreement

 

3.14 Domain Rights and Related Matters . Borrower (a) together with other Group Members, are the sole record, legal and beneficial owner of all domain names and domain name rights used in connection with its business and that of its Subsidiaries, free and clear of any rights or claims of any third party; (b) has set forth in the Representations such domain names and ownership thereof, domain registry, domain servers, location and administrative contact information, web hosting and related services and facilities (collectively, “Domain Rights”), which are true, accurate and complete and Borrower shall promptly notify PFG of any material changes to such information; (c) shall maintain all Domain Rights that Borrower has not affirmatively determined to abandon in full force and effect so long as any Obligations remain outstanding; (d) shall, upon request of PFG, notify such third parties (including domain registrars, hosting companies and internet service providers) of PFG’s security interest in Borrower’s Domain Rights; and (e) shall promptly advise PFG in writing of any material Known disputes or infringements of its Domain Rights. The obligations of Borrower under this Section shall not be limited by any Borrower obligations under the IP Security Agreement and related Collateral Agreements and Notices executed in connection with this Agreement.

 

3.15 No Insolvency Proceeding . No Insolvency Proceeding has occurred in respect of any Borrower or Guarantor or any of their respective direct and indirect Subsidiaries.

 

3.16 Repetition . The representations of Borrower in this Agreement and in any other Loan Document in relation to itself and other Group Members are deemed to be made by Borrower by reference to the facts and circumstances then existing at all times and on each date until all amounts owed to PFG hereunder or under any Loan Document are paid in full, subject only to such changes that are expressly permitted hereunder.

 

3.17 Solvency . The fair salable value of the assets of Borrower and the Guarantor (including goodwill minus disposition costs) exceeds the fair amount of their respective liabilities (taking into account actual and prospective liabilities); no Borrower or Guarantor is left with unreasonably small capital after the transactions in this Agreement; no Borrower or Guarantor is unable to pay its debts (including trade debts) as they fall due.

 

4. ADDITIONAL DUTIES OF BORROWER.

 

Borrower will at all times comply with all of the following covenants throughout the term of this Agreement:

 

4.1 Financial and Other Covenants. Borrower shall at all times comply with the financial and other covenants set forth in the Schedule.

 

4.2. Remittance of Proceeds. Subject to the rights of the Senior Lender, all proceeds arising from the disposition of any Collateral shall be delivered, in kind, by Borrower to PFG in the original form in which received by Borrower not later than the following Business Day after receipt by Borrower, to be applied to the Obligations in such order as PFG shall determine; provided that, if no Default or Event of Default has occurred and is continuing, Borrower shall not be obligated to remit to PFG (i) the proceeds of Accounts arising in the ordinary course of business, or (ii) the proceeds of the sale of surplus, worn out or obsolete Equipment disposed of by Borrower in good faith in an arm’s length transaction for an aggregate purchase price of $50,000 or less (for all such transactions in any fiscal year). For the avoidance of doubt, payment of trade payables in the ordinary course does not constitute a “disposition of Collateral” for purposes of this Section. Borrower agrees that it will not commingle proceeds of Collateral (other than those described in subclauses (i) and (ii) above) with any of Borrower’s other funds or property, but will hold such proceeds separate and apart from such other funds and property and in an express trust for PFG, except as set forth above, and subject to the rights of the Senior Lender. Upon the occurrence and during the continuance of a Default or an Event of Default, PFG may, in its good faith business judgment, require that all proceeds of Collateral be deposited by Borrower into a Lock-Box account, or such other “blocked account” as PFG may specify, pursuant to a blocked account agreement in such form as PFG may specify in its good faith business judgment. Nothing in this Section limits the restrictions on disposition of Collateral set forth elsewhere in this Agreement.

 

4.3 Insurance. Borrower shall at all times use commercially reasonably efforts to insure all of the tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to PFG, in such form and amounts as PFG may reasonably require and as are customary and in accordance with standard practices for Borrower’s industry and locations, and Borrower shall provide evidence of such insurance to PFG. All such insurance policies shall name PFG as an additional loss payee, and shall contain a lenders loss payee endorsement in form reasonably acceptable to PFG. Upon receipt of the proceeds of any such insurance, subject to the rights of the Senior Lender, PFG shall apply such proceeds in reduction of the Obligations as PFG shall determine in its good faith business judgment, except that, provided no Default or Event of Default has occurred and is continuing, PFG shall release to Borrower insurance proceeds with respect to Collateral totaling less than $100,000, which shall be utilized by Borrower for the replacement of the Collateral with respect to which the insurance proceeds were paid. PFG may require reasonable assurance that the insurance proceeds so released will be so used. If Borrower fails to provide or pay for any insurance, PFG may, but is not obligated to, obtain the same at Borrower’s expense. Borrower shall promptly deliver to PFG copies of all material reports made to insurance companies.

 

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Partners for Growth Loan and Security Agreement

 

4.4 Reports. Borrower, at its expense, shall provide PFG with the written reports set forth in the Schedule, and such other written reports with respect to Borrower (including budgets, projections, operating plans and other financial documentation), as PFG shall from time to time specify in its good faith business judgment.

 

4.5 Access to Collateral, Books and Records; Additional Reporting and Notices. At reasonable times, and on three (3) Business Days” notice, PFG, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower’s books and records. The foregoing inspections and audits shall be at Borrower’s expense and the charge therefor shall be $850 per person per day (or such higher amount as shall represent PFG’s then current standard charge for the same), plus Lender Expenses, provided that so long as no Default or Event of Default has occurred and is then continuing and no prior inspection or audit has revealed material deficiencies or inaccuracies in Borrower’s books and records, only one such inspection and audit shall be at Borrower’s expense during any calendar year. Notwithstanding the foregoing, Borrower shall not be required to disclose to PFG any document or information (i) where disclosure is prohibited by applicable law, or (ii) is subject to attorney-client or similar privilege or constitutes attorney work product. If Borrower is withholding any information under the preceding sentence, it shall so advise PFG in writing, giving PFG a general description of the nature of the information withheld. Without limiting the scope of reporting under Section 6 of the Schedule, Borrower shall promptly disclose to PFG any efforts to sell Borrower, its business or assets or any material part thereof or to refinance the Loan and shall disclose the salient details of any offers received from time to time in respect of the foregoing. At any time when a Default or Event of Default has occurred and is continuing (whether or not PFG has agreed to forbear), PFG shall be entitled (i) to be briefed by Borrower as to such matters as PFG may require in its business discretion, (ii) to receive advance notice of any and all Board meetings or written consents, together with the agendas for the foregoing, and (iii) to observe any such Board meetings, whether or not formally constituted as such.

 

4.6 Negative Covenants. Except as may be permitted in the Schedule, Borrower shall not, without PFG’s prior written consent (which shall be a matter of its good faith business judgment and shall be conditioned on Borrower then being in compliance with the terms of this Agreement), do any of the following:

 

(i) acquire any assets, except in the ordinary course of business, or make any Investments other than Permitted Investments;

 

(ii) enter into any transaction outside the ordinary course of business with a value in excess of $150,000 (which non-ordinary course transactions shall include mergers, amalgamations, consolidations in respect of any Borrower or other Group Member, provided that with not less than thirty (30) days’ notice to PFG, one Borrower may merge with another Borrower and a Non-Borrower Group Member may merge with a Borrower or another Non-Borrower Group Member;

 

(iii) Transfer any part of its business or property, except for (A) the sale of finished Inventory in the ordinary course of Borrower’s business, (B) the sale of obsolete or unneeded Equipment in the ordinary course of business and otherwise in compliance with the terms of this Agreement, (C) the making of Permitted Investments, and (D) the granting of Permitted Liens; and, for the avoidance of any doubt, a Transfer of business or property, as contemplated above, would include (1) Borrower or any Subsidiary making or causing any payment to be made on Subordinated Debt unless expressly permitted under the terms of the subordination, intercreditor or other agreement to which the Subordinated Debt is subject (and, if permitted in this Agreement, only to the extent permitted), and (2) other than with the express consent of PFG in its sole business discretion, the amendment or modification of any such subordination, intercreditor or other agreement to provide for earlier or greater principal, interest or other payments thereon or adversely affect the subordination thereof to Obligations owed to PFG;

 

(iv) store any Inventory or other Collateral with any warehouseman or other third party with an aggregate value (per location) of $50,000 or greater, unless there is in place a bailee agreement in such form as PFG shall specify in its good faith business judgment between PFG and such warehouseman or other third party;

 

(v) sell any Inventory on a sale-or-return, guaranteed sale, consignment, or other contingent basis;

 

(vi) make any loans of any money or other assets, other than Permitted Investments;

 

(vii) incur or permit to exist any Indebtedness, other than Permitted Indebtedness;

 

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Partners for Growth Loan and Security Agreement

 

(viii) guarantee or otherwise become liable with respect to the obligations of another party or entity;

 

(ix) pay or declare any Dividends (except for dividends payable solely in shares of Borrower or any dividends in connection with the Accumulated Dividends (as defined in the articles of association of the Guarantor as in effect as of the Effective Date);

 

(x) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower’s equity, except as required in the ordinary course of business and consistent with past practice in connection with redeeming or purchasing equity of departing employees, up to a maximum aggregate redemption or purchase price of $100,000 in any fiscal year;

 

(xi) engage, directly or indirectly, in any business other than the businesses currently engaged in by Borrower or reasonably related thereto;

 

(xii) in addition to any limitations that may apply under clause (xiii), after the Effective Date, cause or permit Borrower or any Guarantor to make Permitted Investments in Group Members not a Borrower or Guarantor or incur Permitted Indebtedness (other than the Senior Debt not in excess of the Senior Debt Limit specified in Section 8(a)(2) of the Schedule) to Group Members not a Borrower or Guarantor of more than $50,000 (in the aggregate) in any calendar year;

 

(xiii) with respect to Non-Borrower Group Members, cause or permit (A) any Non-Borrower Group Member to hold cash or Cash Equivalents greater in amount than 150% of the amount required for such Non-Borrower Group Member to carry on its business in the ordinary course and maintain its corporate existence, or (B) Borrower to make Permitted Investments in any Non-Borrower Group Member or incur Permitted Indebtedness to any Non-Borrower Group Member in amounts materially greater than required in order to enable such Non-Borrower Group Member to carry on its business in the ordinary course and maintain its corporate existence under Legal Requirements applicable to such Non-Borrower Group Member;

 

(xiv) make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof, provide for earlier or greater principal, interest, or other payments thereon, or adversely affect the subordination thereof to Obligations owed to PFG;

 

(xv) (A) without at least thirty (30) days prior written notice to PFG: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than $50,000 in Borrower’s assets or property), (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, (5) change any organizational number (if any) assigned by its jurisdiction of organization; (6) form any new Subsidiaries (non-PRC or PRC), and in each case, subject to (x) Borrower’s and such Subsidiary(ies) compliance with Section 4.9 and 4.14 hereof, (y) subject to the control mechanism being available in the jurisdiction in which a Subsidiary may hold its Collateral Accounts, such Subsidiary(ies) compliance with Section 3.4(b), and (z) such Subsidiary(ies) compliance with Section 8(b) of the Schedule; or (B) fail to provide notice to PFG of any Key Person departing from or ceasing to be actively in the employ of Borrower within the earlier to occur of promptly after Knowledge thereof and (2) two days after such Key Person’s departure from Borrower;

 

(xvi) liquidate or dissolve, or elect or resolve to liquidate or dissolve;

 

(xvii) use proceeds of the Loan for other than the purposes permitted under Section 1 of the Schedule;

 

(xviii) with respect to any Person who is or becomes a Guarantor of Obligations on or after the Effective Date, cause or permit any Guarantor to take an action in violation of any negative covenant set forth in this Section 4.6 on an “as if applicable” to Guarantor basis (for example only, a breach of this clause would occur if a Guarantor were to make a payment on its Subordinated Debt as contemplated under clause (xiv), or as contemplated under clause (iii), if a Guarantor were to Transfer shares it owns in a Subsidiary to any Person); or

 

(xix) the Board shall permit or shall resolve to or approve, or Borrower shall otherwise take any steps to effect, any of the foregoing actions in clauses (i) through (xviii), inclusive, which are not otherwise expressly permitted herein.

 

Transactions permitted by the foregoing provisions of this Section are only permitted if no Default or Event of Default would occur as a result of such transaction.

 

4.7 Litigation Cooperation. Should any third-party suit or proceeding be instituted by or instituted or threatened in writing against PFG with respect to any Collateral or relating to Borrower, Borrower shall, without expense to PFG, make available Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that PFG may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding unless such cooperation would waive Borrower’s attorney-client privilege.

 

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Partners for Growth Loan and Security Agreement

 

4.8 Changes. Borrower agrees to promptly notify PFG in writing of any changes in the information set forth in the Representations.

 

4.9 Further Assurances. Subject always to the rights of the Senior Lender, Borrower agrees, at its expense, on reasonable request by PFG, to execute all documents and take all actions, as PFG, may, in its good faith business judgment, deem necessary or useful in order to perfect and maintain PFG’s perfected First-Priority security interest in the Collateral (subject to Permitted Liens), and in order to fully consummate the transactions contemplated by this Agreement, including without limitation, the joinder of any non-PRC New Subsidiaries to this Agreement and execution of such other agreements and instruments as PFG reasonably request, including execution of a cross-corporate continuing guaranty among Borrower and non-PRC Non-Borrower Group Members. In addition, Borrower shall Deliver to PFG, within five (5) days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental Body regarding compliance with or maintenance of Governmental Authorizations or Legal Requirements or that could reasonably be expected to have a material effect on any of the Governmental Authorizations or otherwise on the operations of Borrower or any of its Subsidiaries.

 

4.10 Collateral Accounts . Subject to Section 8(b) of the Schedule: (a) At all times thereafter, maintain all of its Collateral Accounts depositary institutions in respect of which a Control Agreement in favor of PFG is at all times in effect; and (b) provide PFG five (5) days prior written notice before establishing any Collateral Account at or with any bank or financial institution other than the Senior Lender.

 

4.11 Authorization to File Security Instruments . By executing and delivering a term sheet in respect of the Loans, Borrower shall be deemed to have authorized PFG to file Security Instruments on or prior to the Effective Date, without notice to Borrower, with all appropriate jurisdictions to perfect or protect PFG’s interest or rights hereunder, including a notice that any disposition of the Collateral, by either Borrower or any other Person not made in compliance of this Agreement, shall be deemed to violate the rights of PFG under the Code. Such Security Instruments may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in PFG’s discretion.

 

4.12 Burdensome Agreements . Directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any of its Subsidiaries to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by US Borrower or any of its Subsidiaries, or pay any Indebtedness owed to Borrower or any of its Subsidiaries, (b) make loans or advances to Borrower or any of their respective Subsidiaries or (c) transfer any of its properties to Borrower or any of their respective Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) applicable Legal Requirements; (ii) this Agreement and the other Loan Documents; (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of any of its Subsidiaries; (iv) customary provisions restricting assignment of any agreement entered into by a Subsidiary in the ordinary course of business; (v) any holder of a Permitted Lien restricting the transfer of the property subject thereto; or (vi) the rights of the Senior Lender.

 

4.13 Full Disclosure . No written representation, warranty or other statement of Borrower in any certificate or written statement given to PFG, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to PFG, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by PFG that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

 

4.14 Formation or Acquisition of Subsidiaries . Notwithstanding and without limiting the affirmative covenant contained in Section 4.9 and the negative covenants contained in Sections 4.6(xv) hereof, at the time that Borrower forms any direct or indirect non-PRC Subsidiary or acquires any direct or indirect non-PRC Subsidiary after the Effective Date, Borrower shall, unless otherwise directed by PFG in writing, (a) cause such new non-PRC Subsidiary to provide to PFG a joinder to the Loan Agreement to cause such non-PRC Subsidiary to become a co-borrower hereunder or a guarantor of Obligations under the Guaranty, together with such Security Instruments and/or Control Agreements, all in form and substance reasonably satisfactory to PFG (including being sufficient to grant PFG a first ranking Lien (subject only to Permitted Liens (which may only have superior priority to PFG’s Lien as expressly permitted herein)) in and to the assets of such newly formed or acquired Subsidiary), (b) provide to PFG appropriate certificates and powers and financing statements, pledging all of the direct or beneficial ownership interest in such new non-PRC Subsidiary, in form and substance reasonably satisfactory to PFG, and (c) provide to PFG all other documentation in form and substance reasonably satisfactory to PFG, including one or more opinions of counsel reasonably satisfactory to PFG, which in its opinion is appropriate with respect to the execution and delivery of the applicable documentation referred to above. Any document, agreement, or instrument executed or issued pursuant to this Section 4.14 shall be a Loan Document.

 

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Partners for Growth Loan and Security Agreement

 

5. TERM.

 

5.1 Maturity Date. This Agreement shall continue in effect until the respective Maturity Date of Tranche 1 Loans and Tranche 2 Loans, subject to Sections 5.2, 5.3 and 5.4, below.

 

5.2 Early Termination. This Agreement may be terminated prior to the respective Maturity Date of Tranche 1 Loans and Tranche 2 Loans as follows: (i) if expressly permitted in the Schedule, by Borrower, effective three Business Days after written notice of termination is given to PFG and payment in full in cash of all Obligations (other than inchoate indemnity obligations); or (ii) by PFG at any time after the occurrence and during the continuance of an Event of Default, without notice, effective immediately. If a Borrower right to prepay Obligations is provided in the Schedule and the exercise of such right is subject to payment of any consideration to PFG as a condition to such exercise, a Borrower Default or Event of Default that results in an acceleration of Obligations and/or termination of this Agreement shall not relieve Borrower of the obligation to pay such consideration, which shall be included in the Obligations required to be paid or performed by Borrower.

 

5.3 Payment of Obligations. On the Maturity Date or on any earlier effective date of termination, Borrower shall pay and perform in full all Obligations, whether evidenced by installment notes or otherwise, and whether or not all or any part of such Obligations are otherwise then due and payable. Notwithstanding any termination of this Agreement, (i) all of PFG’s security interests in all of the Collateral and all of the terms and provisions of this Agreement shall continue in full force and effect until all Obligations have been paid and performed in full, and (ii) no further Loans will be made to Borrower unless PFG otherwise agrees in its sole and absolute discretion. No termination shall in any way affect or impair any right or remedy of PFG, nor shall any such termination relieve Borrower of any Obligation to PFG, until all of the Obligations have been paid and performed in full. Upon payment and performance in full of all the Obligations and termination of this Agreement, PFG shall promptly terminate its financing statements with respect to Borrower and deliver to Borrower such other documents as may be required to fully terminate PFG’s security interests.

 

5.4 Survival of Certain Obligations . Without limiting the survival of obligations addressed otherwise in this Agreement and notwithstanding any other provision of this Agreement, all covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been paid in full and satisfied. The obligation of Borrower in Section 8.9 to indemnify PFG shall survive until the statute of limitations with respect to such claim or cause of action shall have run.

 

6. EVENTS OF DEFAULT AND REMEDIES.

 

6.1 Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” under this Agreement regardless of whether notice thereof is given by PFG, and Borrower shall give PFG immediate written notice thereof:

 

(a) Any warranty, representation, covenant, statement, report or certificate made or delivered to PFG by Borrower or any Guarantor or any of their respective officers, employees or agents, now or in the future shall be untrue or misleading in a material respect when made or deemed to be made; or

 

(b) Borrower shall fail to pay any Loan or any interest thereon or any other monetary Obligation when due; or

 

(c) (i) Borrower shall fail to comply with any of the financial covenants set forth in the Schedule, or (ii) Borrower or any Guarantor shall breach any of the provisions of Section 4.6 hereof, or (iii) Borrower or any Guarantor shall fail to perform any other non-monetary Obligation which by its nature cannot be cured, or (iv) Borrower shall fail to permit PFG to conduct an inspection or audit as provided in Section 4.5 hereof or shall fail to provide the notices, information, briefing and other rights set forth in Section 4.5, or (v) Borrower shall fail to provide PFG with a Report under Section 6 of the Schedule within three (3) Business Days after the date due; or

 

(d) Borrower shall fail to perform any other non-monetary Obligation, which failure is not cured within ten (10) Business Days after the date due; provided, however, if such failure results from a Default or an Event of Default for which there is a shorter cure period set forth in this Section 6.1, then the applicable cure period shall be such shorter period; or

 

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Partners for Growth Loan and Security Agreement

 

(e) any levy, assessment, attachment or seizure is made on all or any part of the Collateral having an aggregate value of no less than $100,000 which is not cured within five (5) Business Days after the occurrence of the same, or any lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral which is not cured within ten (10) Business Days after the occurrence of the same; or

 

(f) any default or event of default occurs under any obligation secured by a Permitted Lien in the amount of no less than $100,000, which is not cured within any applicable cure period or unconditionally waived in writing by the holder of the Permitted Lien (and for purposes of the foregoing, a waiver does not include a forbearance); or

 

(g) there is, under any agreement to which Borrower is a party with a third party or parties, (i) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of $100,000; or (ii) any breach or default by Borrower, the result of which could result in a Material Adverse Change or have a material adverse effect on Borrower, any Guarantor or its business or prospects (the term “material adverse effect” for purposes hereof, shall be deemed to include (non-exclusively) any event having at such time or cumulatively in the following 12-month period, a dollar impact of $5,000,000 or more; or

 

(h) (i) Dissolution, termination of existence, insolvency or business failure of Borrower or any Guarantor; or (ii) appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any Insolvency Proceeding by, against or in respect of Borrower or any Guarantor under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, in each above case that is not dismissed or stayed within 45 days (and for the avoidance of doubt, PFG shall have no obligation to advance any Loan while any of the foregoing conditions or those set forth in clauses (iii) and (iv), below, exist); or (iii) Borrower shall generally not pay its debts as they become due; or (iv) Borrower shall conceal, remove or Transfer any part of its property, with intent to hinder, delay or defraud its creditors, or make or suffer any Transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or

 

(i) Revocation or termination of, or limitation or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing, or commencement of proceedings by any guarantor of any of the Obligations under any bankruptcy or insolvency law; or

 

(j) revocation or termination of, or limitation or denial of liability upon, any pledge of any certificate of deposit, securities or other property or asset of any kind pledged by any third party to secure any or all of the Obligations, or any attempt to do any of the foregoing, or commencement of proceedings by or against any such third party under any bankruptcy or insolvency law; or

 

(k) Borrower makes any payment on account of any indebtedness or obligation which has been subordinated to the Obligations (other than as permitted in the applicable subordination agreement), or if any Person who has subordinated such indebtedness or obligations terminates or in any way repudiates or breaches the terms of his subordination agreement; or); or

 

(l) Borrower shall, without the prior consent of PFG (which shall be a matter of its sole business discretion unless all Obligations are to be repaid as a condition precedent to such Change in Control being consummated), (i) enter into any agreement, binding or non-binding, that would result in a Change in Control, or (ii) effect or suffer a Change in Control; or

 

(m) a default or breach shall occur under any other Loan Document, which default or breach shall be continuing after the later of cure period expressly specified in such Loan Document or five (5) Business Days; or

 

(n) a Material Adverse Change shall occur.

 

PFG may cease making any Loans hereunder during any of the cure periods provided above, and thereafter if an Event of Default has occurred and is continuing.

 

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Partners for Growth Loan and Security Agreement

 

6.2 Remedies. Upon the occurrence and during the continuance of any Event of Default, and at any time thereafter, PFG, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Borrower), may, subject to the rights of the Senior Lender, do any one or more of the following: (a) Cease making Loans or otherwise extending credit to Borrower under this Agreement or any other Loan Document; (b) Accelerate and declare all or any part of the Obligations to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation; (c) Take possession of any or all of the Collateral wherever it may be found, and for that purpose Borrower hereby authorizes PFG without judicial process to enter onto any of Borrower’s premises without interference to search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge for so long as PFG deems it necessary, in its good faith business judgment, in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should PFG seek to take possession of any of the Collateral by court process, Borrower hereby irrevocably waives: (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (iii) any requirement that PFG retain possession of, and not dispose of, any such Collateral until after trial or final judgment; (d) Require Borrower to assemble any or all of the Collateral and make it available to PFG at places designated by PFG which are reasonably convenient to PFG and Borrower, and to remove the Collateral to such locations as PFG may deem advisable; (e) Complete the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, PFG shall have the right to use Borrower’s premises, vehicles, hoists, lifts, cranes, and other Equipment and all other property without charge; (f) Sell, lease or otherwise dispose of any of the Collateral, in its condition at the time PFG obtains possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale. PFG shall have the right to conduct such disposition on Borrower’s premises without charge, for such time or times as PFG deems reasonable, or on PFG’s premises, or elsewhere and the Collateral need not be located at the place of disposition. PFG may directly or through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Borrower of any liability Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale; (g) Demand payment of, and collect any Accounts and General Intangibles comprising Collateral and, in connection therewith, Borrower irrevocably authorizes PFG to endorse or sign Borrower’s name on all collections, receipts, instruments and other documents, to take possession of and open mail addressed to Borrower and remove therefrom payments made with respect to any item of the Collateral or proceeds thereof, and, in PFG’s good faith business judgment, to grant extensions of time to pay, compromise claims and settle Accounts and the like for less than face value; (h) Exercise any and all rights under any present or future Control Agreements relating to Deposit Accounts or Investment Property; (i) Demand and receive possession of any of Borrower’s federal and state income tax returns and the books and records utilized in the preparation thereof or referring thereto; and (j) without limiting the rights and remedies of PFG under clauses (a) through (i), inclusive, PFG may exercise any rights and remedies it may have under the Security Instruments in any jurisdiction where such Security Instruments may be enforced. All Lender Expenses, liabilities and obligations incurred by PFG with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any of PFG’s rights and remedies, from and after the occurrence and during the continuance of any Event of Default, the interest rate applicable to the Obligations shall be the Default Rate.

 

6.3 Standards for Determining Commercial Reasonableness. Without limiting the standards that may be applicable to the enforcement of Security Instruments in any non-U.S. jurisdiction in which such Security Instruments may be enforced, Borrower and PFG agree that a sale or other disposition (collectively, “sale”) of any Collateral which complies with the following standards will conclusively be deemed to be commercially reasonable: (i) Notice of the sale is given to Borrower at least ten days prior to the sale, and, in the case of a public sale, notice of the sale is published at least five days before the sale in a newspaper of general circulation in the county where the sale is to be conducted; (ii) Notice of the sale describes the collateral in general, non-specific terms; (iii) The sale is conducted at a place designated by PFG, with or without the Collateral being present; (iv) The sale commences at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price in cash or by cashier’s check or wire transfer is required; (vi) With respect to any sale of any of the Collateral, PFG may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower any and all information concerning the same. PFG shall be free to employ other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable. Without limiting the foregoing, if Exigent Circumstances exist, Borrower and PFG agree that notice periods may be shorter than as set forth above and such shorter notice periods are commercially reasonable in Exigent Circumstances. Borrower further acknowledges and agrees that if PFG’s or third parties’ access to Collateral is inhibited, restricted or denied, it shall be commercially reasonable for PFG to conduct a sale of Collateral under such circumstances even though the lack of access to Collateral would likely give rise to a sale price less than if parties had unfettered access to Collateral for purposes of conducting a sale.

 

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Partners for Growth Loan and Security Agreement

 

6.4 Power of Attorney. Upon the occurrence and during the continuance of any Event of Default, without limiting PFG’s other rights and remedies, Borrower grants to PFG an irrevocable power of attorney coupled with an interest, authorizing and permitting PFG (acting through any of its employees, attorneys or agents) at any time, at its option, but without obligation, with or without notice to Borrower, and at Borrower’s expense, to do any or all of the following, in Borrower’s name or otherwise, but PFG agrees that if it exercises any right hereunder, it will do so in good faith and in a commercially reasonable manner and the exercise of any rights will be subject to the rights of the Senior Lender: (a) Execute on behalf of Borrower any documents that PFG may, in its good faith business judgment, deem advisable in order to perfect and maintain PFG’s security interest in the Collateral, or in order to exercise a right of Borrower or PFG, or in order to fully consummate all the transactions contemplated under this Agreement, and all other Loan Documents; (b) Execute on behalf of Borrower, any invoices relating to any Account, any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s or other lien, or assignment or satisfaction of mechanic’s, materialman’s or other lien; (c) Take control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of Borrower upon any instruments, or documents, evidence of payment or Collateral that may come into PFG’s possession; (d) Endorse all checks and other forms of remittances received by PFG; (e) Pay, contest or settle any lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (f) Grant extensions of time to pay, compromise claims and settle Accounts and General Intangibles for less than face value and execute all releases and other documents in connection therewith; (g) Pay any sums required on account of Borrower’s taxes or to secure the release of any liens therefor, or both; (h) Settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor; (i) Instruct any third party having custody or control of any books or records belonging to, or relating to, Borrower to give PFG the same rights of access and other rights with respect thereto as PFG has under this Agreement; (j) Execute on behalf of Borrower and file in Borrower’s name such documents and instruments as may be necessary or appropriate to effect the Transfer of Domain Rights, domain names, domain registry administrative contacts and domain and website hosting services into the name of PFG or its designees, and (k) Take any action or pay any sum required of Borrower pursuant to this Agreement and any other Loan Documents. Any and all Lender Expenses incurred by PFG with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. In no event shall PFG’s rights under the foregoing power of attorney or any of PFG’s other rights under this Agreement be deemed to indicate that PFG is in control of the business, management or properties of Borrower.

 

6.5 Application of Proceeds. All proceeds realized as the result of any sale of the Collateral shall be applied by PFG first to Lender Expenses incurred in the exercise of its rights under this Agreement, second to the interest due upon any of the Obligations, and third to the principal of the Obligations, in such order as PFG shall determine in its sole discretion. Any surplus shall be paid to Borrower or other persons legally entitled thereto; Borrower shall remain liable to PFG for any deficiency. If, PFG, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, PFG shall have the option, exercisable at any time, in its good faith business judgment, of either reducing the Obligations by the principal amount of purchase price or deferring the reduction of the Obligations until the actual receipt by PFG of the cash therefor.

 

6.6 Remedies Cumulative. In addition to the rights and remedies set forth in this Agreement, PFG shall have all the other rights and remedies accorded a secured party under the Code and under all other applicable laws, and under any other instrument or agreement now or in the future entered into between PFG and Borrower, including the Security Instruments, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by PFG of one or more of its rights or remedies shall not be deemed an election, nor bar PFG from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of PFG to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed. The rights of PFG hereunder shall be supplemental to any rights and remedies of PFG under the Security Instruments.

 

7. Definitions. As used in this Agreement, the following terms have the following meanings:

 

Account Debtor ” means the obligor on an Account.

 

Accounts ” means all present and future “accounts” as defined in the Code in effect on the Effective Date with such additions to such term as may hereafter be made, and includes without limitation all accounts receivable, healthcare receivables and other sums owing to Borrower.

 

Affiliate ” means, with respect to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any parent or Subsidiary of such Person, or any Person directly or indirectly through any other Person controlling, controlled by or under common control with such Person.

 

Back-End Fee ” has the meaning set forth in Section 8(e) of the Schedule.

 

Board ” means the Board of Directors of Borrower.

 

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Partners for Growth Loan and Security Agreement

 

Borrower ” means the entity identified on the first page of this Agreement and any other Person who may from time to time be joined as a borrower under this Agreement; a reference to “Borrower” means “each Borrower”.

 

Business Day ” or “ business day ” means a day on which PFG is open for business.

 

Cash “ means unrestricted and unencumbered (except for the Liens of PFG and the Senior Lender) cash or cash equivalents in Deposit Accounts or other Collateral Accounts for which there is in effect a Control Agreement among Borrower, PFG and the depositary institution in respect of such accounts, unless the requirement for a Control Agreement has been waived by PFG.

 

Cash Equivalents ” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States, any agency or any State thereof, or the Governmental Body of any other country (including without limitation the PRC, Hong Kong, Japan, the Cayman Islands or India), having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having a rating of at least A-1 or the equivalent thereof by Standard & Poor’s Ratings Group or a rating of P-1 or the equivalent thereof by Moody’s Investors Service, Inc.; (c) certificates of deposit, time deposits and bankers’ acceptances maturing no more than one (1) year after the date of acquisition, and overnight bank deposits, in each case which are issued by a commercial bank organized under the laws of the United States, any state thereof or any other jurisdiction (including without limitation the PRC, Hong Kong, Japan, the Cayman Islands or India), having capital and surplus in excess of $500,000,000; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition and (e) Investments pursuant to Borrower’s Investment Policy, provided that such investment policy (and any such amendment thereto) has been provided by Borrower to PFG and approved in writing by PFG.

 

Cayman Security Documents ” means the Loan Documents to be executed and delivered by Parent under or in connection with the Loan Agreement, including a general debenture (incorporating fixed and floating charges), a deed of guarantee and indemnity of the Obligations of Borrower, BORQS Hong Kong Limited, a share charge in relation to the shares Parent owns in BORQS Hong Kong Limited, an Intellectual Property Security Agreement, Parent corporate authorizations and related consents and certificates.

 

Change in Control ” means any event, transaction, or occurrence as a result of which (a) any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as an amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of Borrower, is or becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Borrower, representing thirty-five percent (35%) or more of the combined voting power of Borrower’s then outstanding securities in a single transaction or a series of related transactions (other than by the sale of Borrower’s equity securities in a public offering or to venture capital or private equity investors so long as Borrower identifies to PFG the venture capital or private equity investors at least seven (7) Business Days prior to the initial closing of the transaction and provides to PFG a description of the material terms of the transaction and such other information as PFG may reasonably request); or (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the Board of Borrower (together with any new directors whose election by the Board of Borrower was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office (other than as a result of the above-referenced venture capital / private equity exception, subject to the same notice and information requirements as specified above).

 

Code ” means the Uniform Commercial Code as adopted and in effect in the State of California from time to time.

 

Collateral ” has the meaning set forth in Section 2 above.

 

Collateral Account ” is any Deposit Account.

 

Compliance Certificate ” means Borrower’s certification of its compliance with the terms and conditions of this Agreement and such other matters as PFG may require to be addressed in such certificate, in the form as initially set forth as Exhibit B hereto, as such form may be amended from time to time upon advance notice from PFG.

 

Constitutional Document ” means for any Person, such Person’s formation documents, as last certified by the Secretary of State (or equivalent Governmental Body) of such Person’s jurisdiction of organization, if applicable, together with, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its certificate of incorporation, articles of association and/or limited liability company agreement (or operating or similar agreement), (c) if such Person is a partnership, its partnership agreement (or similar agreement), and (d) if such Person is a statutory joint venture company or similar entity, its joint venture (or similar) agreement, each of the foregoing with all current amendments or modifications thereto.

 

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Partners for Growth Loan and Security Agreement

 

Contingent Obligation ” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, Dividend, letter of credit or other obligation of another such as an obligation, in each case directly or indirectly guaranteed, endorsed, co made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

 

continuing ” and “ during the continuance of ” when used with reference to a Default or Event of Default means that the Default or Event of Default has occurred and has not been either waived in writing by PFG or cured within any applicable cure period.

 

Control Agreement ” means (i) a written agreement among PFG, Borrower and a depositary bank or other custodian in respect of Borrower’s Collateral Accounts by which the depositary bank or other custodian, as appropriate, agrees to comply with instructions given from time to time by PFG directing the disposition of the funds, investments and securities in Borrower’s Collateral Accounts without further consent of Borrower, which instructions may include not complying with instructions (which term may include the honoring of checks written by Borrower against funds in said accounts) given by Borrower, and containing other terms acceptable to PFG, and (ii) such other notices and depositary acknowledgments as may be customary and appropriate to perfect a security interest in Collateral Accounts under the laws of non-U.S. jurisdictions.

 

Current Depositary(ies) ” means the banking and / or other financial institutions at which Borrower maintains Collateral Accounts on the Effective Date.

 

Default ” means any event which with notice or passage of time or both, would constitute an Event of Default.

 

Default Rate ” means the lesser of (i) the applicable rate(s) set forth in the Schedule, plus six percent (6%) per annum, and (ii) the maximum rate of interest that may lawfully be charged to a commercial borrower under applicable usury laws.

 

Deposit Accounts ” means all present and future “deposit accounts” as defined in the Code in effect on the Effective Date in the name of the Borrower or any Guarantor, with such additions to such term as may hereafter be made, and includes without limitation all general and special bank accounts, demand accounts, checking accounts, savings accounts and certificates of deposit, and as used in this Agreement, the term “Deposit Accounts” shall be construed to also include securities, commodities and other Investment Property accounts.

 

Dividend ” means a payment or other distribution in respect to equity to an owner thereof, (A) whether or not (i) in respect of net profits or otherwise, (ii) declared by Borrower’s (or other relevant party’s) (iii) Board, previously paid, or (iv) authorized in its Constitutional Documents or otherwise, and (B) for the avoidance of doubt, includes distributions to members of a limited liability company.

 

Dormant Group Member ” means any Group Member, other than a Borrower, that does not actively conduct business, and such term may include a Guarantor whose role within the Group is principally to hold the shares of another Group Member.

 

Equipment ” means all present and future “equipment” as defined in the Code in effect on the Effective Date with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

 

Event of Default ” means any of the events set forth in Section 6.1 of this Agreement.

 

Executive Director ” means a corporate director of a Person who has the inherent or lawfully-granted executive authority to contractually bind such Person by his or her signature or other action.

 

Exigent Circumstances ” means circumstances that substantially inhibit an orderly sale process or that imply urgency due to rapid erosion of value or opportunity, including Borrower closing its business or “going dark”, inability or refusal (express or implied by non-response) to provide for the security of Collateral.

 

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Partners for Growth Loan and Security Agreement

 

Financial Statements ” means consolidated and consolidating financial statements of Parent, including a balance sheet, income statement and cash flow and, in the case of monthly-required financial statements, showing data for the month being reported and a history showing each month from the beginning of the relevant fiscal year.

 

First-Priority ” means, in relation to PFG’s Lien in Collateral, a security interest that is prior to any other security interest, with the exception of the Liens of the Senior Lender and other Permitted Liens, which other Permitted Liens may only have superior priority to PFG’s Lien as expressly specified herein or pursuant to the terms of a subordination agreement between PFG and the holder of such other Permitted Lien, and “ First Ranking ” in relation to charges created under debentures executed by Borrower and Guarantor means a charge that is prior to charges other than those of the Senior Lender and any other charges to which PFG expressly consents, in its business discretion.

 

General Intangibles ” means all present and future “general intangibles” as defined in the Code in effect on the Effective Date with such additions to such term as may hereafter be made, and includes without limitation all Intellectual Property, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

 

good faith business judgment ” means honesty in fact and good faith (as defined in Section 1201 of the Code) in the exercise of PFG’s business judgment.

 

Governmental Authorization ” means any: (a) permit, license, certificate, franchise, concession, approval, consent, ratification, permission, clearance, confirmation, endorsement, waiver, certification, designation, rating, registration, qualification or authorization that is, has been issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement; or (b) right under any Contract with any Governmental Body.

 

Governmental Body ” means any: (a) nation, principality, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) local, municipal, foreign or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or entity and any court or other tribunal); (d) multi-national organization or body; or (e) individual, entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature.

 

Group ” means Borrower, Guarantor, the direct or indirect Subsidiaries and controlled Affiliates of Guarantor or Borrower, and “ Group Member ” means any of such foregoing Persons.

 

Guarantor ” means Parent (together with any other Persons who may from time to time be joined to the Guaranty or otherwise guaranty the Obligations hereunder).

 

Guaranty ” means that certain Deed of Guarantee and Indemnity executed and delivered by Parent in favor of PFG on the Effective Date in respect of Borrower’s Obligations.

 

Hong Kong Security Documents ” means the Loan Documents to be executed and delivered by HK Borrower under or in connection with the Loan Agreement, including a general debenture (incorporating fixed and floating charges) by Parent, a deed of guarantee and indemnity of the Obligations by Parent and related charges, HK Borrower corporate authorizations and related consents and certificates.

 

IFRS ” means International Financial Reporting Standards.

 

including ” means including (but not limited to).

 

Indebtedness ” means (a) indebtedness for borrowed money or the deferred purchase price of property or services (other than trade payables arising in the ordinary course of business), (b) obligations evidenced by bonds, notes, debentures or other similar instruments, (c) reimbursement obligations in connection with letters of credit, (d) capital lease obligations and (e) Contingent Obligations.

 

Insolvency Proceeding ” means (a) any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law in any jurisdiction, including winding-up procedures, assignments for the benefit of creditors, compositions, receiverships, administrations, extensions generally with its creditors, or proceedings seeking reorganization, arrangement or other relief; or (b) if any step is taken with a view to a moratorium or a composition, assignment or similar arrangement with any of a Person’s creditors; (c) if a meeting of a Person’s shareholders, directors or other officers is convened for the purpose of considering any resolution for, to petition for or to make an application to or to file documents with a court or any registrar for, such Person’s winding-up, administration or dissolution or any such resolution is passed; or (d) if an order is made for a Person’s winding-up, administration or dissolution, or any Person presents a petition, or makes an application to or files documents with a court or any registrar, for such Person’s winding-up, administration or dissolution, or gives notice to Agent and Lenders of an intention to appoint an administrator; or (e) if any liquidator, receiver, administrative receiver, administrator or similar officer is appointed in respect of a Person or any of such Person’s assets; or (f) if a Person’s shareholders, directors or other officers request the appointment of, or give notice of their intention to appoint, a liquidator, receiver, administrator or similar officer.

 

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Partners for Growth Loan and Security Agreement

 

Intellectual Property ” means all present and future: (a) copyrights, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, (b) trade secret rights, including all rights to unpatented inventions and know-how, and confidential information; (c) mask work or similar rights available for the protection of semiconductor chips; (d) patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same; (e) trademarks, servicemarks, trade styles, and trade names, whether or not any of the foregoing are registered, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by any such trademarks; (f) Domain Rights as described in Section 3.14 hereof, (g) computer software and computer software products; (h) designs and design rights; (i) technology; (j) all claims for damages by way of past, present and future infringement of any of the rights included above; and (k) all licenses or other rights to use any property or rights of a type described above.

 

Inventory ” means all present and future “inventory” as defined in the Code in effect on the Effective Date with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

 

Investment ” means any beneficial ownership interest in any Person (including any stock, partnership interest or other equity or debt securities issued by any Person), and any loan, advance or capital contribution to any Person.

 

Investment Property ” means all present and future investment property, securities, stocks, bonds, debentures, debt securities, partnership interests, limited liability company interests, options, security entitlements, securities accounts, commodity contracts, commodity accounts, and all financial assets held in any securities account or otherwise, and all options and warrants to purchase any of the foregoing, wherever located, and all other securities of every kind, whether certificated or uncertificated.

 

Key Person ” means Borrower’s Chairman and Chief Executive Officer, Pat Chan, and Borrower’s Senior Vice President Corporate Finance, Anthony Chan.

 

Knowledge ” or “ best of knowledge ” and words of similar import mean either (i) the actual knowledge of any of Borrower’s officers, including its Executive Directors, any Chief Executive Officer, President, designated legal representative under the Legal Requirements of any non-U.S. jurisdiction, Chief Information/Intelligence Officer (if any), Chief Technology Officer (or equivalent), Chief Financial Officer and Corporate Controller, or Borrower’s Vice Presidents or General Managers supervising a business unit or division, or any persons succeeding or performing the responsibilities of such identified positions including Directors with executive authority, or (ii) such knowledge as the persons in such identified positions would have assuming (A) Borrower policies in accordance with generally-accepted norms of corporate governance and (B) the actual exercise of reasonable diligence and prudence by such persons in accordance with such policies.

 

Legal Requirement ” means any written local, municipal, foreign or other law, statute, legislation, constitution, principle of common law, resolution, ordinance, code, edict, decree, proclamation, treaty, convention, rule, regulation, ruling, directive, pronouncement, requirement, specification, determination, decision, opinion or interpretation that is, has been issued, enacted, adopted, passed, approved, promulgated, made, implemented or otherwise put into effect by or under the authority of any Governmental Body.

 

Lender Expenses ” means, in each case without limitation as to type and kind: reasonable Professional Costs, and all filing, recording, search, title insurance, appraisal, audit, and other reasonable costs incurred by PFG, pursuant to, or in connection with, or relating to this Agreement (whether or not a lawsuit is filed), including, but not limited to, Professional Costs PFG pays or incurs in order to do the following: (i) prepare and negotiate this Agreement and all present and future documents relating to this Agreement; (ii) obtain legal advice in connection with this Agreement or Borrower; enforce, or seek to enforce, any of its rights or retain the services of consultants to do so; (iii) prosecute actions against, or defend actions by, Account Debtors; (iv) commence, intervene in, or defend any action or proceeding; (v) initiate any complaint to be relieved of the automatic stay in bankruptcy; (vi) file or prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; (vii) examine, audit, copy, and inspect any of the Collateral or any of Borrower’s books and records, subject to Section 4.5; (viii) protect, obtain possession of, lease, dispose of, or otherwise enforce PFG’s security interest in, the Collateral; and (ix) otherwise represent PFG in any litigation relating to Borrower.

 

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Partners for Growth Loan and Security Agreement

 

Lien ” or “ lien ” is a security interest, claim, mortgage, deed of trust, levy, charge, pledge or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.

 

Liquidity Event ” means a transaction in respect of the Group where an investor would reasonably be expected to realize upon its investment in the Group, such as, for example only, an initial public offering or listing, a transaction in which the Group (or the material operating members thereof) are merged or acquired, or a sale of a substantial part of the assets of the Group, in each case other than as part of an internal reorganization of the Group.

 

Loan Documents ” means, collectively, this Agreement, the Representations, and all other present and future documents, instruments and agreements between PFG and Borrower, including, but not limited to those relating to this Agreement, and all amendments and modifications thereto and replacements therefor.

 

Loan Request ” means any request that may be made by a Borrower in connection with this Agreement, including a borrowing request, consent request, a waiver request and any other accommodation that may be given by PFG under or relating to the Loan Agreement.

 

Material Adverse Change ” means any of the following: (i) a material adverse change in the business, operations, or financial or other condition of Borrower, or (ii) a material impairment of the prospect of repayment of any portion of the Obligations; or (iii) a material impairment of the value or priority of PFG’s security interests in the Collateral, or (iv) PFG’s determination, based upon information available to it and in its reasonable judgment, that there is a reasonable likelihood that Borrower shall fail to comply with one or more of the financial covenants in Section 5 of the Schedule during the next succeeding financial reporting period.

 

Maturity ” means the day on which the Obligations become due and payable whether at the Maturity Date or by acceleration or otherwise, or when such Obligations are in fact repaid (such as, by prepayment),

 

Maturity Date ” means the relevant Maturity Date set forth in Section 4 of the Schedule.

 

New Subsidiary(ies) ” means any person that becomes a direct or indirect Subsidiary of a Borrower or Guarantor after the date hereof.

 

Non-Borrower Group Member(s) ” means any direct or indirect Group Member not joined as a co-Borrower hereunder.

 

Non-Overdue Senior Monetary Obligations ” means, at any time, the amount of monetary Obligations other than principal Indebtedness owed by Borrower to the Senior Lender but not then due, such as accrued and unpaid interest not yet due.

 

Non-PRC ” (or “non-PRC”) in relation to a Subsidiary means a Subsidiary that is not formed under the laws of the Peoples Republic of China.

 

Obligations ” means all present Loans and future Loans, advances, debts, liabilities, obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower to PFG, including obligations and covenants intended to survive the termination of this Agreement, whether evidenced by this Agreement or any note or other instrument or document, or otherwise, including indebtedness under any obligation to purchase equity derivatives (including stock warrants) purchased or otherwise issued to PFG from time to time, whether arising from an extension of credit, opening of a letter of credit, banker’s acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those acquired by assignment and any participation by PFG in Borrower’s debts owing to others), absolute or contingent, due or to become due, including, without limitation, all interest, charges, expenses, fees, attorney’s fees, expert witness fees, audit fees, collateral monitoring fees, closing fees, facility fees, commitment fees, contingent fees, back-end and performance-based fees, termination fees, minimum interest charges and any other sums chargeable to Borrower under this Agreement or under any other Loan Documents.

 

Ordinary (or “ordinary”) course of business ” and derivatives shall apply to an action taken or an action required to be taken and not taken by or on behalf of a Borrower. An action will not be deemed to have been taken in the “ordinary course of business” unless : (a) such action is consistent with its past practices (if such type of action has been taken in the past and, if not, such action shall be deemed not in the ordinary course of business) and is similar in nature and magnitude to actions customarily taken by it; (b) such action is taken in accordance with sound and prudent business practices in its jurisdiction of organization; and (c) such action is not required to be authorized by its shareholders and does not require any other separate or special authorization of any nature.

 

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Partners for Growth Loan and Security Agreement

 

Other Property ” means the following as defined in the Code in effect on the Effective Date with such additions to such terms as may hereafter be made, and all rights relating thereto: all present and future “commercial tort claims” (including without limitation any commercial tort claims identified in the Representations), “documents”, “instruments”, “promissory notes”, “chattel paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farm products” and “money”; and all other goods and personal property of every kind, tangible and intangible, whether or not governed by the Code.

 

Parent ” means Guarantor, BORQS International Holding Corp., an exempted limited liability company incorporated under the laws of the Cayman Islands bearing Company No. 192127.

 

Payment ” means all checks, wire transfers and other items of payment received by PFG for credit to Borrower’s outstanding Obligations.

 

Permitted Indebtedness ” means:

 

(i) the Loans and other Obligations;

 

(ii) Indebtedness existing on the Effective Date and shown on Exhibit A hereto;

 

(iii) Subordinated Debt;

 

(iv) Indebtedness owing to Senior Lender as set forth in Exhibit A, but in no event in excess of the Senior Debt Limit specified in Section 8(a)(2) of the Schedule;

 

(v) other Indebtedness secured by Permitted Liens described in clauses (i) and (iii) of that definition;

 

(vi) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

 

(vii) Liens of carriers, warehouseman, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed $50,000 and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

 

(viii) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (i) through (vii) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose materially more burdensome terms upon Borrower; and

 

(ix) reimbursement obligations in respect of letters of credit in an aggregate face amount outstanding not to exceed $300,000 at any time outstanding, which have been reported to PFG in writing, and, in the case of reimbursement obligations to the Senior Lender in respect of letters of credit which do not exceed the Senior Debt Limit (taking into account all other Indebtedness to Senior Lender).

 

Permitted Investments ” are:

 

(i) Investments (if any) shown on Exhibit A and existing on the Effective Date;

 

(ii) Investments consisting of Cash Equivalents;

 

(iii) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower;

 

(iv) Investments in Subsidiaries existing on the Effective Date in amounts consistent with past practice; and

 

(v) at any time when no Default or Event of Default has occurred and is continuing, Investments in Borrower’s PRC and India Subsidiaries consisting of cash required in the ordinary course of such Subsidiaries’ business to maintain ordinary course operations and pay ordinary course expenses.

 

Permitted Liens ” means the following:

 

(i) purchase money Liens (including Liens arising under any retention of title, hire purchase or conditional sales arrangement or arrangements having similar effect) (i) on Equipment acquired or held by Borrower incurred for financing the acquisition of the Equipment securing no more than $250,000 in the aggregate amount outstanding, or (ii) existing on such Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;

 

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Partners for Growth Loan and Security Agreement

 

(ii) Liens for Taxes not yet payable;

 

(iii) additional Liens consented to in writing by PFG, which consent may be withheld in its good faith business judgment. PFG shall have the right to require, as a condition to its consent under this subparagraph (iii), that the holder of the additional security interest or lien sign a subordination agreement in PFG’s then standard form, acknowledge that the security interest is subordinate to the security interest in favor of PFG, and agree not to take any action to enforce its subordinate security interest so long as any Obligations remain outstanding, and that Borrower agrees that any uncured default in any obligation secured by the subordinate security interest shall also constitute an Event of Default under this Agreement;

 

(iv) Liens being terminated substantially concurrently with this Agreement;

 

(v) Liens of materialmen, mechanics, warehousemen, carriers, or other similar liens arising in the ordinary course of business and securing obligations which are not delinquent;

 

(vi) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

 

(vii) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by liens of the type described above in clauses (i), (ii), (iii) and (x), provided that any extension, renewal or replacement lien is limited to the property encumbered by the existing lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase and other terms are holistically not less favorable to Borrower;

 

(viii) Liens in favor of customs and revenue authorities which secure payment of customs duties in connection with the importation of goods;

 

(ix) Liens to secure the Loans or other Obligations;

 

(x) non-exclusive licenses of Intellectual Property granted to third parties in the ordinary course of business;

 

(xi) Liens existing on the Effective Date and specified in Exhibit A hereto; and

 

(xii) Liens in favor of Senior Lender securing an amount not in excess of the Senior Debt Limit.

 

Person ” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, government, or any agency or political division thereof, or any other entity.

 

PFG Warrant ” means those certain warrants to acquire Parent’s shares to be issued to PFG and its designees on the Effective Date.

 

Plan ” means Borrower’s financial plan as presented to PFG on June 6, 2016, in PDF format in a file entitled “Borqs 2016-2018 PL 201602017b.pdf” for the 2016-2018 calendar years, as such plan may be delivered by Borrower and approved by PFG (for purposes of setting financial covenants covering future periods) for periods not reflected in the initial financial plan.

 

Professional Costs ” means all reasonable fees and expenses of auditors, accountants, valuation experts, Collateral disposition service providers, restructuring and other advisory services in connection with restructurings, workouts and Insolvency Proceedings, and fees and costs of attorneys.

 

Qualifying Request ” means a request made by a Responsible Officer of Borrower under Section 1.4 for (i) a Loan (A) that is within Borrower’s borrowing availability under this Agreement, (B) that satisfies the relevant conditions set forth in Section 10 of the Schedule, (C) that is accompanied by such certificates, documents and instruments as may be required under this Agreement or otherwise reasonably required by PFG to confirm Borrower’s compliance with the Loan Documents at the time of such request, and (D) that is made within 30 days of the due date of the Reporting package (under Section 6 of the Schedule) showing satisfaction of the relevant borrowing conditions, or (ii) any other matter for which PFG’s consent is required under the Loan Documents.

 

Representations ” means the written Representations and Warranties provided by Borrower to PFG referred to in the Schedule.

 

Responsible Officer(s) ” means Borrower’s Chairman and Chief Executive Officer, Pat Chan, and Borrower’s Senior Vice President Corporate Finance, Anthony Chan, and any other person authorized to bind Borrower and notified to PFG in writing by a Responsible Officer as a new Responsible Officer.

 

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Partners for Growth Loan and Security Agreement

 

Restricted License ” means any material license or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with PFG’s right to sell any Collateral.

 

RMB ” means Renminbi, the lawful currency of the People’s Republic of China.

 

Security Instruments ” means financing statements, mortgages, charges and similar notices filed under the Code or other relevant local law (U.S., Cayman Islands, British Virgin Islands, Hong Kong or other non-U.S. law) in any jurisdiction in which such financing statements, mortgages, debentures, charges and similar agreements, instruments and notices may be filed, including fixed and floating charges, share charges, mortgage debentures, and any other notices, instruments and filings that reflect the “all assets” security granted hereunder to PFG, including first ranking fixed and floating charges over Borrower’s and Guarantor’s registered and unissued share capital, reputation and goodwill, Intellectual Property, Accounts, its rights to receive funds from its customers, and other fixed assets and any tax benefit it may have.

 

Senior Debt ” has the meaning set forth in Section 8 of the Schedule.

 

Senior Lender ” has the meaning set forth in Section 8 of the Schedule.

 

Subordinated Debt ” means debt incurred by Borrower subordinated to Borrower’s debt to PFG pursuant to a subordination agreement entered into between PFG, Borrower and the subordinated creditor(s) upon terms acceptable to PFG in its sole business discretion, but which may at PFG’s option include: (i) subordination of subordinated creditor Lens, (ii) restrictions or prohibition of payments on subordinated debt until all Obligations to PFG are fully repaid and performed, and (iii) a prohibition on the exercise of remedies by a subordinated creditor until all Obligations to PFG are fully repaid and performed.

 

Senior Subordination Agreement ” means that certain subordination agreement, dated as of the date hereof, by and between PFG and Senior Lender.

 

Subsidiary ” means, with respect to any Person, (i) any Person of which more than 50% of the voting stock or other equity interests is owned or (ii) a Person controlled, directly or indirectly, by such Person or one or more Affiliates of such Person and which, for the avoidance of doubt, shall include a “sister” company to a Person under common direct or indirect ownership meeting the above specified percentage for being considered a “Subsidiary”.

 

Tax ” means any tax (including any income tax, franchise tax, capital gains tax, estimated tax, gross receipts tax, value-added tax, surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business tax, occupation tax, inventory tax, occupancy tax, withholding tax or payroll tax), levy, assessment, tariff, impost, imposition, toll, duty (including any customs duty), deficiency or fee, and any related charge or amount (including any fine, penalty or interest), that is, has been or may in the future be (a) imposed, assessed or collected by or under the authority of any Governmental Body, or (b) payable pursuant to any tax-sharing agreement or similar contract.

 

Tax Return ” means any return (including any information return), report, statement, declaration, estimate, schedule, notice, notification, form, election, certificate or other document or information that is, has been or may in the future be filed with or submitted to, or required to be filed with or submitted to, any Governmental Body in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of or compliance with any Legal Requirement relating to any Tax.

 

Transfer ” or “ transfer ” shall include any sale, assignment with or without consideration, encumbrance, hypothecation, pledge, or other transfer or disposition of any kind, including, but not limited to, transfers to receivers, levying creditors, trustees or receivers in bankruptcy proceedings or general assignees for the benefit of creditors, whether voluntary or by operation of law, directly or indirectly.

 

$ ” means United States dollars.

 

Other Terms . All accounting terms used in this Agreement, unless otherwise indicated, shall have the meanings given to such terms in accordance with IFRS or such other generally acceptable accounting method as Borrower later adopts with notice to PFG, consistently applied. All other terms contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Code, to the extent such terms are defined therein.

 

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Partners for Growth Loan and Security Agreement

 

8. GENERAL PROVISIONS.

 

8.1 Confidentiality . PFG agrees to use the same degree of care that it exercises with respect to its own proprietary information, to maintain the confidentiality of any and all proprietary, trade secret or other information identified by Borrower as confidential provided to or received by PFG from Borrower or its Affiliates or representatives, including business plans and forecasts, non-public financial information, confidential or secret processes, formulae, devices and contractual information, customer lists, and employee relation matters, provided that PFG may disclose such information (i) to its officers, directors, employees, attorneys, accountants, affiliates, and advisory boards (provided they are informed of the confidential nature of the information and instructed to keep it confidential), (ii) subject to an agreement containing provisions substantially the same as this Section, to any participants, prospective participants, assignees and prospective assignees, (iii) to such other Persons to whom PFG shall at any time be required to make such disclosure in accordance with applicable law or legal process, provided that PFG shall use commercially reasonably efforts to notify such Persons the confidential nature of the information, and (iv) in its good faith business judgment in connection with the enforcement of its rights or remedies after an Event of Default, or in connection with any dispute with Borrower or any other Person relating to Borrower. The confidentiality agreement in this Section supersedes any prior confidentiality agreement of PFG relating to Borrower.

 

8.2 Interest Computation. In computing interest on the Obligations, all Payments received after 12:00 Noon, Pacific Time, on any day shall be deemed received on the next Business Day.

 

8.3 Payments . All Payments may be applied, and in PFG’s good faith business judgment reversed and re-applied, to the Obligations, in such order and manner as PFG shall determine in its good faith business judgment.

 

8.4 Monthly Accountings. PFG may provide Borrower monthly with an account of advances, charges, expenses and payments made pursuant to this Agreement. Such account shall be deemed correct, accurate and binding on Borrower and an account stated (except for reverses and reapplications of payments made and corrections of errors discovered by PFG), unless Borrower notifies PFG in writing to the contrary within 60 days after such account is rendered, describing the nature of any alleged errors or omissions.

 

8.5 Notices. All notices to be given under this Agreement or any other Loan Documents shall be in writing and shall be given either personally, or by nationally recognized overnight air courier, or by regular first-class mail, certified mail return receipt requested, or by fax to the most recent fax number a party has for the other party (and if by fax, sent concurrently by one of the other methods provided herein), or by electronic mail, addressed to PFG at the addresses shown in the heading to this Agreement, to Borrower or its Affiliates at Tower A, Building B23, Universal Business Park, No. 10 Jiuxianqiao Road, Chaoyang District, Beijing 100015, PRC (北京市朝阳区酒仙桥路10号恒通商务园B23楼A座) (attention: President), Email: pat.chan@borqs.com, with a copy to Eva Wang, Esq., Fenwick & West LLP, Kerry Parkside Office, Unit 908, Pudong, Shanghai, 201204, PRC, Email: ewang@fenwick.com, or at any other address designated in writing by one party to the other party. All notices shall be deemed to have been given upon delivery in the case of notices personally delivered, or at the expiration of one Business Day if sent by a nationally recognized overnight air courier, or the date of actual delivery following the deposit thereof in the United States mail, with postage prepaid, or on the first business day of receipt during business hours in the case of notices sent by fax or electronic mail, as provided herein.

 

8.6 Authorization to Use Borrower Name, Etc. Borrower irrevocably authorizes PFG to: (i) use Borrower’s logo on PFG’s website and in its marketing materials to denote the lending relationship between PFG and Borrower; (ii) use a “tombstone” to highlight the transaction(s) from time to time between PFG and Borrower; and (iii) to issue press releases in a form reasonable acceptable to Borrower and PFG highlighting and summarizing the credit facilities extended by PFG to Borrower from time to time under this Agreement, as amended from time to time, all of the above (i) through (iii), for marketing purposes.

 

8.7 Severability. Should any provision of this Agreement be held by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect.

 

8.8 Integration. This Agreement and such other written agreements, documents and instruments as may be executed in connection herewith are the final, entire and complete agreement between Borrower and PFG and supersede all prior and contemporaneous negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement. There are no oral understandings, representations or agreements between the parties which are not set forth in this Agreement or in other written agreements signed by the parties in connection herewith.

 

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Partners for Growth Loan and Security Agreement

 

8.9 Waivers; Indemnity. The failure of PFG at any time or times to require Borrower to strictly comply with any of the provisions of this Agreement or any other Loan Document shall not waive or diminish any right of PFG later to demand and receive strict compliance therewith. Any waiver of any default shall not waive or affect any other default, whether prior or subsequent, and whether or not similar. None of the provisions of this Agreement or any other Loan Document shall be deemed to have been waived by any act or knowledge of PFG or its agents or employees, but only by a specific written waiver signed by an authorized officer of PFG and delivered to Borrower. Borrower waives the benefit of all statutes of limitations relating to any of the Obligations or this Agreement or any other Loan Document, and Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, instrument, account, General Intangible, document or guaranty at any time held by PFG on which Borrower is or may in any way be liable, and notice of any action taken by PFG, unless expressly required by this Agreement. Borrower hereby agrees to indemnify PFG and its affiliates, subsidiaries, parent, directors, officers, employees, agents, and attorneys, and to hold them harmless from and against any and all claims, debts, liabilities, demands, obligations, actions, causes of action, penalties and Lender Expenses of every kind, which they may sustain or incur based upon or arising out of any of the Obligations, or any relationship or agreement between PFG and Borrower, or any other matter, relating to Borrower or the Obligations; provided that this indemnity shall not extend to damages determined by a court of competent jurisdiction in a final judgment to have been proximately caused by the indemnitee’s own gross negligence or willful misconduct. Notwithstanding any provision in this Agreement to the contrary, the indemnity agreement set forth in this Section shall survive any termination of this Agreement and shall for all purposes continue in full force and effect.

 

8.10 No Liability for Ordinary Negligence. Borrower agrees that any and all claims it may have under this Agreement shall be limited to claims against PFG and not its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing PFG. Neither PFG, nor any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing PFG shall be liable for any claims, demands, losses or damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower or any other party through the negligence of PFG, or any of its directors, officers, employees, agents, attorneys or any other Person affiliated with or representing PFG, but nothing herein shall relieve PFG from liability for its own gross negligence or willful misconduct.

 

8.11 Amendment. The terms and provisions of this Agreement may not be waived or amended, except in a writing executed by Borrower and a duly authorized officer of PFG. No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver.

 

8.12 Time of Essence. Time is of the essence in the performance by Borrower of each and every obligation under this Agreement.

 

8.13 Lender Expenses. Borrower shall reimburse PFG for all Lender Expenses. All Lender Expenses to which PFG may be entitled pursuant to this Paragraph shall immediately become part of Borrower’s Obligations, shall be due on demand, and if not paid within two (2) Business Days after demand, shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations.

 

8.14 Benefit of Agreement. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of Borrower and PFG; provided, however, that Borrower may not assign or Transfer any of its rights under this Agreement without the prior written consent of PFG, and any prohibited assignment shall be void. No consent by PFG to any assignment shall release Borrower from its liability for the Obligations.

 

8.15 Joint and Several Liability. If Borrower consists of more than one Person, their liability shall be joint and several, and the compromise of any claim with, or the release of, any Borrower shall not constitute a compromise with, or a release of, any other Borrower.

 

8.16 Limitation of Actions. Any claim or cause of action by Borrower against PFG, its directors, officers, employees, agents, accountants or attorneys, based upon, arising from, or relating to this Loan Agreement, or any other Loan Document, or any other transaction contemplated hereby or thereby or relating hereto or thereto, or any other matter, cause or thing whatsoever, incurred, done, omitted or suffered to be done by PFG, its directors, officers, employees, agents, accountants or attorneys, shall be barred unless asserted by Borrower by the commencement of an action or proceeding in a court of competent jurisdiction by (a) the filing of a complaint within one year after the earlier to occur of (i) the first act, occurrence or omission upon which such claim or cause of action, or any part thereof, is based, or (ii) the date this Agreement is terminated, and (b) the service of a summons and complaint on an officer of PFG, or on any other person authorized to accept service on behalf of PFG, within thirty (30) days thereafter. Borrower agrees that such one-year period is a reasonable and sufficient time for Borrower to investigate and act upon any such claim or cause of action. The one-year period provided herein shall not be waived, tolled, or extended except by the written consent of PFG in its sole discretion. This provision shall survive any termination of this Loan Agreement or any other Loan Document.

 

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Partners for Growth Loan and Security Agreement

 

8.17 Loan Monitoring. At reasonable times and upon reasonable advance notice to Borrower, PFG shall have the right to visit personally with Borrower up to two times per calendar year at its principal place of business or such other location as the parties may mutually agree, for the purpose of meeting with Borrower’s management in order to remain as up-to-date with Borrower’s business as is practicable and to maintain best practices in terms of lender loan monitoring and diligence. Lender Expenses incurred for travel, lodging and similar expenses for up to three PFG staff for such visits shall be at Borrower’s expense and reimbursed in the same manner as other PFG expenses under this Agreement.

 

8.18 Paragraph Headings; Construction; Counterparts. Paragraph headings are only used in this Agreement for convenience. Borrower and PFG acknowledge that the headings may not describe completely the subject matter of the applicable paragraph, and the headings shall not be used in any manner to construe, limit, define or interpret any term or provision of this Agreement. This Agreement has been fully reviewed and negotiated between the parties with the benefit of independent counsel and no uncertainty or ambiguity in any term or provision of this Agreement shall be construed strictly against PFG or Borrower under any rule of construction or otherwise. References to “Borrower” are construed to mean “each Borrower”, unless otherwise expressly specified. Amounts set off in brackets or parentheses are negative. The word “shall” is mandatory, the word “may” is permissive, and the word “or” is not exclusive. The term “Agreement” includes the Schedule. Obligations of a similar nature addressed in different sections of this Agreement shall be deemed supplemental to one another and not exclusive unless expressly set forth as such. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

 

8.19 Correction of Loan Documents. PFG may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties so long as PFG provides Borrower with written notice of such correction and allows Borrower at least ten (10) days to object to such correction. In the event of such objection, such correction shall not be made except by an amendment signed by both PFG and Borrower.

 

8.20 Governing Law; Jurisdiction; Venue. This Agreement and all acts and transactions hereunder and all rights and obligations of PFG and Borrower hereunder shall be governed by the laws of the State of California. As a material part of the consideration to PFG to enter into this Agreement, Borrower (i) agrees that all actions and proceedings relating directly or indirectly to this Agreement shall, at PFG’s sole option, be litigated in courts located within California and that the exclusive venue therefor shall, at PFG’s sole option, be Santa Clara County; (ii) consents to the jurisdiction and venue of any such court (or such other court and jurisdiction as PFG may elect to enforce the Loan Documents or exercise remedies against Collateral) and consents to service of process in any such action or proceeding by personal delivery or by internationally-recognized commercial courier or overnight delivery service or by certified mail, return receipt requested, to the last known address for Borrower; and (iii) waives any and all rights Borrower may have to object to the jurisdiction of any such court, or to transfer or change the venue of any such action or proceeding. Notwithstanding anything to the contrary in the foregoing, (x) PFG may enforce the Obligations (including the obligations of each Guarantor), the Security Instruments and the other Loan Documents in any jurisdiction in which Borrower, Guarantor or any of their respective Collateral resides or is deemed to reside, including the Cayman Islands and Hong Kong, and (y) execution and delivery of this Loan Agreement “as a deed” by non-U.S. Persons shall be construed under Hong Kong law.

 

8.21 Withholding; Gross-up . Payments received by PFG from Borrower under this Agreement will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Body (including any interest, additions to tax or penalties applicable thereto). Specifically, however, if at any time any Governmental Body, applicable law, regulation or international agreement requires Borrower to make any withholding or deduction from any such payment or other sum payable hereunder to PFG, Borrower hereby covenants and agrees that the amount due from Borrower with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, PFG receives a net sum equal to the sum which it would have received had no withholding or deduction been required, and Borrower shall pay the full amount withheld or deducted to the relevant Governmental Body. Borrower will, upon request, furnish PFG with proof reasonably satisfactory to PFG indicating that Borrower has made such withholding payment; provided, however, that Borrower need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Borrower. The agreements and obligations of Borrower contained in this Section 8.21 shall survive the termination of this Agreement.

 

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Partners for Growth Loan and Security Agreement

 

8.22 Multiple Borrowers; Suretyship Waivers. If at any time there is more than one Borrower under this Agreement:

 

(a) Borrowers’ Agent . Each Borrower hereby irrevocably appoints each other Borrower, as the agent, attorney-in-fact and legal representative of all Borrowers for all purposes, including requesting disbursement of the Loan and receiving account statements and other notices and communications to Borrowers (or any of them) from PFG. PFG may rely, and shall be fully protected in relying, on any request for a Loan, disbursement instruction, report, information or any other notice or communication made or given by any Borrower, whether in its own name, as Borrowers’ agent, or on behalf of one or more Borrowers, and PFG shall not have any obligation to make any inquiry or request any confirmation from or on behalf of any other Borrower as to the binding effect on it of any such request, instruction, report, information, other notice or communication, nor shall the joint and several character of Borrowers’ obligations hereunder be affected thereby.

 

(b)  Waivers . Each Borrower hereby waives: (i) any right to require PFG to institute suit against, or to exhaust its rights and remedies against, any other Borrower or any other Person, or to proceed against any property of any kind which secures all or any part of the Obligations, or to exercise any right of offset or other right with respect to any reserves, credits or deposit accounts held by or maintained with PFG or any indebtedness of PFG to any other Borrower, or to exercise any other right or power, or pursue any other remedy PFG may have; (ii) any defense arising by reason of any disability or other defense of any other Borrower or any guarantor or any endorser, co-maker or other Person, or by reason of the cessation from any cause whatsoever of any liability of any other Borrower or any guarantor or any endorser, co-maker or other Person, with respect to all or any part of the Obligations, or by reason of any act or omission of PFG or others which directly or indirectly results in the discharge or release of any other Borrower or any guarantor or any other Person or any Obligations or any security therefor, whether by operation of law or otherwise; (iii) any defense arising by reason of any failure of PFG to obtain, perfect, maintain or keep in force any Lien on, any property of any Borrower or any other Person; (iv) any defense based upon or arising out of any Insolvency Proceeding, liquidation or dissolution proceeding commenced by or against or in respect of any Borrower or any guarantor or any endorser, co-maker or other Person, including without limitation any discharge of, or bar against collecting, any of the Obligations (including without limitation any interest thereon), in or as a result of any such proceeding. Until all of the Obligations have been paid, performed, and discharged in full, nothing shall discharge or satisfy the liability of Borrower hereunder except the full performance and payment of all of the Obligations. If any claim is ever made upon PFG for repayment or recovery of any amount or amounts received by PFG in payment of or on account of any of the Obligations, because of any claim that any such payment constituted a preferential Transfer or fraudulent conveyance, or for any other reason whatsoever, and PFG repays all or part of said amount by reason of any judgment, decree or order of any court or administrative body having jurisdiction over PFG or any of its property, or by reason of any settlement or compromise of any such claim effected by PFG with any such claimant (including without limitation the any other Borrower), then and in any such event, Borrower agrees that any such judgment, decree, order, settlement and compromise shall be binding upon Borrower, notwithstanding any revocation or release of this Agreement or the cancellation of any note or other instrument evidencing any of the Obligations, or any release of any of the Obligations, and Borrower shall be and remain liable to PFG under this Agreement for the amount so repaid or recovered, to the same extent as if such amount had never originally been received by PFG, and the provisions of this sentence shall survive, and continue in effect, notwithstanding any revocation or release of this Agreement. Each Borrower hereby expressly and unconditionally waives all rights of subrogation, reimbursement and indemnity of every kind against any other Borrower, and all rights of recourse to any assets or property of any other Borrower, and all rights to any collateral or security held for the payment and performance of any Obligations, including (but not limited to) any of the foregoing rights which Borrower may have under any present or future document or agreement with any other Borrower or other Person, and including (but not limited to) any of the foregoing rights which Borrower may have under any equitable doctrine of subrogation, implied contract, or unjust enrichment, or any other equitable or legal doctrine. Each Borrower further hereby waives any other rights and defenses that are or may become available to Borrower by reason of California Civil Code Sections 2787 to 2855 (inclusive), 2899, and 3433, as now in effect or hereafter amended, and under all other similar statutes and rules now or hereafter in effect.

 

(c)  Consents . Each Borrower hereby consents and agrees that, without notice to or by Borrower and without affecting or impairing in any way the obligations or liability of Borrower hereunder, PFG may, from time to time before or after revocation of this Agreement, do any one or more of the following in PFG’s sole and absolute discretion: (i) accept partial payments of, compromise or settle, renew, extend the time for the payment, discharge, or performance of, refuse to enforce, and release all or any parties to, any or all of the Obligations; (ii) grant any other indulgence to any Borrower or any other Person in respect of any or all of the Obligations or any other matter; (iii) accept, release, waive, surrender, enforce, exchange, modify, impair, or extend the time for the performance, discharge, or payment of, any and all property of any kind securing any or all of the Obligations or any guaranty of any or all of the Obligations, or on which PFG at any time may have a Lien, or refuse to enforce its rights or make any compromise or settlement or agreement therefor in respect of any or all of such property; (iv) substitute or add, or take any action or omit to take any action which results in the release of, any one or more other Borrowers or any endorsers or guarantors of all or any part of the Obligations, including, without limitation one or more parties to this Agreement, regardless of any destruction or impairment of any right of contribution or other right of Borrower; (v) apply any sums received from any other Borrower, any guarantor, endorser, or co-signer, or from the disposition of any Collateral or security, to any indebtedness whatsoever owing from such Person or secured by such Collateral or security, in such manner and order as PFG determines in its sole discretion, and regardless of whether such indebtedness is part of the Obligations, is secured, or is due and payable. Borrower consents and agrees that PFG shall be under no obligation to marshal any assets in favor of Borrower, or against or in payment of any or all of the Obligations. Borrower further consents and agrees that PFG shall have no duties or responsibilities whatsoever with respect to any property securing any or all of the Obligations. Without limiting the generality of the foregoing, PFG shall have no obligation to monitor, verify, audit, examine, or obtain or maintain any insurance with respect to, any property securing any or all of the Obligations.

 

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Partners for Growth Loan and Security Agreement

 

(d)  Independent Liability . Each Borrower hereby agrees that one or more successive or concurrent actions may be brought hereon against Borrower, in the same action in which any other Borrower may be sued or in separate actions, as often as deemed advisable by PFG. Each Borrower is fully aware of the financial condition of each other Borrower and is executing and delivering this Agreement based solely upon its own independent investigation of all matters pertinent hereto, and Borrower is not relying in any manner upon any representation or statement of PFG with respect thereto. Each Borrower represents and warrants that it is in a position to obtain, and each Borrower hereby assumes full responsibility for obtaining, any additional information concerning any other Borrower’s financial condition and any other matter pertinent hereto as Borrower may desire, and Borrower is not relying upon or expecting PFG to furnish to it any information now or hereafter in PFG’s possession concerning the same or any other matter.

 

(e) Subordination . All indebtedness of a Borrower now or hereafter arising held by another Borrower is subordinated to the Obligations and Borrower holding the indebtedness shall take all actions reasonably requested by PFG to effect, to enforce and to give notice of such subordination.

 

8.23 Electronic Execution of Documents. The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.

 

8.24 Relationship . The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arm’s-length contract.

 

8.25 Third Parties . Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.

 

8.26 Mutual Waiver of Jury Trial. Borrower and PFG each hereby waive the right to trial by jury in any action or proceeding based upon, arising out of, or in any way relating to, this Agreement or any other present or future instrument or agreement between PFG and Borrower, or any conduct, acts or omissions of PFG or Borrower or any of their directors, officers, employees, agents, attorneys or any other persons affiliated with PFG or Borrower, in all of the foregoing cases, whether sounding in contract or tort or otherwise. WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY , if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, PFG desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then PFG may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and order applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to the Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of PFG at any time to exercise self-help remedies, foreclose against Collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

 

[Signature Page Follows]

 

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Borrower:   Lender:
         
Executed and Delivered as a Deed by ) Partners for Growth IV, L.P.
BORQS Hong Kong Limited )    
         
Acting By: /s/ Pat Chan      
Name: Pat Chan   Name: Andrew Kahn
Title: Director   Title:

Manager, Partners for Growth IV, LLC

Its General Partner

 

in the presence of :

 

/s/ Anthony K. Chan  
Witness name: Anthony K. Chan  
Witness occupation: Sup Corporate Finance
Borqs Hong Kong Limited
 

 

Executed and Delivered as a Deed by )  
BORQS Hong Kong Limited )  
       
Acting by:    
       
Name:

 

   
Title: Director    

  

in the presence of:

 

Witness name:  
Witness occupation:    

   

 

 

  

Partners For Growth

 

Schedule to

Loan and Security Agreement

 

  Borrower: BORQS Hong Kong Limited , a private company limited by shares under Hong Kong law, registered with the Companies Registry under number 1151010

  Address: Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong
     
  Date: August __, 2016

 

This Schedule forms an integral part of the Loan and Security Agreement between PARTNERS FOR GROWTH IV, L.P. and the above-referenced Borrower dated the Effective Date.

 

 

 

1. LOAN (Section 1.1):

 

  The Loan :   The Loan shall consist of a term loan in the maximum amount of $8,000,000, which shall be disbursed as follows:
       
      Tranche 1 : Up to a maximum aggregate of $6,000,000, of which not less than $2,000,000 shall be drawn and disbursed within one (1) Business Day from the later of the Effective Date and the Business Day on which the conditions to the Loan set forth in Section 9 of this Schedule have been satisfied (or waived or deferred as post-closing conditions in PFG’s sole discretion), with the balance of Tranche 1 (if less than $6,000,000 is drawn as aforesaid) in one or more drawings during the twelve (12) month period after the Effective Date in minimum increments of $100,000 the proceeds of the Loan in each case to be used by Borrower for any lawful business purpose to the extent not otherwise restricted or limited under this Agreement.
       
      Tranche 2 : Subject to Borrower’s satisfaction of the Performance Test, up to a maximum aggregate of $2,000,000 in one or more draws of not less than $250,000 each, to be drawn (if Borrower has qualified) on or before February 28, 2017 to be used by Borrower for any lawful business purpose to the extent not otherwise restricted or limited under this Agreement.

  

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Partners for Growth Schedule to Loan and Security Agreement

 

  Repayment :   Tranche 1 Loans . Borrower shall pay interest only on principal drawings under Tranche 1 for the twelve (12) months immediately following the Effective Date. Commencing with a principal payment due on the first day of the calendar month following the expiry of the Tranche 1 interest-only period, Borrower shall make twenty-four (24) roughly equal monthly principal payments, due on the first day of each calendar month, equal to the principal amount of all Tranche 1 Loans outstanding on the last day of each preceding calendar month, divided by the number of months then remaining to the Tranche 1 Maturity Date, plus interest on the principal outstanding during such month, with such payments continuing on the same day of each month until the Tranche 1 Maturity Date, on which date the entire unpaid principal balance of the Tranche 1 Loans plus any and all accrued and unpaid interest shall have been paid. Drawn principal that is repaid may not be reborrowed.

 

      Tranche 2 Loans . Borrower shall pay interest only on principal drawings under Tranche 2 for the twelve (12) months immediately following the date the first Tranche 2 Loan has been advanced. Commencing with a principal payment due on the first day of the calendar month following the expiry of the Tranche 2 interest-only period, Borrower shall make twenty-four (24) roughly equal monthly principal payments, due on the first day of each calendar month, equal to the principal amount of all Tranche 2 Loans outstanding on the last day of each preceding calendar month, divided by the number of months then remaining to the Tranche 2 Maturity Date, plus interest on the principal outstanding during each month, with such payments continuing on the same day of each month until the Tranche 2 Maturity Date, on which date the entire unpaid principal balance of the Tranche 2 Loans plus any and all accrued and unpaid interest shall have been paid. Drawn principal that is repaid may not be reborrowed.
       
  Prepayment:   Borrower may prepay any Tranche in whole or in part. If any Tranche is prepaid in whole or in part prior to its respective Maturity Date at the request of Borrower, Borrower shall concurrently with each such prepayment pay to PFG a prepayment fee in the amount of: 1.5% of the amount of all principal prepaid with respect to each Tranche during the first year from the Effective Date (in the case of Tranche 1) and during the first year from the first drawing under Tranche 2 (in the case of Tranche 2), and 1% of the amount of the principal prepaid, if prepaid in the second and third year from the Effective Date (in the case of Tranche 1) and 1% of the amount of the principal prepaid, if prepaid in the second and third year from the first drawing under Tranche 2 (in the case of Tranche 2). Upon full prepayment of all Loans (including the prepayment fees specified above), this Agreement may be terminated by Borrower prior to the respective Maturity Date of Tranche 1 and Tranche 2 in accordance with clause 5.2.
       
  Performance Test:   For the six (6) month period ending December 31, 2016, Group Revenues greater than $60,000,000 and Group EBITDA greater than $5,000,000. The terms “Revenues” and “EBITDA” shall have their customary meanings as presented and measured on a consistent basis in Borrower’s Financial Statements and Plan.

 

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Partners for Growth Schedule to Loan and Security Agreement

 

2. Interest.

  

 

  Interest Rate

(Section 1.2):

       
      The Loan shall bear interest at a per annum rate equal to 8.00%, fixed.
       
      Interest shall be calculated on the basis of a 360-day year and a year of twelve months of 30 days each for the actual number of days elapsed. Accrued interest for each month shall be payable monthly, on the first day of each month for interest accrued during the prior month.

   

 

 

3. Fees (Section 1.3):

  

  Commitment Fee :   $90,000, payable upon the funding of the first draw under Tranche 1, and $30,000 payable upon the funding of the first draw under Tranche 2. The amount of any good faith deposit paid by Borrower in connection with the term sheet in respect of the Loan shall be applied to the initial Commitment Fee payable.

   

 

 

4. Maturity Date

(Section 5.1):

 

      Tranche 1 : August __, 2019.
       
      Tranche 2 : Thirty-six (36) months from the date of the first drawing under Tranche 2.

 

 

 

5. Financial Covenants

 (Section 4.1):

 

    The Group shall meet or exceed Revenues on a calendar quarterly basis and three (3) month trailing EBITDA of no less than the corresponding thresholds for each measurement period as set forth below, with compliance determined as of the end of each month, except as otherwise specifically provided below:

  

    Period Ending   Quarterly Revenue     Trailing 3 months’ EBITDA  
    30-Jun-2016   $ 22,500,000     $ 1,500,000  
    31-Jul-2016       $ 1,500,000  
    31-Aug-2016       $ 1,500,000  
    30-Sep-2016   $ 25,000,000     $ 1,750,000  
    31-Oct-2016       $ 1,750,000  

 

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Partners for Growth Schedule to Loan and Security Agreement

 

    30-Nov-2016       $ 1,750,000  
    31-Dec-2016   $ 22,050,000     $ 1,750,000  
    31-Jan-2017       $ 1,750,000  
    28-Feb-2017       $ 1,750,000  
    31-Mar-2017   $ 25,000,000     $ 1,750,000  
    30-Apr-2017       $ 1,750,000  
    31-May-2017       $ 1,750,000  
    30-Jun-2016   $ 27,500,000     $ 1,750,000  
    31-Jul-2016       $ 1,750,000  
    31-Aug-2016       $ 1,750,000  
    30-Sep-2016   $ 30,000,000     $ 1,750,000  
    31-Oct-2016       $ 1,750,000  
    30-Nov-2016       $ 1,750,000  
    31-Dec-2017   $ 30,000,000     $ 1,750,000  

 

    Thereafter: See “Future Periods” below See “Future Periods” below

         

  Definitions :   For purposes of the foregoing financial covenants, the following term shall have the following meaning:
       
      EBITDA ” means (a) Net Income, plus (b) Interest Expense, plus (c) to the extent deducted in the calculation of Net Income, depreciation expense and amortization expense, plus (d) income tax expense.
       
      Revenue(s) ” means revenues required to be classified as such under U.S. GAAP.
       
  Future Periods :   For future periods not covered by the above table, the thresholds shall be set by PFG in consultation with Borrower based on its then-current Plan, but in no event (for each measurement period) less than the immediately prior measurement period. For instance, the minimum EBITDA threshold for January 2018 would be as set, but in no event less than $1,750,000, and for March 2018 (for Revenues) would be as set but in no event less than $30,000,000.

  

 

 

6. Reporting.

(Section 4.4):

  

      Borrower shall provide PFG with the following:
         
      (a) Monthly accounts payable, accounts receivable and deferred Revenue schedules, aged by invoice date, and outstanding or held check registers, if any, within 20 days after the end of each month.

  

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Partners for Growth Schedule to Loan and Security Agreement

 

      (b) Monthly unaudited consolidated and consolidating Financial Statements, as soon as available, and in any event within 20 days after the end of each month.

 

      (c) Monthly Compliance Certificates within 20 days after the end of each month and at each Loan request, signed by the Chief Financial Officer of Borrower, certifying that as of the end of such month or as at such date of Loan request Borrower was in full compliance with all of the terms and conditions of this Agreement and setting forth calculations showing compliance with the financial covenants set forth in this Schedule and such other information as PFG shall reasonably request.

 

      (d) Updates to the Representations, as and when required to render the information therein true, correct, accurate and complete as of the date of such date: (i) in all respects as to matters addressed in Part A of the Representations (except for the Collateral values set forth in Part A, Section 3(g), which must be true and correct in all material respects) and Part B, Section 11, and (ii) in all material respects with respect to all other sections of the Representations.

 

      (e) Annual Borrower Board-approved Budgets and Forecasts, as soon as available and in any event within thirty (30) days of approval by Borrower’s Board.

 

      (f) Annual consolidated and consolidating Financial Statements, as soon as available, and in any event within 120 days following the end of Borrower’s fiscal year, certified by, and with an opinion containing no material qualifications of, independent certified public accountants acceptable to PFG. If Borrower is required to file and is current in its filings with a securities regulatory agency and the same information is generally available to the public within said period through such agency (such as, through EDGAR with respect to US public companies), this requirement will be deemed satisfied.

 

      (g) Upon request, copies of all reports and statements provided by Borrower to the Senior Lender.

 

      (h) Notification of any changes in the executive management (including directors) of any Group Members, promptly upon such change(s).

   

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Partners for Growth Schedule to Loan and Security Agreement

 

7. Borrower Information :

 

    Borrower represents and warrants that the information set forth in the Representations and Warranties of Borrower dated August 9, 2016, previously submitted to PFG (the “Representations”) is true and correct as of the Effective Date.

 

 

 

8. ADDITIONAL PROVISIONS

 

      (a) Senior Lender.

 

      (1) Senior Lender . As used herein, “Senior Lender” means SPD Silicon Valley Bank Co., Ltd. and its successors, and “Senior Loan Documents” means all present and future documents, instruments and agreements entered into between Borrower and Senior Lender or by third parties relating to Borrower and Senior Lender.

 

      (2) Senior Debt Limit. In the absence of PFG’s consent, which shall be a matter of its sole business discretion, Borrower shall not permit the total Indebtedness of Borrower (whether by way of direct liability or obligations of another Group Member guaranteed by Borrower to Senior Lender), other than Non-Overdue Senior Monetary Obligations, to exceed the aggregate of (i) $5,000,000, whether under that certain Facility Agreement in effect on the Effective Date or otherwise (regardless of the amendment thereof or any other agreement for Indebtedness), plus (ii) an amount not to exceed RMB15 million under a credit facility to be made available by the Senior Lender to a PRC Subsidiary (the “Senior Debt Limit”), including, but not limited to, monies borrowed by Borrower, interest on loans due from Borrower (other than Non-Overdue Senior Monetary Obligations as aforesaid), Lender Expenses for which Borrower is obligated, sums due from Borrower in connection with issuance of commercial letters of credit, issuance of forward contracts for foreign exchange reserve, and any other direct or indirect financial accommodation Senior Lender may provide to Borrower.

  

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Partners for Growth Schedule to Loan and Security Agreement

 

      (3) Senior Loan Documents. Borrower represents and warrants that it has provided PFG with true and complete copies of all existing Senior Loan Documents, and Borrower covenants that it will, in the future, provide PFG with true and complete copies of any future Senior Loan Documents, including without limitation any amendments to any existing Senior Loan Documents.

 

      (b) Collateral Accounts. To the fullest extent available in the jurisdictions in which Borrower holds its Collateral Accounts, concurrently, Borrower shall cause the banks and other institutions where its Collateral Accounts are maintained to enter into Control Agreements with PFG, in form and substance legally sufficient and otherwise satisfactory to PFG in its good faith business judgment and sufficient to perfect PFG’s security interest in said Collateral Accounts, subject to the security interest of the Senior Lender. Said Control Agreements shall, subject to applicable law, permit PFG upon a Default to exercise exclusive control over said Collateral Accounts and proceeds thereof (subject to the rights of the Senior Lender). As a continuing obligation, all primary operating accounts and excess Cash of Borrower shall be maintained with the Senior Lender and its affiliates.

 

      (c) Subordination of Inside Debt . All present and future indebtedness of Borrower to its officers, directors and shareholders (“Inside Debt”) shall, at all times, be subordinated to the Lien of PFG in respect of and prior payment of Obligations. Borrower represents and warrants that there is no Inside Debt presently outstanding, except as set forth in Exhibit A . Prior to incurring any Inside Debt in the future, Borrower shall cause the person to whom such Inside Debt will be owed to execute and deliver to PFG a subordination agreement on PFG’s standard form.

 

      (d) Adjustment for Extraordinary Events . In the event that Borrower engages in a corporate transaction or other restructure that would bear in any non-trivial way on any of the financial covenant thresholds set forth in Section 5 of this Schedule, such as an acquisition that accretes to EBITDA or Revenue or a change in fiscal year or other periods, then PFG shall be entitled to reset the financial covenant thresholds to reasonably adjust for the effect of such corporate or other restructure transactions.

  

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Partners for Growth Schedule to Loan and Security Agreement

 

      (e) Back - End Fees . Fully earned upon the funding of the first draw under Tranche 1, at the Tranche 1 Maturity Date or other earlier full repayment of Tranche 1 Obligations, Borrower shall pay PFG a cash fee in the amount of $337,500. In addition, at the Tranche 2 Maturity Date or other earlier full repayment of Tranche 2 Obligations, Borrower shall pay PFG a cash fee in the maximum amount of $112,500, calculated pro rata based on Borrower’s drawings under Tranche 2. For example only, if Borrower did not qualify to draw under Tranche 2, absent a waiver of the Performance Test or other agreement of PFG, no Back-End Fee would be payable in respect of Tranche 2. If Borrower drew $1,000,000 under Tranche 2, then $56,250 would be payable as a Back-End Fee in respect of Tranche 2.

 

 

 

9. CONDITIONS

 

      In addition to any other conditions to the Loan set out in this Agreement, PFG will not make any Loan until PFG shall have received from Borrower, in form and substance reasonably satisfactory to PFG, such documents, and completion of such other matters, as PFG may reasonably deem necessary or appropriate, including that there shall be no discovery of any facts or circumstances which would, as determined by PFG in its good faith business judgment, materially negatively affect or be reasonably expected to materially negatively affect the collectability of the Obligations, PFG’s security interest in Borrower’s Collateral or the value thereof. Notwithstanding the foregoing, Borrower agrees to deliver to PFG each item required to be delivered to PFG under this Agreement as a condition precedent to any Loan. Borrower expressly agrees that a Loan made prior to the receipt by PFG of any such item shall not constitute a waiver by PFG of Borrower’s obligation to deliver such item, and the making of any Loan in the absence of a required item shall be in PFG’s sole discretion. Without limiting the foregoing, as conditions precedent to the Loan, Borrower shall provide:
       
      (i) duly executed original signatures of Borrower and Guarantor to this Agreement, the Intellectual Property Security Agreement and related Collateral Agreements and Notices, share charges in respect of shares in the Borrower, a deed of guarantee executed in favor of PFG by Guarantor; and debentures (incorporating fixed and floating charges) in favor of PFG executed by Guarantor;
       
      (ii) a Certificate for Borrower and Guarantor signed by a Responsible Officer (in the case of Borrower) or a Person authorized to lawfully act on behalf of Guarantor (in the case of Guarantor) in respect of obligations such as the Guaranty, appending copies of (A) its Constitutional Documents, (B) its register of members, (C) its register of charges, and (D) the written resolutions or minutes of its board of directors authorizing the execution, delivery and performance of the Loan Documents to which such Borrower is a party and authorizing the Responsible Officer(s), and certifying that such documents are true, correct and in full force and effect on the date of this Agreement;

 

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Partners for Growth Schedule to Loan and Security Agreement

 

      (iii) Any Control Agreements as required by Section 8(b) of this Schedule, duly executed by Borrower and each relevant depositary institution in favor of PFG;
       
      (iv) to the extent reasonably practicable, certified copies, dated as of a recent date, of Security Instrument searches, as PFG shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such Security Instruments either constitute Permitted Liens or have been or, in connection with the Loan, will be terminated or released;
       
      (v) the Representations, duly executed by Borrower on behalf of Borrower and each Guarantor;
       
      (vi) the insurance policies and/or endorsements required pursuant to Section 4.3;
       
      (vii) payment of the payable Fees specified in Section 3 of this Schedule and Lender Expenses incurred in connection with the Loan;
       
      (viii) any third party consents required in order for Borrower to enter into and perform the Loan Documents;
       
      (ix) the Senior Subordination Agreement, in agreed form between PFG and the Senior Lender;
       
      (x) subordination agreements in favor of PFG from holders of Indebtedness;
       
      (xi) the PFG Warrant, in agreed form;
       
      (xii) execution and delivery of the Cayman Security Documents;
       
      (xiii) execution and delivery of the Hong Kong Security Documents;
       
      (xiv) execution, delivery of all other Security Instruments contemplated under the Cayman Security Documents or Hong Kong Security Documents; and

 

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Partners for Growth Schedule to Loan and Security Agreement

 

      (xv) to the extent that the conditions to this Agreement have not been completed as of the Effective Date, a post-closing obligations letter in PFG’s customary form by which PFG waives or defers performance of such conditions as PFG is willing to defer in its sole business discretion.

 

 

 

10.  CONDITIONS TO EACH DRAWING (TRANCHE 1 AND TRANCHE 2)

 

      In addition to any other conditions to the Loan set out in this Agreement, PFG will have no obligation to make any Tranche 1 Loan not drawn at the Effective Date or any Tranche 2 Loan until the following conditions have been met to PFG’s reasonable satisfaction:
       
      (i) a duly executed and delivered Qualifying Request from a Responsible Officer;
       
      (ii) no Default or Event of Default shall have occurred and be continuing; and
       
      (iii) in the case of the initial Tranche 2 Loan, Borrower’s satisfaction of the Performance Test.

  

[Signature Page Follows]

 

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Borrower:   Lender:
         
Executed and Delivered as a Deed by ) Partners for Growth IV, L.P.
BORQS Hong Kong Limited )    
         
Acting By:   /s/ Pat Chan      
Name: Pat Chan   Name: Andrew Kahn
Title: Director   Title:

Manager, Partners for Growth IV, LLC

Its General Partner

 

in the presence of:

 

/s/ Anthony K. Chan  
Witness name: Anthony K. Chan  
Witness occupation: Sup Corporate Finance
Borqs Hong Kong Limited
 

 

Executed and Delivered as a Deed by )  
BORQS Hong Kong Limited )  
       
Acting by:    
       
Name:

 

   
Title: Director    

  

in the presence of:

 

Witness name:  
Witness occupation:    

   

 

 

 

Exhibit A to Loan and Security Agreement

  

Section 3.4(d) – Fixtures, Etc. – None.

 

Section 7—“Permitted Indebtedness”—Other Existing Permitted Indebtedness:

 

  a) US$1,000,000 two-year term loan with SPD Silicon Valley Bank dated August 31, 2015 with final payoff by August 30, 2017

   

  b) US$4,000,000 line of credit maturing July 19, 2017 with SPD Silicon Valley Bank

 

  c) Rmb 15,000,000 line of credit maturing July 19, 2017 with SPD Silicon Valley Bank

 

Section 7—“Permitted Investments”—Other Existing Permitted Investments: – None.

  

Section 7— “Permitted Liens” —Other Existing Permitted Liens: – None.

  

Schedule Section 8 - “Inside Debt”: – None.

 

 

 

 

Exhibit B to Loan and Security Agreement – Compliance Certificate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 10.49

 

 

Date: 26 August 2016

 

 

 

 

BORQS International Holding Corp

as Guarantor

 

Partners for Growth IV, L.P.

as Lender

 

 

 

 

 

 

 

 

 

 

 

 

 

  

DEED OF GUARANTEE AND INDEMNITY

 

 

 

 

 

 

 

 

 

 

Execution version

  

THIS GUARANTEE (this “ Guarantee ”) is made as a deed this 26 day of August 2016,

 

BETWEEN:

 

(1) BORQS INTERNATIONAL HOLDING CORP , a company duly incorporated and validly existing under and by virtue of the Laws of The Cayman Islands, registered under company number 192127 and with registered office address at P.O. Box 309, Ugland House, Grand Cayman KY1-1104 (the “ Guarantor ”); and

 

(2) PARTNERS FOR GROWTH IV, L.P. , a Delaware limited partnership, with its principal place of business at 1660 Tiburon Blvd., Suite D, Tiburon, CA 94920 USA (the “ Lender ”).

 

IT IS AGREED as follows:

 

1. Definitions and Interpretation

 

1.1. Definitions

 

Unless otherwise defined herein, capitalised terms used in this Guarantee have the meaning given to such terms in the Loan Agreement (as defined below). In addition, in this Guarantee, unless the context otherwise requires, the following expressions shall have the following meanings:

 

  Encumbrance means any mortgage, charge, pledge, lien (otherwise than arising by statute or operation of law) or other encumbrance, priority or security interest, deferred purchase, title retention, leasing, sale-and-repurchase, sale-and-leaseback arrangement whatsoever over or in any property, assets or rights or interest of whatsoever nature or any agreement for any of the same;
     
  Loan Agreement means the California law loan and security agreement dated on or about the date hereof between the Lender as lender and the Principals as the borrowers;
     
  Principals means BORQS Hong Kong Limited and such other borrowers as may accede to the Loan Agreement from time to time; and
     
  Principals’ Obligations means all present and future obligations and liabilities of the Principals to the Lender under the Loan Agreement and the other Loan Documents whether actual or contingent and whether owed or incurred alone or jointly and/or severally with another and as principal or as surety or in any other capacity or of any nature.

 

  1  

 

 

1.2. Construction

 

1.2.1. Any reference in this Guarantee to:

 

(a) the Lender or the Guarantor or any other person includes its respective successors in title, permitted assigns and/or permitted transferees;

 

(b) a Clause is a reference to a clause of this Guarantee;

 

(c) this Guarantee , the Loan Agreement or any other agreement or document is a reference to this Guarantee, the Loan Agreement or such other agreement or document as the same may have been, or may from time to time be, amended, varied, supplemented or novated;

 

(d) the Principal’s Obligations includes a reference to any part of them;

 

(e) the singular shall include the plural and vice versa;

 

(f) a person includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having a separate legal personality) and any other entity or two or more of the foregoing; and

 

(g) any statute or statutory provision or ordinance shall include any statute or statutory provision or ordinance which amends, extends, consolidates or replaces the same (whether before or after the date of this Guarantee) or which has been amended, extended, consolidated or replaced by the same and shall include any order, regulation, instrument or other subordinate legislation made under the relevant statute or statutory provision or ordinance.

 

1.2.2. Apart from a permitted assignee of the Lender pursuant to Clause 15.1, a person who is not a party to this Guarantee has no rights under the Contracts (Rights of Third Parties) Ordinance (Cap. 623 of the laws of Hong Kong) to enforce or enjoy the benefit of any term of this Guarantee.

 

2. Guarantee

 

In consideration of the Lender agreeing to enter into the Loan Agreement and making available loans or other banking facilities, or giving time, credit or accommodation to the Principals, the Guarantor hereby irrevocably, unconditionally and absolutely:

 

(a) guarantees to the Lender punctual payment and performance of the Principals’ Obligations; and

 

(b) undertakes that the Guarantor will on demand make good any default by any Principal in the payment or discharge of the Principals’ Obligations as if the Guarantor instead of the Principal were expressed to be the primary obligor in respect of the Principals’ Obligations.

 

  2  

 

 

3. Indemnity

 

For the same consideration, the Guarantor agrees as a primary obligor to indemnify the Lender immediately on demand against any loss, cost or liability suffered by the Lender if any Principals’ Obligations or any actual or purported agreement, arrangement or instruction relating to any Principals’ Obligations is or becomes invalid, unenforceable or illegal, irrespective of whether the reason for such invalidity, unenforceability or illegality was or ought to have been known to the Lender. The amount of such loss shall be the amount which the Lender would otherwise have been entitled to recover from the Principals.

 

4. Representations and Warranties

 

The Guarantor makes the representations and warranties set out in this Clause 4 (Representations and Warranties) to the Lender.

 

4.1. Status

 

The Guarantor is a company, duly incorporated, and validly existing under the laws of its jurisdiction of incorporation and has the power to carry on its business as it is now being conducted and to own property and other assets and is in good standing.

 

4.2. Powers, Authority and Non-Conflict

 

The execution, delivery and performance of this Guarantee is within the corporate powers of the Guarantor, has been duly authorised by all necessary corporate and other action and does not and will not conflict with (a) any law or regulation applicable to it; (b) any constitutional documents of the Guarantor; or (c) any agreement or instrument binding on the Guarantor.

 

4.3. Legal Validity

 

The obligations and liabilities expressed to be assumed by the Guarantor under this Guarantee are legal, valid, binding and enforceable obligations of the Guarantor (subject to applicable equitable principles and insolvency laws) and it is not necessary in order to ensure the legality, validity and enforceability of this Guarantee that it be filed, recorded or enrolled with any court or authority anywhere or that any stamp duty, registration or similar tax be paid on or in relation to it.

 

4.4. Authorisations

 

All authorisations, consents, approvals, resolutions, licences, exemptions, filings or registrations required under any applicable law or regulation (a) to enable it lawfully to carry on its business and to enter into, exercise its rights and comply with its obligations in this Guarantee, and (b) to make this Guarantee admissible in evidence in its jurisdiction of incorporation have been obtained or effected and are in full force and effect.

 

4.5. Choice of Law

 

The choice of the law of Hong Kong as the governing law of this Guarantee will be recognised and enforced in its jurisdiction of incorporation.

 

  3  

 

 

4.6. No litigation

 

No litigation, arbitration or administrative proceeding is current, pending or (to the knowledge of the Guarantor) threatened against the Guarantor:

 

(a) to restrain the entry into by the Guarantor of, the exercise by the Guarantor of its rights and/or performance or enforcement of or compliance with its obligations under this Guarantee; or

 

(b) which has or could have a material adverse effect on or on the financial condition of the Guarantor or the ability of the Guarantor to make any payment when due or to perform any of its other obligations in accordance with this Guarantee.

 

4.7. Security and Ranking

 

Save for any Permitted Liens, no Encumbrance exists over any of the undertaking or the present or future revenues or assets of the Guarantor and the obligations of the Guarantor under this Guarantee are or will be its direct, general and unconditional obligations and rank or will rank at least pari passu in all respects with all its other present and future unsecured and unsubordinated indebtedness and obligations (including contingent obligations), with the exception of indebtedness and obligations mandatorily preferred by law and not by contract.

 

4.8. Time when representations and warranties are made

 

The Guarantor represents, warrants and agrees that each of the representations and warranties contained in this Clause 4 will be and remain correct so long as it has any liability (contingent or actual) under this Guarantee.

 

5. Continuing Guarantee

 

This Guarantee is a continuing guarantee for all the Principals’ Obligations and will extend to the ultimate balance of the Principals’ Obligations, regardless of any intermediate discharge or payment of or on account of the Principals’ Obligations or any intermediate settlement of accounts between the Lender and any Principal or any other person. No demand made by the Lender under this Guarantee shall restrict the right of the Lender to make further or other demands.

 

6. Interest

 

The Guarantor shall on demand pay to the Lender interest at the Default Rate on any amount for the time being due from the Guarantor to the Lender under this Guarantee (both before and after judgement) from the date of a demand for payment under this Guarantee until actual payment in full.

 

7. Opening of New Accounts

 

If for any reason this Guarantee ceases to be a continuing security, the Lender may open a new account for each Principal. If the Lender does not open a new account, it shall nevertheless be treated as if it had done so at the time this Guarantee ceased to be a continuing security. As from that time all payments made to the Lender will be credited or treated as having been credited to the new account and will not operate to reduce the obligations of the Guarantor under this Guarantee.

 

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8. Waiver of Defences

 

The liability of the Guarantor under this Guarantee shall not be reduced, discharged or otherwise adversely affected by any of the events or circumstances set out in this Clause 8 (Waiver of Defences).

 

8.1. Variations

 

Any determination, renewal, variation (however fundamental), replacement, discharge, release or increase of, or composition or arrangement by the Lender relating to, any credit or facilities to the Principals or of or relating to the Principals’ Obligations.

 

8.2. Time or Indulgence

 

The grant by the Lender to any Principal or any other person of any time, waiver, consent or indulgence.

 

8.3. Dealings with Security

 

Any taking, dealing, exchange, renewal, variation, release, compromise, discharge, composition, arrangement or modification in relation to any guarantee, security or right which the Lender may now or after the date of this Guarantee have in respect of the Principals’ Obligations.

 

8.4. Negotiable Instruments

 

The renewal by the Lender of any bill, promissory note or other negotiable instrument or security.

 

8.5. Other Guarantees or Security

 

The Lender obtaining or refusing, neglecting or otherwise failing to obtain, perfect, enforce or claim any other guarantee, security or right (whether contemporaneously with this Guarantee or otherwise) or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security.

 

8.6. Incapacity

 

Any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of the Principal or any other person.

 

8.7. Unenforceability

 

Any unenforceability, illegality, invalidity or non-provability of any obligation of the Principal or any person under any document, agreement or security.

 

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8.8. Insolvency

 

Any liquidation, composition, insolvency, administration, bankruptcy, death or other incapacity, or any alteration in the corporate existence or structure, of any of the Principals, the Guarantor or any other person.

 

8.9. Other Circumstances

 

Any other act, omission, matter or thing which, but for this provision, would or might reduce, discharge or otherwise adversely affect the obligations of the Guarantor under this Guarantee.

 

9. Reinstatement

 

If any payment by any Principal or any other person or any discharge given by the Lender (whether in respect of the Principals’ Obligations or any security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:

 

(a) the liability of the Guarantor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and

 

(b) the Lender shall be entitled to recover the value or amount of that security or payment from the Guarantor, as if the payment, discharge, avoidance or reduction had not occurred.

 

10. Deferral of Guarantor’s Rights

 

10.1. Restriction on Rights or Claims

 

Until all of the Principals’ Obligations have been irrevocably paid or discharged in full, the Guarantor will not, unless the Lender otherwise directs:

 

(c) make or enforce any claim (including, but not limited to, a claim by way of set-off or counterclaim) or right against any Principal or prove as a creditor of any Principal in competition with the Lender, whether in respect of any payment under this Guarantee made by the Guarantor or otherwise; or

 

(d) be entitled to claim or have the benefit of, any set-off, counterclaim or proof against, or dividend paid on a winding-up or administration of or composition with creditors by any Principal or any Principal’s estate; or

 

(e) be entitled to claim or otherwise obtain the benefit (by way of subrogation or otherwise) of any security or guarantee or indemnity at any time held by the Lender for or in respect of any of the Principals’ Obligations; or

 

(f) claim or enforce any right of contribution against any co-surety.

 

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10.2. Proof at the Lender’s Request

 

If requested by the Lender the Guarantor shall:

 

(a) exercise any right of proof or claim in the winding-up, administration, voluntary arrangement, bankruptcy or estate of any Principal on behalf of the Lender and hold any dividend or other money received in respect of such proof or claim upon trust for the Lender to the extent of the Principals’ Obligations; and

 

(b) hold upon trust for the Lender any money which it may receive or recover from any co-surety by virtue of any rights of contribution.

 

10.3. Monies held on Trust

 

If while the Guarantor remains under any liability to the Lender under this Guarantee, any monies or other property or assets shall be received or recovered by the Guarantor in breach of any provisions of this Clause 10 (Deferral of Guarantor’s Rights), such monies or other property or assets shall, to the extent of such liability, be held upon trust to pay or transfer the same to the Lender.

 

11. Suspense Account

 

The Lender may at any time place and keep to the credit of a separate interest bearing suspense account any monies received under this Guarantee for so long and in such manner as the Lender may determine without any obligation to apply such monies or any part of them in or towards the discharge of the Principals’ Obligations. In the event of any proceedings in or analogous to bankruptcy, liquidation, composition or arrangement of or concerning any Principal, the Lender may notwithstanding any payment made under this Guarantee prove for a claim and agree to accept any dividend or composition in respect of the whole or any part of the Principals’ Obligations as if this Guarantee had not been given.

 

12. Other Means of Payment

 

Lender may make a demand under this Guarantee:

 

(a) before making any demand on any Principal or any Principal’s estate or any other person or enforcing any other guarantee or security for the Principals’ Obligations; and

 

(b) for the payment of the ultimate balance after resorting to other means of payment, or for the balance due at any time notwithstanding that the Lender has not resorted to other means of payment (in which case the Guarantor shall not be entitled to any benefit from such other means of payment so long as the Principals’ Obligations remain outstanding).

 

13. Expenses

 

13.1. Costs

 

The Guarantor shall pay to the Lender on demand all reasonable costs and expenses (including, but not limited to, legal fees) from time to time paid or incurred by the Lender in connection with taking, perfecting, preserving, defending or enforcing this Guarantee or in exercising any right or power under or in connection with this Guarantee, and shall indemnify the Lender against all such costs and expenses.

 

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13.2. Stamp Duty

 

The Guarantor shall pay on demand all stamp, documentary, registration and other similar duties and taxes of any kind and from any source, if any, to which this Guarantee may be subject or give rise and shall indemnify the Lender against any and all liability with respect to or resulting from any delay or failure by the Guarantor in making such payment.

 

13.3. Value Added Tax

 

Where this Guarantee requires the Guarantor to re-imburse the Lender for any costs or expenses the Guarantor shall at the same time pay and indemnify the Lender against any value added tax (or any tax of a similar nature) incurred by the Lender in respect of the costs and expenses to the extent that the Lender determines that it is not entitled to credit or repayment of the value added tax (or other tax of a similar nature).

 

14. Miscellaneous

 

14.1. Additional Security

 

This Guarantee is in addition to and is not in any way prejudiced by any bill, note, guarantee, mortgage, charge or other security now or subsequently held by the Lender for any of the Principals’ Obligations.

 

14.2. No Deduction or Withholding

 

All payments made by the Guarantor to the Lender under this Guarantee shall (save insofar as required by law to the contrary) be paid in full without set-off or counterclaim and free and clear of and without any deduction or withholding or payment for or on account of any present or future tax, levy, duty, impost or other charge or withholding of a similar nature. If the Guarantor shall be required by law to effect any such deduction or withholding or payment the Guarantor shall immediately pay to the Lender such additional amount as will result in the immediate receipt by the Lender of the full amount which would otherwise have been received had no such deduction or withholding or payment been made.

 

14.3. Set-off

 

The Lender may set-off any matured obligation owed by the Guarantor to the Lender against any obligation (whether or not matured) owed by the Lender to the Guarantor regardless of the place of payment, or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange for the purpose of the set-off in an amount estimated by it in good faith to be the amount of that obligation.

 

14.4. Waivers; Rights Cumulative

 

No delay or omission of the Lender in exercising any right, power or privilege (each a “ right ”) under this Guarantee or otherwise available to it at law shall impair such right, or be construed as a waiver of such right nor shall any single or partial exercise of any such right preclude its further exercise or the exercise of any other right. The rights and remedies provided in this Guarantee are cumulative and not exclusive of any rights or remedies provided by law and may be waived only in writing and specifically.

 

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14.5. Severability

 

Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Guarantee or affecting the validity or enforceability of such provision in any other jurisdiction.

 

14.6. Certificates and Determinations

 

A certificate or determination by the Lender of the amount of the Principals’ Obligations outstanding at any time or of any other amount payable by the Guarantor under this Guarantee is, in the absence of manifest error, conclusive evidence for all purposes of this Guarantee as against the Guarantor.

 

14.7. Currency Indemnity

 

14.7.1. The Guarantor’s liability under this Guarantee is to pay to the Lender the full amount of the Principals’ Obligations in the currency in which they are for the time being denominated. If, for any reason, any payment due from the Guarantor under or in connection with this Guarantee is made or is satisfied in a currency (the “ Other Currency ”) other than the currency in which the relevant payment is due (the “ Contractual Currency ”), then to the extent that the payment (when converted into the Contractual Currency at the rate of exchange on the date of payment or, in the case of the liquidation or insolvency of the Guarantor, at the rate of exchange on the latest date permitted by applicable law for the determination of liabilities in such liquidation or insolvency) actually received by the Lender falls short of the amount expressed to be due under the terms of this Guarantee, the Guarantor shall, as a separate and independent obligation, indemnify the Lender and hold the Lender harmless against the amount of such shortfall.

 

14.7.2. For the purpose of this Clause “rate of exchange” means the rate at which the Lender is able on the relevant date to purchase the Contractual Currency with the Other Currency and shall take into account any premium and other costs of exchange.

 

15. Benefit of this Guarantee

 

15.1. Assignment by the Lender

 

The Lender may assign or transfer all or any part of its rights under this Guarantee in connection with the assignment of its rights and obligations in accordance with the terms of Section 8.14 (Benefit of Agreement) of the Loan Agreement. The Guarantor shall enter into any documents reasonably specified by the Lender to be necessary to give effect to such assignment or transfer.

 

15.2. No Assignment by the Guarantor

 

The Guarantor may not assign or transfer all or any part of its rights and/or obligations under this Guarantee.

 

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15.3. Disclosure of Information

 

The Lender may not disclose such information about the Guarantor unless such disclosure is made in compliance with Section 8.1 (Confidentiality) of the Loan Agreement.

 

16. Notices and Demands

 

16.1. Address

 

The Guarantor’s address and fax number for any notice, demand or other communication under or in connection with this Guarantee are set forth in Section 8.5 (Notices) of the Loan Agreement. Any such notice, demand or other communication shall also be effective if sent to the Guarantor’s registered office or the address of the Guarantor last known to the Lender.

 

16.2. Method and Receipt

 

Any notice, demand or other communication to be given or made pursuant to this Guarantee to the Guarantor may be given or made in such manner and be deemed delivered at such time specified under Section 8.5 (Notices) of the Loan Agreement.

 

16.3. English language

 

Any notice given under or in connection with this Guarantee must be in English.

 

17. Governing Law

 

17.1. This Guarantee shall be governed by and construed in accordance with the laws of Hong Kong. The parties hereto hereby submit to the non-exclusive jurisdiction of the Hong Kong Courts.

 

17.2. The submission of the parties hereto to the jurisdiction of the Hong Kong Courts shall not restrict the right of the Lender to take proceedings in connection with this Guarantee in any other courts having, claiming or accepting jurisdiction in respect of matters pertaining to this Guarantee, including but not limited to the California Courts, nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction whether concurrently or not.

 

17.3. The Guarantor hereby irrevocably consents to the granting of any relief and/or the issue of any process in connection with any legal action or proceedings in connection with this Guarantee, including the making, enforcement or execution of any judgment or order against any of the property, assets or revenues of the Guarantor whatsoever.

 

18. Process Agent

 

The service of any process connected with proceedings in the Hong Kong courts and relating to this Guarantee will be deemed to have been validly served on the Guarantor if it is received by any Principal at its registered address or the address specified in Section 8.5 (Notices) of the Loan Agreement and service will be deemed to have been acknowledged by the Chargor if it is acknowledged by such Principal.

 

EXECUTED as a Deed and delivered on the date stated at the beginning of this document.

 

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EXECUTED and DELIVERED
as a DEED by  BORQS International Holding Corp )
   
Acting by :    /s/ Pat Chan                 
Name: Pat Chan  
Title: Director  

 

 
in the presence of :                              
   
/s/ Anthony K. Chan  
Witness name: Anthony K. Chan  
Witness occupation:    SVP Corporate Finance   
  Borqs International Holding Corp  

 

   
EXECUTED and DELIVERED )
as a DEED by  Partners for Growth IV, L.P. )
   
Acting by: Partners for Growth IV, LLC                         
Its: General Partner  
Name: Andrew Kahn  
Title: Managing Member  
   
Witnessed by:  
                                  
Name: Kathy Adams  
Title: CCO  

 

   
/s/ Kathy Adams  
Witness name: Kathy Adams                                                
Witness occupation: CCO  

 

  11  

Exhibit 10.50

 

 

 

Date: 26 August 2016

 

 

 

 

 

BORQS International Holding Corp

as Chargor

 

Partners for Growth IV, L.P.

as Lender

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEBENTURE

 

(constituting a fixed and floating charge over all the assets of

BORQS International Holding Corp )

 

 

 

 

Execution version

 

THIS DEED (this “ Deed ”) is made as a deed this 26th day of August 2016,

 

BETWEEN:

 

(1) BORQS INTERNATIONAL HOLDING CORP , a company duly incorporated and validly existing under and by virtue of the Laws of The Cayman Islands, registered under company number 192127 and with registered office address at P.O. Box 309, Ugland House, Grand Cayman KY1-1104 (the “ Chargor ”); and

 

(2) PARTNERS FOR GROWTH IV, L.P. , a Delaware limited partnership, with its principal place of business at 1660 Tiburon Blvd., Suite D, Tiburon, CA 94920 USA (the “ Lender ”).

 

IT IS AGREED as follows:

 

1. Definitions and Interpretation

 

1.1. Definitions

 

Unless otherwise defined herein, capitalised terms used in this Deed have the meaning given to such terms in the Loan Agreement (as defined below). In addition, in this Deed unless the context otherwise requires, the following expressions shall have the following meanings:

 

Bank Accounts ” means all present and future bank accounts held in the name of the Chargor from time to time, including but not limited to the bank accounts listed in Schedule 1 hereto;

 

Charged Assets ” means all assets listed in Clause 2.2, excluding any Excluded Property;

 

CPO ” means the Conveyancing and Property Ordinance (Cap. 219 of the Laws of Hong Kong);

 

Encumbrance ” means any mortgage, charge, pledge, lien (otherwise than arising by statute or operation of law) or other encumbrance, priority or security interest, deferred purchase, title retention, leasing, sale-and-repurchase, sale-and-leaseback arrangement whatsoever over or in any property, assets or rights or interest of whatsoever nature or any agreement for any of the same;

 

Exchange Rate ” means the rate for converting one currency into another currency which the Lender determines to be prevailing in the relevant foreign exchange market at the relevant time, such determination to be conclusive and binding (except in the case of manifest error);

 

Guarantee ” means the Hong Kong law deed of guaranty and indemnity dated on or about the date hereof between the Chargor and the Lender;

 

HK$ ” means Hong Kong Dollars, the lawful currency for the time being of Hong Kong;

 

Hong Kong ” means the Hong Kong Special Administrative Region of the People’s Republic of China;

 

Loan Agreement ” means the California law loan and security agreement dated on or about the date hereof between the Lender as lender and BORQS Hong Kong Limited as the borrower;

 

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Party ” means a party to this Deed;

 

Receiver ” means each of the receivers and/or receivers and managers appointed under this Deed, any of the other Loan Documents or under the powers conferred on the Lender by any law or regulation whether appointed simultaneously or to act jointly and/or severally or to act in place of any one or more receivers and/or receivers and managers previously appointed under this Deed or otherwise, and includes all delegates, attorneys or agents of any such Receiver;

 

Secured Obligations ” means all present and future obligations and liabilities of the Chargor, BORQS Hong Kong Limited and any other person to the Lender under the Loan Agreement, the Guarantee, this Deed and the other Loan Documents, whether actual or contingent and whether owed or incurred alone or jointly and/or severally with another and as principal or as surety or in any other capacity or of any nature;

 

Security ” means the Encumbrances created by or pursuant to this Deed;

 

Security Period ” means the period beginning on the date of this Deed and ending on the date on which all the Secured Obligations have been unconditionally and irrevocably paid and discharged in full and the Lender has no further commitment under or pursuant to the Loan Documents; and

 

Shares ” means the assets listed in Clause 2.2(a)(ii), including but not limited to the shares listed in Schedule 1 hereto, but excluding any Excluded Property.

 

1.2. Construction

 

Any reference in this Deed to:

 

(a) the Lender or the Chargor or any other person includes its respective successors in title, permitted assigns and/or permitted transferees;

 

(b) a Clause is a reference to a clause of this Deed;

 

(c) this Deed , the Loan Agreement , the Guarantee or any other agreement or document is a reference to this Deed, the Loan Agreement, the Guarantee or such other agreement or document as the same may have been, or may from time to time be, amended, varied, supplemented or novated;

 

(d) the Secured Obligations includes a reference to any part of them;

 

(e) the singular shall include the plural and vice versa;

 

(f) a person includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having a separate legal personality) and any other entity or two or more of the foregoing; and

 

(g) any statute or statutory provision or ordinance shall include any statute or statutory provision or ordinance which amends, extends, consolidates or replaces the same (whether before or after the date of this Deed) or which has been amended, extended, consolidated or replaced by the same and shall include any order, regulation, instrument or other subordinate legislation made under the relevant statute or statutory provision or ordinance.

 

Apart from a permitted assignee of the Lender pursuant to Clause 20.3, a person who is not a party to this Deed has no rights under the Contracts (Rights of Third Parties) Ordinance (Cap. 623 of the laws of Hong Kong) to enforce or enjoy the benefit of any term of this Deed.

 

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2. Grant of Security

 

2.1. Covenant to Pay

 

The Chargor covenants to pay and discharge in full the Secured Obligations on demand made by the Lender at any time and to provide cash cover on demand in respect of any contingent or future obligations.

 

2.2. Charge

 

As continuing security for the payment and discharge of the Secured Obligations, the Chargor agrees to charge and hereby charges to the Lender:

 

(a) by way of first fixed charge:

 

(i) all present and future book and other debts, receivables, monies, revenues, royalties, claims and things in action due or owing to or purchased or otherwise acquired by the Chargor (including all credit balances and deposits of the Chargor with the Lender or any other bank or financial institution and any monies credited to any suspense account by the Lender, together with the debts represented by them, and any surplus arising on a realisation of any Encumbrance whether in favour of the Lender or any other person), the proceeds of the same, all legal, beneficial or equitable interests and rights in trust (including any beneficial interest, claim or entitlement in or to the assets of any occupational retirement scheme belonging to or held by the Chargor, the benefit of all discretionary payments and the proceeds of any claim or receivable of the Chargor not itself capable of being charged and the full benefit of all guarantees, indemnities, Encumbrances, rights of set-off, security reservations of proprietary rights, rights of tracing and all other rights and remedies in respect of the same or otherwise);

 

(ii) all present and future shares, namely all right, title and interest held by the Chargor in and to all stocks, shares, debentures, bonds or other securities or investments and all other interests of the Chargor in any person and all rights, benefits and advantages arising in respect of or incidental to the same;

 

(iii) all present and future uncalled capital, goodwill and all patents, patent applications, inventions, trademarks and service marks and applications therefor, trade names, registered designs, copyrights, know-how and other intellectual property rights held by the Chargor and all licences and all rights, benefits and advantages arising in respect of or incidental to the same;

 

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(iv) all present and future real property and all rights and interests in or affecting land (or the proceeds of sale of land or the documents of title to land) of the Chargor and all buildings, structures, fixtures (including trade fixtures), owned by the Chargor, including the full benefit of all Encumbrances, options, agreements, rights and interests of the Chargor over or affecting land of the Chargor and all fixed plant, other plant, machinery, fittings and equipment and all other chattels now or at any time after the date of this Deed belonging to the Chargor and its interest in any plant, machinery, equipment or chattels in its possession, including the benefit of all contracts and warranties relating to the same (excluding any of the same for the time being forming part of its stock in trade or work in progress);

 

(v) all present and future rights under any sale or purchase agreements and distributorship or any similar agreements entered into by it, any letters of credit issued in its favour and all bills of exchange and other negotiable instruments held by it;

 

(vi) all present and future benefits of all licences, quota, consents and authorities (statutory or otherwise) held in connection with its business or the use of any asset charged by any other sub-paragraph in this Clause 2.2 and the right to recover and receive all proceeds and/or compensation which may be payable to it in respect of them; and

 

(vii) all present and future benefits in respect of all contracts and policies of insurance of whatever nature which are from time to time taken out by or on behalf of the Chargor or (to the extent of such interest) in which the Chargor has an interest and all claims and returns of premiums in respect of them; and

 

(b) by way of first floating charge, the undertaking and all present and future property, assets and rights of the Chargor, whatsoever and wheresoever not otherwise effectively charged by way of first fixed charge by Clause 2.2(a),

 

in each case, excluding any Excluded Property, and provided that if any asset cannot be secured without consent of a third party, this Agreement will constitute security over all proceeds and other amount receivable from such asset.

 

2.3. Crystallisation

 

The Lender may, by notice in writing to the Chargor, convert the floating charge referred to in Clause 2.2(b) into a specific fixed charge as regards all or part of the Charged Assets described therein, if an Event of Default has occurred and is continuing, or the Lender considers those assets to be in danger of being seized or sold under any distress, execution or sequestration or to be otherwise in jeopardy.

 

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The floating charge referred to in Clause 2.2(b) shall (in addition to the circumstances in which the same shall occur under general law) automatically be converted into a specific fixed charge:

 

(c) if the Chargor takes steps to create any subsequent Encumbrance (other than Permitted Liens) on any of the Charged Assets without the prior approval of the Lender;

 

(d) on the convening of any meeting of the members of the Chargor to consider a resolution to wind up the Chargor (or not to wind up the Chargor);

 

(e) immediately prior to the presentation of a petition (other than a frivolous or vexatious petition) to wind up the Chargor; or

 

(f) if any person levies or attempts to levy distress, execution or sequestration against any of the Charged Assets.

 

2.4. Documents Supporting Security

 

In furtherance of the Security created under this Deed, the Chargor shall at its own cost, deliver or procure that there shall be delivered to the Lender the following (in each case, in form and substance satisfactory to the Lender):

 

(a) any documents necessary or conducive to enable the Lender to register such Charged Assets in its name or in the name of its nominee(s); and

 

(b) all documents necessary and satisfactory to the Lender in order to effect a valid transfer of any Charged Assets following an Event of Default.

 

2.5. Registration

 

The Chargor shall at its own cost:

 

(a) immediately after the execution of this Deed, enter particulars of the Security in its register of mortgages and charges (“ Register of Mortgages and Charges ”) maintained at its registered office in the Cayman Islands pursuant to section 54 of the Companies Law (2013 Revision) of the Cayman Islands;

 

(b) promptly and in any event within three (3) Business Days from and including the date of execution of this Deed, deliver or procure that there shall be delivered to the Lender:

 

(i) a certified copy of the updated Register of Mortgages and Charges recording the particulars of the Security; and

 

(ii) a copy of the written notice of charge to each bank where Bank Accounts are held substantially in the form as set out in Schedule 2 hereto; and

 

(c) use its best efforts to obtain written acknowledgement of the notice(s) sent in accordance with Clause 2.5(b)(ii) by each relevant bank as soon as practical after the date of execution of this Deed.

 

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3. Continuing Security

 

(a) The Security is continuing and shall extend to the ultimate balance of all the Secured Obligations regardless of any intermediate payment or discharge in whole or in part. This Deed shall remain in full force and effect as a continuing security for the duration of the Security Period.

 

(b) This Deed is in addition to, without prejudice to, and shall not merge with, any other right, remedy, guarantee or Encumbrance which the Lender may at any time hold for any Secured Obligation.

 

(c) This Deed may be enforced against the Chargor without the Lender first having to take recourse to any other right, remedy, guarantee or Encumbrance held by or available to it.

 

4. Covenants

 

4.1. General Covenants

 

The Chargor covenants that it will observe and perform each of the following covenants and undertakings in relation to its business, property and assets or (as the case may be) the Charged Assets, except as expressly permitted under the Loan Documents:

 

(a) conduct and carry on its business in a proper and efficient manner and not make any substantial alteration in the nature or mode of conduct of its business;

 

(b) keep or cause to be kept proper books of accounts relating to its business and from time to time within a reasonable time after being requested by the Lender, furnish the Lender with such information about the assets, business and financial condition of the Chargor as the Lender may require;

 

(c) use commercially reasonable endeavours to duly and punctually pay and discharge all debts, obligations and liabilities, and all rents, rates, taxes, outgoings and impositions payable in respect of any premises now or from time to time after the date of this Deed owned, tenanted, occupied or used by the Chargor and, when required, produce to the Lender receipts or other evidence satisfactory to the Lender that such payments have been made, or (as the case may be) such obligations and liabilities have been discharged;

 

(d) (i) use commercially reasonable endeavours to take all steps to maintain, preserve and protect its revenues and assets (tangible and intangible) and maintain and (where applicable) take out insurances in respect of its business, undertaking, property and assets and against such risks and contingencies as is prudent (given the industry practice in relation to the business, undertaking, property or asset concerned) with the interest of the Lender noted on the policies and with the policies containing such provisions for the benefit of the Lender as the Lender may require; (ii) on demand produce to the Lender the policies of such insurances and proof of payment of all premiums and other monies necessary for effecting and keeping such insurances; and (iii) immediately upon receipt pay to the Lender and pending such payment hold on trust for the Lender all monies received by the Chargor by virtue of any insurances maintained or effected by it (whether or not effected pursuant to the above) for application in making good the loss or damage in respect of which such monies are received or, at the option of the Lender, for payment to such account(s) as the Lender may specify;

 

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(e) if so required by the Lender, give notice (in such form as the Lender may require) to any person requiring payment into such account(s) as the Lender may specify of all monies due or to become due to the Chargor from that person;

 

(f) deposit with the Lender all certificates and documents of title, duly executed transfers and any other documents relating to the Charged Assets as the Lender may from time to time require;

 

(g) use its commercially reasonable endeavours to observe and perform all covenants and stipulations (under any agreement, law, regulation or otherwise) from time to time affecting any of the Charged Assets, take such action as may from time to time be necessary or desirable to preserve and maintain the Charged Assets or any registration thereof, and not do or omit to be done any act, matter or thing whereby any provision of any applicable law, decree, order or regulation from time to time affecting any of the Charged Assets is infringed;

 

(h) if requested to do so by the Lender, make entries in any public register or give such notices as the Lender may consider appropriate to record the existence of this Deed, any security created by it or the restrictions contained in it;

 

(i) not declare any dividends or pay any similar distribution to shareholders or redeem or purchase its own shares unless explicitly permitted under the Loan Agreement or with the prior written consent of the Lender;

 

(j) inform the Lender immediately on contracting to purchase any estate or interest in real property and provide to the Lender such information in relation to the same as the Lender may from time to time require;

 

(k) keep all its buildings and erections and all the plant, machinery, equipment, accessories, fixtures, fittings, vehicles and other effects and every part of them in good and substantial repair and in good working order and condition, and not to pull down or remove any of the same without the prior written consent of the Lender;

 

(l) not make any application under the Buildings Ordinance (Cap. 123 of the Laws of Hong Kong) to carry out any development of any of the immovable property for the time being owned by the Chargor;

 

(m) not call up or receive in advance of calls any of the uncalled capital for the time being of the Chargor;

 

(n) not continue its existence in a jurisdiction outside of the Cayman Islands or attempt or resolve to do so; and

 

(o) generally not to do or cause or permit to be done anything which may in any way jeopardise or otherwise prejudice the value of the Charged Assets as a whole or the Security and not (without the prior written consent of the Lender) incur any expenditure or liabilities of an exceptional or unusual nature.

 

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4.2. Negative pledge and Disposals

 

The Chargor shall not do or agree to do any of the following without the prior written consent of the Lender, except as expressly permitted under the Loan Documents:

 

(a) create or permit to subsist any Encumbrance on any Charged Asset other than Permitted Liens;

 

(b) sell, transfer, lease, lend or otherwise dispose of (whether by a single transaction or a number of transactions and whether related or not) the whole or any part of its interest in any Charged Asset (other than the Charged Assets subject to the floating charge under Clause 2.2(b)); or

 

(c) take or permit the taking of any action which may result in the rights attaching to any Charged Asset being altered.

 

4.3. Subsequent Encumbrances

 

If the Lender receives notice (actual or otherwise) of any subsequent Encumbrance, assignment or other disposition affecting the Charged Assets or any interest in the Charged Assets or the proceeds of sale thereof, the Lender shall be deemed to have opened a new account when such notice was received and as from that time all payments in respect of or on account of the Secured Obligations shall be deemed to have been credited to the new account and shall not, as between the Chargor and the Lender, operate to reduce the amount of the Secured Obligations outstanding when such notice was received.

 

4.4. Lien

 

The Lender shall have and shall be authorised to exercise a lien over all property of the Chargor (excluding any Excluded Property) coming into the possession or control of the Lender, for custody or any other reason and whether or not in the ordinary course of banking business, with power for the Lender to sell such property to satisfy the Secured Obligations if an Event of Default has occurred and is continuing.

 

4.5. Voting Rights and Dividends

 

(a) Until an Event of Default occurs, the Chargor shall be entitled to:

 

(i) receive and retain all dividends, distributions and other monies paid on or derived from the Shares; and

 

(ii) exercise all voting and other rights and powers attaching to the Shares, provided that it must not do so in a manner which has the effect of changing the terms of the Shares (or any class of them) or of any related rights or is prejudicial to the interests of the Lender.

 

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(b) At any time following the occurrence of an Event of Default, the Lender may effectuate the transfer for all or any Shares on behalf of the Chargor in favour of itself or such other person as it may select and all dividends, interest payments, distributions of an income nature or other monies which may be paid on or in respect of the Shares, if received by the Chargor or its nominee(s), shall be paid over to (and pending such payment shall be held on trust for) the Lender and may be applied, at the discretion of the Lender, in or towards discharging the Secured Obligations.

 

5. Further Assurances

 

5.1. Further action

 

The Chargor shall, at its own expense, promptly on request do all acts and execute all documents as the Lender or a Receiver may reasonably specify (and in such form as the Lender or a Receiver may reasonably require) for:

 

(a) creating, perfecting or protecting the Security intended to be created by this Deed or any other Loan Document;

 

(b) facilitating the realisation of any Charged Asset;

 

(c) facilitating the exercise of any rights, powers and remedies exercisable by the Lender, or any Receiver or any delegate in respect of any Charged Asset or provided by or pursuant to the Loan Documents or by law; or

 

(d) creating and perfecting Security in favour of the Lender over any Charged Asset located in any jurisdiction outside Hong Kong equivalent or similar to the Security intended to be created by or pursuant to this Deed or any other Loan Document.

 

This includes:

 

i. the re-execution of this Deed or such Loan Document;

 

ii. the execution of any legal mortgage, charge, transfer, conveyance, assignment, assignation or assurance of any property, whether to the Lender or to its nominee; and

 

iii. the giving of any notice, order or direction and the making of any filing or registration,

 

which, in any such case, the Lender may think expedient.

 

5.2. Loan Documents

 

The Chargor shall take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Security conferred or intended to be conferred on the Lender by or pursuant to the Loan Documents.

 

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6. Power to remedy

 

6.1. Power to remedy

 

If at any time the Chargor does not comply with any of its obligations under this Deed, the Lender (without prejudice to any other rights arising as a consequence of such non-compliance) shall be entitled (but not bound) to rectify that default. The Chargor irrevocably authorises the Lender and its employees and agents by way of security to do all things which are necessary or desirable to rectify that default.

 

6.2. Mortgagee in possession

 

The exercise of the powers of the Lender under this Clause 6 shall not render it liable as a mortgagee in possession.

 

6.3. Monies expended

 

The Chargor shall pay to the Lender on demand any monies which are expended by the Lender in exercising its powers under this Clause 6 together with interest at the Default Rate from the date on which those monies were expended by the Lender (both before and after judgment).

 

7. Representations and Warranties

 

7.1. Representations and Warranties

 

The Chargor represents and warrants to the Lender in addition to any warranties implicit under any applicable law that:

 

(a) it is duly incorporated and validly existing under its place of incorporation as a limited liability company with power to carry on its business as it is now being conducted and to own its assets and is in good standing;

 

(b) it has the power and authority to enter into and perform this Deed and no limitation on its powers will be exceeded by doing so;

 

(c) this Deed constitutes its legal, valid and binding obligations, enforceable in accordance with its terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar Legal Requirements relating to creditors’ rights generally);

 

(d) neither the execution of this Deed nor the creation of any of the charges contained in this Deed contravenes, or is inconsistent or in conflict with, any provision of its constitutional documents or any applicable enactment, law, decree, order, regulation, authorisation, franchise, consent, permit, security, instrument, agreement or document binding upon or affecting the Chargor or any of its undertaking, property, assets or rights;

 

(e) this Deed creates those Encumbrances it purports to create and is not liable to be avoided or otherwise set aside on the liquidation of the Chargor in whole or in part;

 

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(f) the Chargor is now and will during the subsistence of this Deed be the sole legal and beneficial owner of the Charged Assets and has good title to (and has full right and authority to charge and assign under this Deed) the Charged Assets and the Charged Assets are free from any Encumbrance or other rights or interests in favour of third parties (other than the Security and Permitted Liens);

 

(g) as at the date of this Deed, the contents of Schedule 1 hereto, and the other information and reports furnished by the Chargor to the Lender in connection with the negotiation and preparation of this Deed and/or in connection with the advance or continuance of any facilities are true and accurate in all material respects, and not misleading and do not omit material facts and all reasonable enquiries have been made to verify the facts and statements contained in them; and

 

(h) no litigation, arbitration or administrative proceedings are current or, to its knowledge, pending or threatened, which might, if adversely determined, have a material adverse effect on the business or financial condition of the Chargor and its Subsidiaries (or any of them) or the ability of the Chargor to perform or discharge any of the Secured Obligations.

 

7.2. Times when Representations and Warranties are made

 

The representations and warranties set out in this Clause 7 are:

 

(a) made on the date of this Deed; and

 

(b) except for Clause 7.1(g), deemed to be repeated by the Chargor every day with reference to the facts and circumstances then existing until this Deed is discharged.

 

7.3. Acknowledgement of Reliance

 

The Chargor acknowledges that the Lender has entered into this Deed in reliance upon the representations and warranties set out in Clause 7.1.

 

8. Enforcement of Security

 

8.1. When Security becomes enforceable

 

The Security (and any powers implied by statute) shall become immediately enforceable upon the occurrence of an Event of Default and shall remain so for so long as such Event of Default is continuing.

 

8.2. Statutory powers

 

The power of sale and other powers conferred to the Lender pursuant to the CPO (as amended or extended by this Deed) shall be immediately exercisable upon and at any time after the occurrence of any Event of Default and for so long as such Event of Default is continuing.

 

8.3. Enforcement

 

After the Security has become enforceable, the Lender may in its absolute discretion enforce all or any part of the Charged Assets in such manner as it sees fit.

 

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8.4. Powers on Enforcement

 

At the same time as or at any time after this Deed has become enforceable, the Lender may, without prejudice to any other rights available to the Lender in respect of the Secured Obligations or to any other security held for or in respect of the Secured Obligations:

 

(a) dispose of the Charged Assets or any part thereof in such manner and for such consideration (whether payable or deliverable immediately or by instalments) as the Lender considers appropriate; and/or

 

(b) effect the transfer of any and all of the Charged Assets into its name or the name(s) of its nominee(s) and/or without liability on the part of the Lender in the event of loss, act in all respects as the legal or beneficial owner of the Charged Assets and assume the management and control of any subsidiary companies; and/or

 

(c) apply all payments, dividends, interest payments, distributions or other monies accruing on the Charged Assets in or towards satisfaction of the Secured Obligations; and/or

 

(d) dispose of all or any of the Lender’s other rights under this Deed for such consideration (whether payable or deliverable immediately or by instalments) and in such manner as the Lender considers appropriate.

 

8.5. Statutory Restrictions

 

No restrictions imposed by any applicable law on any immediate or other power of sale, application of proceeds or on any other right or on the consolidation of mortgages or other Encumbrance shall apply to this Deed, the Lender or any Receiver or to any Encumbrance given to the Lender pursuant to this Deed.

 

8.6. Valid Receipt

 

Upon any such sale or other disposition and upon any other dealing or transaction under the provisions of this Deed, the receipt of the Lender or any Receiver for the purchase money of the property or asset sold or for any other monies paid to or other consideration received by the Lender or any Receiver shall effectually discharge the purchaser or person paying or giving the same therefrom and from being concerned to see to the application or being answerable for the loss, non-application or mis-application thereof.

 

8.7. Protection of Third Party

 

No person (including a purchaser) dealing with the Lender, any Receiver, their respective delegate or sub-delegate or any of their respective agents will be concerned to enquire:

 

(a) whether the Secured Obligations have become payable;

 

(b) whether any power which the Lender or the Receiver is purporting to exercise has become exercisable;

 

(c) whether any money remains due under any Loan Document; or

 

(d) how any money paid to the Lender or to the Receiver is to be applied.

 

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8.8. Exercise of Rights not Foreclosure

 

If the Lender exercises the rights conferred on it by Clause 8.4, the same shall not be treated as an absolute appropriation of or foreclosure on the Charged Assets to the exclusion of the Chargor and in extinguishment of its interests therein, unless the Lender otherwise notifies the Chargor (whether before or after the relevant appropriation or foreclosure has been effected), in which latter event any such appropriation or foreclosure shall be treated as a sale of the Charged Assets at a fair market value and the Secured Obligations shall be reduced by an equivalent amount.

 

8.9. Lender may purchase Charged Assets

 

In the event of any disposal pursuant to Clause 8.4, the Lender may itself purchase the whole or any part of the Charged Assets free from any rights of redemption on the part of the Chargor which are hereby waived and released.

 

8.10. No Claims against the Lender

 

(a) The Chargor shall not have any right or claim against the Lender and the Lender shall not have any liability of any nature whatsoever to the Chargor or any other person in respect of any loss arising out of any disposal of the Secured Obligations or the disposal or exercise of any other rights under this Deed or any part thereof, however such loss may have been caused, and whether or not a better price could or might have been obtained on such disposal, by either deferring or advancing the date of such disposal or otherwise howsoever, except for any loss caused by the gross negligence or wilful misconduct of the Lender.

 

(b) Neither the Lender nor any Receiver shall be liable to account as a mortgagee in possession in respect of all or any part of the Charged Assets or be liable for any loss upon realisation or for any neglect, default or omission in connection with the Charged Assets to which a mortgagee or a mortgagee in possession might otherwise be liable.

 

9. Receivership

 

9.1. Appointment of Receiver

 

On or at any time after the occurrence of an Event of Default or, if the Chargor so requests the Lender in writing, the Lender may, without further notice, legal process or any other action with respect to the Chargor appoint any one or more persons to be a Receiver under this Deed of all or any part of the Charged Assets and may from time to time fix his remuneration (which shall be of such amount as may be agreed from time to time between the Lender and the Receiver) and may remove any Receiver so appointed and/or appoint another in his place or in place of any Receiver whose appointment may for any reason have terminated.

 

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9.2. Receiver Agent of the Chargor

 

Each Receiver shall be the agent of the Chargor, and the Chargor shall be solely responsible for his acts or defaults and for his remuneration.

 

9.3. Rights of the Receiver

 

Each Receiver shall have all the rights conferred on any mortgagee and/or receiver under the CPO as well as the following rights:

 

(a) to take possession of, collect and get in the Charged Assets, exercise all voting or other powers or rights available to a registered and/or beneficial (as appropriate) owner of the Charged Assets in such manner as such Receiver may think fit and to take, defend or abandon any proceedings in the name of the Chargor or otherwise as may seem expedient;

 

(b) to carry on or authorise or concur in carrying on the business or any part of the business of the Chargor and to manage, conduct, reconstruct, amalgamate or diversify the business of the Chargor or any part of it (including power to acquire, develop or improve properties or other assets) without being responsible for loss or damage;

 

(c) to raise or borrow money from or incur any other liability to the Lender or others on such terms with or without security as such Receiver may think fit and so that any such security may be or include a charge on the Charged Assets ranking in priority to this security or otherwise;

 

(d) to sell by public auction or private contract, let, surrender or accept surrenders, grant leases, options, rights of pre-emption, tenancies or licences or otherwise dispose of or deal with the Charged Assets in such manner, for such consideration and generally on such terms and conditions as such Receiver may think fit, with full power to convey or otherwise transfer such Charged Assets in the name of the Chargor or other estate owner. Any such consideration may be cash, debentures or other obligations, shares, stock or other consideration and may be payable immediately or by instalments spread over such period or periods as he shall think fit and so that any consideration received or receivable shall immediately be and become charged with the payment and discharge of the Secured Obligations. Plant, machinery, equipment, accessories and other fixtures and fittings may be severed and sold separately from any premises of the Chargor containing them and such Receiver may apportion any rent and the performance of any obligations affecting the premises sold without the consent of the Chargor;

 

(e) to promote the formation of companies with a view to such companies purchasing the Charged Assets or otherwise;

 

(f) to make any arrangement, settlement or compromise or enter into or complete, cancel, abandon or disregard any contracts which such Receiver shall think expedient in the interests of the Lender;

 

(g) to make and effect all repairs, renewals and improvements and to maintain, renew, take out or increase insurances in relation to the Charged Assets;

 

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(h) to appoint and remunerate any person for any of the purposes of this Deed and/or to guard or protect the Charged Assets for such periods as such Receiver may determine and to dismiss the same or any other person appointed by the Chargor;

 

(i) to make calls, conditionally or unconditionally on the members of the Chargor, in respect of uncalled capital, with the same powers of enforcing payment of any calls so made as are, by the constitutional documents of the Chargor, conferred upon its directors and to the exclusion of the directors’ powers in that regard;

 

(j) to do anything which such Receiver shall think necessary or expedient to preserve, protect, maintain or manage the Charged Assets; and

 

(k) to sign any document, execute any deed (with authorisation to use the common seal of the Chargor for such purposes) and generally, on behalf and at the cost of the Chargor (notwithstanding liquidation of the Chargor or any similar event), to do or omit to do anything incidental to the matters referred to in this Clause 8.3 or to the realisation of this security or which the Chargor could do or omit to do in relation to the Charged Assets and to use the name of the Chargor for all the above purposes.

 

9.4. More Than One Receiver

 

If more than one person is appointed as a Receiver under this Deed, such persons shall throughout the duration of their office (unless the documents appointing them state otherwise) be entitled to exercise all or any of the powers conferred on a Receiver under this Deed individually.

 

10. Sale of Charged Assets

 

10.1. Statutory Restrictions

 

No restrictions imposed by any applicable law on any immediate or other power of sale, application of proceeds or on any other right or on the consolidation of mortgages or other Encumbrances shall apply to this Deed, the Lender or any Receiver or to any Encumbrance given to the Lender pursuant to this Deed.

 

10.2. Indemnity

 

Any sale or other disposition by or on behalf of the Lender or any of its nominees or any Receiver under the provisions of this Deed may be made upon such terms for the safety and protection of the purchaser or upon such terms as to indemnity as the Lender or such Receiver may think fit.

 

10.3. Valid Receipt

 

Upon any such sale or other disposition referred to in Clause 10.2 and upon any other dealing or transaction under the provisions of this Deed, the receipt of the Lender or any Receiver for the purchase money of the property or asset sold or for any other moneys paid to or other consideration received by the Lender or any Receiver shall effectually discharge the purchaser or person paying or giving the same therefrom and from being concerned to see to the application or being answerable for the loss, non-application or mis-application thereof.

 

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10.4. Enquiries by Purchaser

 

No purchaser or other person shall be bound or concerned to see or enquire whether the right of the Lender or any of its nominees or agents or any Receiver to exercise any of the rights conferred by this Deed has arisen or not, or be concerned with notice to the contrary, or with the propriety of the exercise or purported exercise of such rights.

 

10.5. Limitation of Liability

 

Neither the Lender nor any Receiver shall be liable for any losses which may arise:

 

(a) in the exercise or non-exercise of any of their rights;

 

(b) by reason of any entry into possession of the Charged Assets to account as mortgagee in possession;

 

(c) on realisation of the Charged Assets; or

 

(d) as a result of any default or omission for which a mortgagee in possession may be liable,

 

except for any loss caused by the gross negligence or wilful misconduct of the Lender or Receiver.

 

11. Power of Attorney

 

11.1. Appointment

 

For the purpose of securing the interest of the Lender in the Charged Assets and the performance of its obligations to the Lender, the Chargor, irrevocably, by way of security, appoints the Lender and separately each Receiver and any of their delegates or sub-delegates severally to be its attorney (with full power to appoint substitutes and to sub-delegate including power to authorise the person so appointed to make further appointments, in both cases, with regard to the Charged Assets) on behalf of and in the name of the Chargor or otherwise, to execute, seal and deliver and otherwise perfect and do all such deeds, agreements, acts and things which:

 

(l) (before the Security becomes enforceable) the Chargor is obliged to do under this Deed, but has not done;

 

(m) (after the Security becomes enforceable) the Chargor is or may become obliged to do under this Deed; and/or

 

(n) (after the Security becomes enforceable) otherwise may be required for or deemed proper on or in connection with the full exercise of all or any of the rights conferred by this Deed on the Lender or on any Receiver and its rights to give full force and effect to the terms and conditions contained in this Deed.

 

This power of attorney is coupled with an interest and is irrevocable and shall remain irrevocable as long as this Deed remains outstanding.

 

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11.2. Ratification

 

The Chargor ratifies and confirms and agrees to ratify and confirm any deed, agreement, act or thing which any attorney appointed under this Deed may lawfully execute, seal, deliver or do.

 

12. Expenses and Indemnity

 

12.1. Expenses

 

The Chargor will pay the Lender, on demand, all the Lender’s and Receiver’s expenses (including legal and out-of-pocket expenses) incurred:

 

(a) in connection with the negotiation, preparation and execution of this Deed and any amendment to, or waiver or consent or release of or under, this Deed; and/or

 

(b) in contemplation of, or in connection with, the preservation, enforcement or exercise of any rights under this Deed.

 

12.2. Indemnity

 

The Chargor will indemnify the Lender and the Receiver, on demand, against all losses, actions, claims, expenses, demands and liabilities whether in contract, tort or otherwise now or after the date of this Deed incurred by the Lender or the Receiver (except for any losses, actions, claims, expenses, demands and liabilities caused by the gross negligence or wilful misconduct of the Lender or the Receiver):

 

(a) for anything done or omitted in the exercise or purported exercise or non-exercise of the rights contained in this Deed;

 

(b) as a result of any breach by the Chargor of any of its covenants or other obligations to the Lender or any other person;

 

(c) in consequence of any payment in respect of the Secured Obligations (whether made by the Chargor or any other person) being impeached or declared void for any reason whatsoever; and/or

 

(d) as a result of any taxes, duties, rates or outgoings assessed upon or payable in respect of the Charged Assets or in connection with the entry into preservation, enforcement or exercise of any rights under this Deed.

 

12.3. Documentary Duties and Taxes

 

The Chargor will pay all documentary stamp, registration and other duties or similar taxes, including any payable by the Lender, which are imposed on or are payable in connection with this Deed.

 

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12.4. Default Interest

 

The amounts payable under this Clause 12 shall carry interest at the Default Rate after as well as before judgment from the date on which they were incurred by the Lender or any Receiver (as the case may be) and such amounts and interest shall form part of the Secured Obligations.

 

13. Application of Proceeds

 

13.1. Order of Application

 

All monies received or recovered by any Receiver and/or by the Lender from the Chargor pursuant to this Deed shall, subject to any claims ranking in priority to the Secured Obligations to the extent of such priority, be applied, in or towards discharging, in the following order of priority:

 

(a) the amount of all fees and remuneration of, and all other costs, charges, expenses and liabilities incurred by the Lender and/or each Receiver in connection with or as a result of the exercise of their respective rights, including the remuneration of each Receiver, or otherwise in relation to this Deed or any other agreement entered into between the Chargor and the Lender in such order as the Lender or any Receiver may from time to time determine;

 

(b) all other Secured Obligations in such order as the Lender may from time to time determine; and

 

(c) the Chargor and/or the claims of those entitled to any surplus.

 

13.2. Currency Conversion

 

The Lender and/or each Receiver may convert any monies received, recovered or realised under this Deed (including the proceeds of any previous conversion under this Clause 13.2) from their existing currency of denomination into such other currency of denomination as the Lender and/or any Receiver may think fit and any such conversion shall be effected at the Exchange Rate. If and to the extent that the Chargor fails to pay any amount due on demand, the Lender and/or each Receiver may in its absolute discretion without notice to the Chargor purchase at any time after the demand has been made so much of any currency as the Lender and/or any Receiver considers necessary or desirable to cover the Secured Obligations at the Exchange Rate and the Chargor agrees to indemnify the Lender and each Receiver against the full cost (including all costs, charges and expenses) paid.

 

13.3. Currency Indemnity

 

If the currency of a sum due from the Chargor under this Deed (the “ contractual currency ”) or a sum due from the Chargor under any judgment or order relating to this Deed in the contractual currency is converted from the contractual currency into another currency for the purpose of:

 

(a) making or filing a claim or proof;

 

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(b) obtaining a judgment or order; or

 

(c) enforcing a judgment or order,

 

the Chargor will indemnify the Lender against any loss or liability incurred as a result of any difference between (i) the rate of exchange used to convert the sum in question from the contractual currency into the other currency and (ii) the rate or rates of exchange at which the Lender, in the ordinary course of business, can purchase the contractual currency with the other currency on receipt of a sum paid to it in full or part satisfaction of that claim, proof, judgment or order.

 

Any amount due from the Chargor under this Clause 13.3 will be a separate and independent debt and will not be affected by judgment being obtained for any other sum due under or in respect of this Deed. The term “ rate of exchange ” in this Clause 13.3 includes any premium and exchange costs payable in connection with the purchase of the contractual currency with the other currency.

 

14. Protection of Lender

 

14.1. Suspense Account

 

Any moneys paid to or received by the Lender in respect of the Secured Obligations or under this Deed may be applied in or towards satisfaction of the Secured Obligations or placed to the credit of such account as the Lender may determine with a view to preserving its rights to prove for the whole of the Secured Obligations.

 

14.2. No Withholding

 

Payments by the Chargor shall be made to the Lender as specified by the Lender without any set-off, counterclaim, withholding or condition of any kind except that, if the Chargor is compelled by law to make such withholding, the sum payable by the Chargor shall be increased so that the amount actually received by the Lender is the amount it would have received if there had been no withholding.

 

14.3. Claw Back

 

If the Lender considers that an amount paid by the Chargor or any other person is capable of being avoided or otherwise set aside (on the liquidation of the Chargor or otherwise) then that amount shall not be considered to have been paid for the purposes of this Deed. Furthermore, the Lender may in its absolute discretion concede or compromise any claim that any payment, security or other disposition is liable to be avoided, reduced or repaid.

 

14.4. Conditional Discharge

 

Any release, discharge or settlement under this Deed shall be conditional upon no payment or discharge in respect of the Secured Obligations by the Chargor or any other person being avoided, reduced or repaid for any reason and the Lender shall be entitled to enforce this Deed if such condition is not fulfilled as if such release, discharge or settlement had not occurred.

 

  19  

 

 

14.5. Set-Off

 

The Lender may at any time without notice:

 

(a) combine or consolidate all or any of the Chargor’s accounts with the Lender;

 

(b) apply any credit balance to which the Chargor is entitled on any account with the Lender or any other moneys owing to the Chargor in or towards satisfaction of the Secured Obligations; or

 

(c) in the absolute discretion of the Lender, refuse to permit the withdrawal or utilisation of any deposit or moneys for such period as the Lender may consider appropriate (notwithstanding the terms of the deposit or moneys and whether or not any Secured Obligation has become due).

 

For these purposes, the Lender is authorised to purchase, at the Exchange Rate, such other currencies as may be necessary to effect such application with the monies standing to the credit of such account.

 

15. Trusteeship

 

The Chargor declares that:

 

(a) as and when the security created by this Deed shall become enforceable, it will hold all the Charged Assets (subject to the Chargor’s right of redemption) upon trust to convey, assign, transfer or otherwise dispose of or deal with the same in such manner and to such person as the Lender shall direct; and

 

(b) it shall be lawful for the Lender to appoint new trustees of the Charged Assets from time to time in place of the Chargor or in place of any trustee appointed under this power.

 

16. Redemption of Prior Encumbrances

 

On or at any time after the Security has become enforceable, the Lender may:

 

(a) redeem any prior Encumbrance against the Charged Assets;

 

(b) procure the transfer of that Encumbrance to itself; and/or

 

(c) settle and pass the accounts of the prior mortgagee, chargee or encumbrancer; any accounts so settled and passed shall be conclusive and binding on the Chargor;

 

and all principal moneys, interest, costs, charges and expenses of and incidental to any such redemption and/or transfer shall be paid by the Chargor to the Lender on demand.

 

  20  

 

 

17. Delegation

 

The Lender and any Receiver may:

 

(a) delegate by power of attorney or in any other manner to any person any right exercisable by them under this Deed on such terms (including power to sub-delegate) as the Lender or any Receiver (as the case may be) sees fit; and/or

 

(b) employ agents, managers, employees, advisers and others on such terms as the Lender or any Receiver (as the case may be) sees fit for the purposes of this Deed.

 

Neither the Lender nor any Receiver will in any way be liable or responsible to the Chargor for any loss or liability arising from any act, default, omission or misconduct on the part of any such delegate or sub-delegate.

 

18. No Waiver

 

No failure or delay by the Lender or any Receiver to exercise any right under this Deed or otherwise will operate as a waiver of that right or any other right, nor will any single or partial exercise of any such right preclude any other or further exercise of that right or the exercise of any other right.

 

19. Remedies Cumulative

 

The rights of the parties or any Receiver under this Deed are cumulative and do not exclude or restrict any other rights.

 

20. Assignment

 

20.1. Successors and Permitted Assigns

 

This Deed shall be binding upon and enure to the benefit of each party to this Deed and its successors in title and permitted assigns.

 

20.2. Assignment by the Chargor

 

The Chargor shall not be entitled to assign or transfer any of its rights, benefits or obligations under this Deed without the prior written consent of the Lender.

 

20.3. Assignment by the Lender

 

The Lender may assign all or any of its rights under this Deed to any person in accordance with the terms of Section 8.14 (Benefit of Agreement) of the Loan Agreement.

 

21. Notices

 

21.1. In Writing and Methods of Delivery

 

Any notice, demand or other communication under this Deed shall be sent in accordance with Section 8.5 (Notices) of the Loan Agreement.

 

21.2. Deemed Giving of Notice and Receipt

 

Any such notice, demand or other communication shall be deemed effective in such manner and at such time specified under Section 8.5 (Notices) of the Loan Agreement.

 

  21  

 

 

22. Severance

 

If any provision of this Deed is not or ceases to be legal, valid, binding and enforceable under the law of any jurisdiction, neither the legality, validity, binding effect or enforceability of the remaining provisions under that law nor the legality, validity, binding effect or enforceability of that provision under the law of any other jurisdiction shall be affected.

 

23. Counterparts

 

This Deed may be executed in any number of counterparts and by different parties on separate counterparts, each of which is an original but, together, they constitute one and the same agreement.

 

24. Amendments

 

No amendment to this Deed will be effective unless in writing and executed by all the Parties.

 

25. Governing Law and Jurisdiction

 

25.1. Governing Law

 

This Deed is governed by and will be construed in accordance with Hong Kong Law.

 

25.2. Hong Kong Jurisdiction

 

The parties submit to the non-exclusive jurisdiction of the Hong Kong courts and each party waives any objection to proceedings in Hong Kong on the grounds of venue or inconvenient forum.

 

25.3. Waiver of Sovereign Immunity

 

To the extent that the Chargor may, in any jurisdiction, be entitled to claim for itself or its assets immunity from suit, execution, attachment (whether in aid of execution, before judgement or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed), the Chargor irrevocably agrees not to claim and irrevocably waives such immunity to the full extent permitted by the laws of such jurisdiction.

 

25. Process Agent

 

The service of any process connected with proceedings in the Hong Kong courts and relating to this Deed will be deemed to have been validly served on the Chargor if it is received by the Borrower at its registered address or the address specified in Section 8.5 (Notices) of the Loan Agreement and service will be deemed to have been acknowledged by the Chargor if it is acknowledged by the Borrower.

 

  22  

 

 

SCHEDULE 1

 

Asset Information

 

(a) Offices / locations where movable assets are held

 

Borqs Hong Kong Limited

Office B, 21/F., Legend Tower, 7 Shing Yip Street

Kwun Tong, Kowloon, Hong Kong

 

Borqs Beijing Ltd.

Tower A, Building B23, Universal Business Park

No. 10 Jiuxianqiao Road, Chaoyang District

Beijing 100015, China

 

Borqs Software Solutions Private Limited

Prestige Al-Kareem, NO.3 Edward Road, Civil Station

Corporation Division NO.72

Bangalore, Karnataka, INDIA 560052

 

(b) Intellectual Property Rights

 

As listed on Schedules A, B, C and D attached to the

Borqs Cayman – Intellectual Property Security Agreement

 

(c) Shares

 

100% of all the shares of Borqs Hong Kong Limited

and

9,999 out of 10,000 shares of Borqs Software Solutions Private Limited

 

(d) Bank Accounts

 

Silicon Valley Bank

Account number 3300710352

 

  23  

 

 

SCHEDULE 2

 

Form of Notice

 

To: [ insert account bank ]

 

Date:

 

Dear Sirs,

 

NOTICE OF CHARGE

 

We hereby give you notice that we have charged to Partners For Growth IV, L.P. (the “ Lender ”) all our rights, title and interest in our bank account[s] held with you with account number[s] [●] (including any renewal or redesignation thereof) (the “Accounts[s] ”) and all monies standing to the credit of the Account from time to time under a deed of debenture dated [●] 2016 (the “ Debenture ”).

 

We hereby irrevocably and unconditionally instruct you that, with effect from the service of a notice by or on behalf of the Lender on you notifying you that an event of default has occurred under the Debenture: (i) any then existing payment instructions affecting the Account[s] shall immediately and automatically be terminated and payments and communications in respect of the Account[s] should be made to the Lender and (ii) all rights, title and interest in the Account[s] shall vest in the Lender.

 

This letter is governed by the laws of Hong Kong.

 

Please acknowledge receipt of this notice by signing the acknowledgement enclosed and returning it to us with a copy to the Lender:

 

PARTNERS FOR GROWTH IV, L.P.

1660 Tiburon Blvd., Suite D

Tiburon, CA 94920 USA

Yours faithfully,

 

 

 

For and on behalf of [●]

  

Form of Acknowledgement

 

To: [Chargor]

Copy to: PARTNERS FOR GROWTH IV, L.P.

 

We acknowledge receipt of the Notice of Charge dated [•] 2016 and confirm that we will comply with the terms set out in the Notice of Charge. We further confirm that, following receipt of the notice of an event of default as set out in the Notice of Charge we will not act in relation to the Account[s] except as instructed by the Lender or any persons authorised by the Lender and we shall send all statements and other notices in relation to the Account[s] to the Lender.

 

 

 

For and on behalf of [ insert account bank ]

 

  24  

 

 

IN WITNESS of which this Deed has been duly executed by the Chargor as a deed and duly executed by the Lender.

 

EXECUTED and DELIVERED )
as a DEED by BORQS INTERNATIONAL HOLDING CORP )

 

Acting by: /s/ Pat Chan  
Name: Pat Chan  
Title: Chief Executive Officer  

 

in the presence of :

 

/s/ Anthony K. Chan  
Witness name: Anthony K. Chan  
Witness occupation:   Sup Corporate Finance  
  Borqs International Holding Corp  

 

EXECUTED and DELIVERED )
as a DEED by PARTNERS FOR GROWTH IV, L.P. )

 

Acting by:   Partners for Growth IV, LLC  
Its: General Partner  
     
Name: Andrew Kahn  
Title: Managing Member  
     
Witnessed by:  
     
Name: Kathy Adams  
Title: CCO  

 

/s/ Kathy Adams  
Witness name: Kathy Adams  
Witness occupation:   CCO  

 

  25  

 

Exhibit 10.51

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

This Intellectual Property Security Agreement (this “Agreement”) is entered into as of August 26, 2016 (the “Effective Date”), by and between PARTNERS FOR GROWTH IV, L.P. (“PFG”) and BORQS International Holding Corp, a company duly incorporated and validly existing under and by virtue of the Laws of The Cayman Islands, registered under company number 192127 and with its registered office at P.O. Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands (“Grantor”), with reference to the following facts:

 

A. PFG and a Subsidiary of Grantor (as Borrower), are parties to that certain Loan and Security Agreement of even date with this Agreement (as amended from time to time, the “Loan Agreement”). (Capitalized terms used herein have the meaning assigned in the Loan Agreement.)

 

B. Grantor has guaranteed the Obligations of each Borrower under the Loan Agreement pursuant to a Debenture of even date with the Loan Agreement, pursuant to which Grantor has granted to PFG a security interest in all Charged Assets. Charged Assets include without limitation certain Intellectual Property (including without limitation the Intellectual Property described herein) owned by Grantor.

 

Grantor agrees as follows:

 

1. To secure performance of all of its “Obligations” as defined in the Loan Agreement, Grantor grants to PFG a security interest in all of Grantor’s right, title and interest in Grantor’s “Intellectual Property”, including without limitation (i) the trademarks and servicemarks listed or required to be listed from time to time on Schedule A hereto, whether registered or not, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks, and (ii) the patents and patent applications listed or required to be listed from time to time on Schedule B hereto and all like protections including, without limitation, all improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, (iii) all copyrights, maskworks, software, computer programs and other works of authorship listed or required to be listed from time to time on Schedule C hereto, and all extensions and renewals thereof, (iv) all domain names and domain name rights owned by it and used in connection with its business and that of its Subsidiaries, all legal and equitable rights in domain names and ownership thereof, domain registry, domain servers, web hosting and related contracts, services and facilities (collectively, “Domain Rights”) listed or required to be listed from time to time on Schedule D hereto, and all extensions and renewals thereof, and (iv) all rights to recover for past or future infringement of any of the foregoing, and (v) all right, title and interest in and to any and all present and future license agreements with respect to any of the foregoing, and (vi) all present and future accounts, accounts receivable and other rights to payment arising from, in connection with or relating to any of the foregoing and provided that if any asset cannot be secured without consent of a third party (and such consent is not given), this Agreement will constitute security over all proceeds and other amounts receivable from such asset.

 

 

 

 

2. Grantor represents and warrants that (i) listed on Schedule A hereto are all trademark registrations and pending registrations owned or controlled by Grantor, (ii) listed on Schedule B are all patents and patent applications owned or controlled by Grantor, (iii) listed on Schedule C are all copyrights, software, computer programs, mask works, and other works of authorship owned or controlled by Grantor which are registered with the United States Copyright Office and the copyright registry of each other applicable jurisdiction, wherever located, and (iv) listed on Schedule D are all Domain Rights in which Grantor has any legal, contractual or equitable right. Grantor shall: (a) protect, defend and maintain the validity and enforceability of its intellectual property, other than intellectual property of immaterial business and monetary value that Grantor’s executive management has made a determination not to maintain; (b) promptly advise PFG in writing of material infringements of its intellectual property; and (c) not allow any intellectual property material to Grantor’s business to be abandoned, forfeited or dedicated to the public without PFG’s written consent. If, before the Obligations have been paid and/or performed in full, Grantor shall (i) adopt, use, acquire or apply for registration of any trademark, service mark or trade name, (ii) apply for registration of any patent or obtain any patent or patent application; (iii) create or acquire any published or material unpublished works of authorship material to the business that is or is to be registered with the U.S. Copyright Office or any non-U.S. equivalent or other Governmental Body; or (iv) register or acquire any domain name or domain name rights, then the provisions of Section 1 shall automatically apply thereto, and Grantor shall provide PFG written notice thereof concurrently with delivery of Borrower’s monthly compliance certificate. Grantor shall further provide PFG with all information and details relating to the foregoing and shall take such further actions as PFG may reasonably request from time to time to perfect or continue the perfection of PFG’s interest in such intellectual property.

 

3. This Agreement is being executed and delivered pursuant to the Loan Agreement; nothing herein limits any of the terms or provisions of the Loan Agreement, and PFG’s rights hereunder and under the Loan Agreement are cumulative. This Agreement, the Loan Agreement and the other Loan Documents set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, oral representations, oral agreements and oral understandings between the parties. This Agreement may not be modified or amended, nor may any rights hereunder be waived, except in a writing signed by the parties hereto; provided, however, and notwithstanding the foregoing, PFG may amend the Schedules hereto from time to time when it becomes aware of new Intellectual Property subject to this Agreement. In the event of any litigation between the parties based upon, arising out of, or in any way relating to this Agreement, the prevailing party shall be entitled to recover all of its costs and expenses (including without limitation attorneys’ fees) from the non-prevailing party. This Agreement and all acts, transactions, disputes and controversies arising hereunder or relating hereto, and all rights and obligations of PFG and Grantor shall be governed by, and construed in accordance with the internal laws (and not the conflict of laws rules) of the State of California.

 

2

 

 

4. Grantor agrees that simultaneously with the execution of this Agreement, and thereafter upon any amendment of Schedule A , Schedule B, Schedule C or Schedule D , the appropriate entities constituting Grantor shall execute notices in the forms appended hereto (each, a “ Notice ”), as appropriate, with respect to all of the pledged Intellectual Property, now owned or hereafter acquired, and shall deliver each Notice to PFG for the purpose of recordation at the U.S. Patent and Trademark Office or the U.S. Copyright Office, with any patent or trademark registry outside of the United States or otherwise, as appropriate. Whether or not Grantor executes such a Notice reflecting new Intellectual Property, Grantor hereby irrevocably appoints PFG as its lawful attorney-in-fact without any further authorization to file such notices, liens or other instruments as may be customary from time to time for PFG to perfect security interests in Grantor’s Intellectual Property. With respect to the power of attorney granted in the attached Domain Rights Collateral Agreement and Notice, so long as no default has occurred and is continuing under the Loan Documents, PFG shall not take any action referenced therein in the name of Grantor.

 

[Signature Page Follows]

 

3

 

 

Address of Grantor: BORQS International Holding Corp
     
P.O. Box 309    
Ugland House    
Grand Cayman KY1-1104    
Cayman Islands By: /s/ William Wong
  Name: William Wong
  Title: Director
     
     
  By: /s/ Wong wai Leung Joseph
  Name:   Wong Wai Leung Joseph
  Title: Director
     
Address of PFG: PARTNERS FOR GROWTH IV, L.P.
Partners for Growth IV, L.P.    
1660 Tiburon Blvd., Suite D    
Tiburon, California 94920    
     
  By:  
     
  Name:  
     
  Title: Manager, Partners for Growth IV, LLC
  Its: General Partner 

 

 

 

Intellectual Property Security Agreement Signature Page

 

4

 

 

SCHEDULE A

 
BORQS International Holding Corp

 

Trademark Schedule

 

None at Effective Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5

 

 

SCHEDULE B

 

BORQS International Holding Corp

 

Patent Schedule

 

None at Effective Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

SCHEDULE C

 

BORQS International Holding Corp

 

COPYRIGHTS

 

None at Effective Date

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

SCHEDULE D

 

BORQS International Holding Corp

  

DOMAIN RIGHTS

 

Domain Name   Service Provider Contact Detail and Account number (if any)   Owner and Registrar or Administrative Contact of Record   Expiry Date of Domain
None at Effective Date      
             
             
             
             
             
             
             

 

8

 

 

TRADEMARK COLLATERAL AGREEMENT AND NOTICE

 

This Trademark Collateral Agreement and Notice dated as of August __, 2016 (“Trademark Agreement”), is between BORQS International Holding Corp, a company duly incorporated and validly existing under and by virtue of the Laws of The Cayman Islands, registered under company number 192127 and with registered office address at P.O. Box 309, Ugland House, Grand Cayman KY1-1104 (“ Assignor ”) and Partners for Growth IV, L.P., 1660 Tiburon Blvd., Suite D, Tiburon, California 94920 (“ Assignee ”) pursuant to a Loan and Security Agreement, an Intellectual Property Security Agreement of even date herewith by and among Assignor and Assignee (the “ IP Security Agreement ”) and pursuant to certain other loan documents referenced therein (collectively, the “ Loan Documents ”).

 

WHEREAS, Assignor is the owner of certain trademarks, including all federal applications and/or registrations therefor, together with the goodwill of the business connected with the use of and symbolized thereby, as listed on Exhibit 1 hereto (the “ Marks ”); and

 

WHEREAS, Assignee has agreed to extend certain credit to Assignor on condition that the Assignor pledge and grant to Assignee as collateral for the Obligations (as defined in the Loan Documents) a security interest and lien in and to the Marks and all proceeds thereof and all other related claims and rights as more fully described in the IP Security Agreement in favor of the Assignee, by and among Assignor and Assignee;

 

NOW THEREFORE, for good and valuable consideration, as security for the due and timely payment and performance of the Obligations, Assignor hereby pledges and grants to Assignee a security interest and lien in and to the Marks and all proceeds thereof and gives notice of such security interest and the existence of such Security Agreement providing therefor.

 

Executed as of the date first above written.

 

Assignor:   Assignee:
     
BORQS International Holding Corp     PARTNERS FOR GROWTH IV, L.P.
         
By     By  
         
Name:     Name:  
         
Title: Director   Title:

Manager, Partners for Growth IV, LLC
Its General Partner

         
By        
         
Name:        
         
Title: Director      

 

9

 

 

EXHIBIT 1

 

BORQS International Holding Corp

 

Trademark Schedule

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

PATENT COLLATERAL AGREEMENT AND NOTICE

 

This Patent Collateral Agreement and Notice dated as of August __, 2016 (“Patent Agreement”), is between BORQS International Holding Corp, a company duly incorporated and validly existing under and by virtue of the Laws of The Cayman Islands, registered under company number 192127 and with registered office address at P.O. Box 309, Ugland House, Grand Cayman KY1-1104 (“ Assignor ”) and Partners for Growth IV, L.P., 1660 Tiburon Blvd., Suite D, Tiburon, California 94920 (“ Assignee ”) pursuant to a Loan and Security Agreement, an Intellectual Property Security Agreement of even date herewith by and among Assignor and Assignee (the “ IP Security Agreement ”) and pursuant to certain other loan documents referenced therein (collectively, the “ Loan Documents ”).

 

WHEREAS, Assignor is the owner of certain United States patents and/or patent applications as listed on Exhibit 1 hereto (the “Patents”); and

 

WHEREAS, Assignee has agreed to extend certain credit to Assignor on condition that the Assignor pledge and grant to Assignee as collateral for the Obligations (as defined in the Loan Documents) a security interest and lien in and to the Patents and all proceeds thereof and all other related claims and rights as more fully described in the IP Security Agreement in favor of the Assignee, by and among Assignor and Assignee;

 

NOW THEREFORE, for good and valuable consideration, as security for the due and timely payment and performance of the Obligations, Assignor hereby pledges and grants to Assignee a security interest and lien in and to the Patents and all proceeds thereof and gives notice of such security interest and the existence of the IP Security Agreement providing therefor.

 

Executed as of the date first above written.

 

Assignor:   Assignee:
     
BORQS International Holding Corp     PARTNERS FOR GROWTH IV, L.P.
         
By     By  
         
Name:     Name:  
         
Title: Director   Title:

Manager, Partners for Growth IV, LLC
Its General Partner

         
By        
         
Name:        
         
Title: Director      

 

11

 

 

EXHIBIT 1

 

BORQS International Holding Corp

 

Patent Schedule

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 

 

COPYRIGHT COLLATERAL AGREEMENT AND NOTICE

 

This Copyright Collateral Agreement and Notice dated as of August __, 2016 (“Copyright Agreement”), is between BORQS International Holding Corp, a company duly incorporated and validly existing under and by virtue of the Laws of The Cayman Islands, registered under company number 192127 and with registered office address at P.O. Box 309, Ugland House, Grand Cayman KY1-1104 (“ Assignor ”) and Partners for Growth IV, L.P., 1660 Tiburon Blvd., Suite D, Tiburon, California 94920 (“ Assignee ”) pursuant to a Loan and Security Agreement, an Intellectual Property Security Agreement of even date herewith by and among Assignor and Assignee (the “ IP Security Agreement ”) and pursuant to certain other loan documents referenced therein (collectively, the “ Loan Documents ”).

 

WHEREAS, Assignor is the owner of certain copyrightable works which are the subject of United States copyright registrations and/or copyright applications as listed on Exhibit 1 hereto (the “ Copyrights ”); and

 

WHEREAS, Assignee has agreed to extend certain credit to Assignor on condition that the Assignor pledge and grant to Assignee as collateral for the Obligations (as defined in the Loan Documents) a security interest and lien in and to the Copyrights and all proceeds thereof and all other related claims and rights as more fully described in the IP Security Agreement in favor of the Assignee, by and among Assignor and Assignee;

 

NOW THEREFORE, for good and valuable consideration, as security for the due and timely payment and performance of the Obligations, Assignor hereby pledges and grants to Assignee a security interest and lien in and to the Copyrights and all proceeds thereof and gives notice of such security interest and the existence of the IP Security Agreement providing therefor.

 

Executed as of the date first above written.

 

Assignor:   Assignee:
     
BORQS International Holding Corp     PARTNERS FOR GROWTH IV, L.P.
         
By     By  
         
Name:     Name:  
         
Title: Director   Title:

Manager, Partners for Growth IV, LLC
Its General Partner

         
By        
         
Name:        
         
Title: Director      

 

13

 

 

EXHIBIT 1

BORQS International Holding Corp

 
COPYRIGHT SCHEDULE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14

 

 

DOMAIN RIGHTS COLLATERAL AGREEMENT AND NOTICE

 

This Domain Rights Collateral Agreement and Notice dated as of August __, 2016 (“Domain Agreement”), is between BORQS International Holding Corp, a company duly incorporated and validly existing under and by virtue of the Laws of The Cayman Islands, registered under company number 192127 and with registered office address at P.O. Box 309, Ugland House, Grand Cayman KY1-1104 (“ Assignor ”) and Partners for Growth IV, L.P., 1660 Tiburon Blvd., Suite D, Tiburon, California 94920 (“ Assignee ”) pursuant to a Loan and Security Agreement, an Intellectual Property Security Agreement of even date herewith by and among Assignor and Assignee (the “ IP Security Agreement ”) and pursuant to certain other loan documents referenced therein (collectively, the “ Loan Documents ”).

 

WHEREAS, Assignor is the owner of certain Domain Rights as defined in the Loan Documents which are, as of the date hereof, as listed on Exhibit 1 hereto (the “ Domain Rights ”); and

 

WHEREAS, Assignee has agreed to extend certain credit to Assignor on condition that the Assignor pledge and grant to Assignee as collateral for the Obligations (as defined in the Loan Documents) a security interest and lien in and to the Domain Rights and all proceeds thereof and all other related claims and rights as more fully described in the IP Security Agreement in favor of the Assignee, by and among Assignor and Assignee;

 

NOW THEREFORE, for good and valuable consideration, as security for the due and timely payment and performance of the Obligations: (1) Assignor hereby pledges and grants to Assignee a security interest and lien in and to the Domain Rights and all proceeds thereof and gives notice of such security interest and the existence of the IP Security Agreement providing therefor; and (2) Assignor hereby irrevocably appoints PFG as its lawful attorney-in-fact without any further authorization to take any action and file any notice on behalf of Assignor that Assignor itself could file in respect of its Domain Rights, including without limitation, to transfer Domain Rights, change administrative contacts in respect of Domain Rights, maintain Domain Rights, and provide instructions to domain hosting services and any domain name registrars.

 

Executed as of the date first above written.

 

Assignor:   Assignee:
     
BORQS International Holding Corp     PARTNERS FOR GROWTH IV, L.P.
         
By     By  
         
Name:     Name:  
         
Title: Director   Title:

Manager, Partners for Growth IV, LLC
Its General Partner

         
By        
         
Name:        
         
Title: Director      

 

15

 

 

EXHIBIT 1

 

BORQS International Holding Corp

 

DOMAIN RIGHTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16

 

Exhibit 10.52

 

Date: 26 August 2016

 

 

 

 

 

 

 

BORQS Hong Kong Limited  

as Guarantor

 

 

Partners for Growth IV, L.P. 

as Lender

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEED OF GUARANTEE AND INDEMNITY

   

 

 

 

Execution version

     

THIS GUARANTEE (this “ Guarantee ”) is made as a deed this 26th day of August 2016,

 

BETWEEN:

 

(1) BORQS Hong Kong Limited , a private company limited by shares incorporated under the laws of Hong Kong with registration number 1151010 and registered address at Office B, 21/F., Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon (the “ Guarantor ”); and

 

(2) PARTNERS FOR GROWTH IV, L.P. , a Delaware limited partnership, with its principal place of business at 1660 Tiburon Blvd., Suite D, Tiburon, CA 94920 USA (the “ Lender ”).

 

IT IS AGREED as follows:

 

1. Definitions and Interpretation

 

1.1. Definitions

 

Unless otherwise defined herein, capitalised terms used in this Guarantee have the meaning given to such terms in the Loan Agreement (as defined below). In addition, in this Guarantee, unless the context otherwise requires, the following expressions shall have the following meanings:

 

  Encumbrance means any mortgage, charge, pledge, lien (otherwise than arising by statute or operation of law) or other encumbrance, priority or security interest, deferred purchase, title retention, leasing, sale-and-repurchase, sale-and-leaseback arrangement whatsoever over or in any property, assets or rights or interest of whatsoever nature or any agreement for any of the same;
     
  Loan Agreement means the California law loan and security agreement dated on or about the date hereof between the Lender as lender and the Principals as the borrowers;
     
  Principals means the Guarantor and such other borrowers as may accede to the Loan Agreement from time to time; and
     
  Principals’ Obligations means all present and future obligations and liabilities of the Principals to the Lender under the Loan Agreement and the other Loan Documents whether actual or contingent and whether owed or incurred alone or jointly and/or severally with another and as principal or as surety or in any other capacity or of any nature.

 

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1.2. Construction

 

1.2.1. Any reference in this Guarantee to:

 

(a) the Lender or the Guarantor or any other person includes its respective successors in title, permitted assigns and/or permitted transferees;

 

(b) a Clause is a reference to a clause of this Guarantee;

 

(c) this Guarantee , the Loan Agreement or any other agreement or document is a reference to this Guarantee, the Loan Agreement or such other agreement or document as the same may have been, or may from time to time be, amended, varied, supplemented or novated;

 

(d) the Principal’s Obligations includes a reference to any part of them;

 

(e) the singular shall include the plural and vice versa;

 

(f) a person includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having a separate legal personality) and any other entity or two or more of the foregoing; and

 

(g) any statute or statutory provision or ordinance shall include any statute or statutory provision or ordinance which amends, extends, consolidates or replaces the same (whether before or after the date of this Guarantee) or which has been amended, extended, consolidated or replaced by the same and shall include any order, regulation, instrument or other subordinate legislation made under the relevant statute or statutory provision or ordinance.

 

1.2.2. Apart from a permitted assignee of the Lender pursuant to Clause 15.1, a person who is not a party to this Guarantee has no rights under the Contracts (Rights of Third Parties) Ordinance (Cap. 623 of the laws of Hong Kong) to enforce or enjoy the benefit of any term of this Guarantee.

 

2. Guarantee

 

In consideration of the Lender agreeing to enter into the Loan Agreement and making available loans or other banking facilities, or giving time, credit or accommodation to the Principals, the Guarantor hereby irrevocably, unconditionally and absolutely:

 

(a) guarantees to the Lender punctual payment and performance of the Principals’ Obligations; and

 

(b) undertakes that the Guarantor will on demand make good any default by any Principal in the payment or discharge of the Principals’ Obligations as if the Guarantor instead of the Principal were expressed to be the primary obligor in respect of the Principals’ Obligations.

 

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3. Indemnity

 

For the same consideration, the Guarantor agrees as a primary obligor to indemnify the Lender immediately on demand against any loss, cost or liability suffered by the Lender if any Principals’ Obligations or any actual or purported agreement, arrangement or instruction relating to any Principals’ Obligations is or becomes invalid, unenforceable or illegal, irrespective of whether the reason for such invalidity, unenforceability or illegality was or ought to have been known to the Lender. The amount of such loss shall be the amount which the Lender would otherwise have been entitled to recover from the Principals.

 

4. Representations and Warranties

 

The Guarantor makes the representations and warranties set out in this Clause 4 (Representations and Warranties) to the Lender.

 

4.1. Status

 

The Guarantor is a company, duly incorporated, and validly existing under the laws of its jurisdiction of incorporation and has the power to carry on its business as it is now being conducted and to own property and other assets and is in good standing.

 

4.2. Powers, Authority and Non-Conflict

 

The execution, delivery and performance of this Guarantee is within the corporate powers of the Guarantor, has been duly authorised by all necessary corporate and other action and does not and will not conflict with (a) any law or regulation applicable to it; (b) any constitutional documents of the Guarantor; or (c) any agreement or instrument binding on the Guarantor.

 

4.3. Legal Validity

 

The obligations and liabilities expressed to be assumed by the Guarantor under this Guarantee are legal, valid, binding and enforceable obligations of the Guarantor (subject to applicable equitable principles and insolvency laws) and it is not necessary in order to ensure the legality, validity and enforceability of this Guarantee that it be filed, recorded or enrolled with any court or authority anywhere or that any stamp duty, registration or similar tax be paid on or in relation to it.

 

4.4. Authorisations

 

All authorisations, consents, approvals, resolutions, licences, exemptions, filings or registrations required under any applicable law or regulation (a) to enable it lawfully to carry on its business and to enter into, exercise its rights and comply with its obligations in this Guarantee, and (b) to make this Guarantee admissible in evidence in its jurisdiction of incorporation have been obtained or effected and are in full force and effect.

 

4.5. Choice of Law

 

The choice of the law of Hong Kong as the governing law of this Guarantee will be recognised and enforced in its jurisdiction of incorporation.

 

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4.6. No litigation

 

No litigation, arbitration or administrative proceeding is current, pending or (to the knowledge of the Guarantor) threatened against the Guarantor:

 

(a) to restrain the entry into by the Guarantor of, the exercise by the Guarantor of its rights and/or performance or enforcement of or compliance with its obligations under this Guarantee; or

 

(b) which has or could have a material adverse effect on or on the financial condition of the Guarantor or the ability of the Guarantor to make any payment when due or to perform any of its other obligations in accordance with this Guarantee.

 

4.7. Security and Ranking

 

Save for any Permitted Liens, no Encumbrance exists over any of the undertaking or the present or future revenues or assets of the Guarantor and the obligations of the Guarantor under this Guarantee are or will be its direct, general and unconditional obligations and rank or will rank at least pari passu in all respects with all its other present and future unsecured and unsubordinated indebtedness and obligations (including contingent obligations), with the exception of indebtedness and obligations mandatorily preferred by law and not by contract.

 

4.8. Time when representations and warranties are made

 

The Guarantor represents, warrants and agrees that each of the representations and warranties contained in this Clause 4 will be and remain correct so long as it has any liability (contingent or actual) under this Guarantee.

 

5. Continuing Guarantee

 

This Guarantee is a continuing guarantee for all the Principals’ Obligations and will extend to the ultimate balance of the Principals’ Obligations, regardless of any intermediate discharge or payment of or on account of the Principals’ Obligations or any intermediate settlement of accounts between the Lender and any Principal or any other person. No demand made by the Lender under this Guarantee shall restrict the right of the Lender to make further or other demands.

 

6. Interest

 

The Guarantor shall on demand pay to the Lender interest at the Default Rate on any amount for the time being due from the Guarantor to the Lender under this Guarantee (both before and after judgement) from the date of a demand for payment under this Guarantee until actual payment in full.

 

7. Opening of New Accounts

 

If for any reason this Guarantee ceases to be a continuing security, the Lender may open a new account for each Principal. If the Lender does not open a new account, it shall nevertheless be treated as if it had done so at the time this Guarantee ceased to be a continuing security. As from that time all payments made to the Lender will be credited or treated as having been credited to the new account and will not operate to reduce the obligations of the Guarantor under this Guarantee.

 

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8. Waiver of Defences

 

The liability of the Guarantor under this Guarantee shall not be reduced, discharged or otherwise adversely affected by any of the events or circumstances set out in this Clause 8 (Waiver of Defences).

 

8.1. Variations

 

Any determination, renewal, variation (however fundamental), replacement, discharge, release or increase of, or composition or arrangement by the Lender relating to, any credit or facilities to the Principals or of or relating to the Principals’ Obligations.

 

8.2. Time or Indulgence

 

The grant by the Lender to any Principal or any other person of any time, waiver, consent or indulgence.

 

8.3. Dealings with Security

 

Any taking, dealing, exchange, renewal, variation, release, compromise, discharge, composition, arrangement or modification in relation to any guarantee, security or right which the Lender may now or after the date of this Guarantee have in respect of the Principals’ Obligations.

 

8.4. Negotiable Instruments

 

The renewal by the Lender of any bill, promissory note or other negotiable instrument or security.

 

8.5. Other Guarantees or Security

 

The Lender obtaining or refusing, neglecting or otherwise failing to obtain, perfect, enforce or claim any other guarantee, security or right (whether contemporaneously with this Guarantee or otherwise) or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security.

 

8.6. Incapacity

 

Any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of the Principal or any other person.

 

8.7. Unenforceability

 

Any unenforceability, illegality, invalidity or non-provability of any obligation of the Principal or any person under any document, agreement or security.

 

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8.8. Insolvency

 

Any liquidation, composition, insolvency, administration, bankruptcy, death or other incapacity, or any alteration in the corporate existence or structure, of any of the Principals, the Guarantor or any other person.

 

8.9. Other Circumstances

 

Any other act, omission, matter or thing which, but for this provision, would or might reduce, discharge or otherwise adversely affect the obligations of the Guarantor under this Guarantee.

 

9. Reinstatement

 

If any payment by any Principal or any other person or any discharge given by the Lender (whether in respect of the Principals’ Obligations or any security for those obligations or otherwise) is avoided or reduced as a result of insolvency or any similar event:

 

(a) the liability of the Guarantor shall continue as if the payment, discharge, avoidance or reduction had not occurred; and

 

(b) the Lender shall be entitled to recover the value or amount of that security or payment from the Guarantor, as if the payment, discharge, avoidance or reduction had not occurred.

 

10. Deferral of Guarantor’s Rights

 

10.1. Restriction on Rights or Claims

 

Until all of the Principals’ Obligations have been irrevocably paid or discharged in full, the Guarantor will not, unless the Lender otherwise directs:

 

(c) make or enforce any claim (including, but not limited to, a claim by way of set-off or counterclaim) or right against any Principal or prove as a creditor of any Principal in competition with the Lender, whether in respect of any payment under this Guarantee made by the Guarantor or otherwise; or

 

(d) be entitled to claim or have the benefit of, any set-off, counterclaim or proof against, or dividend paid on a winding-up or administration of or composition with creditors by any Principal or any Principal’s estate; or

 

(e) be entitled to claim or otherwise obtain the benefit (by way of subrogation or otherwise) of any security or guarantee or indemnity at any time held by the Lender for or in respect of any of the Principals’ Obligations; or

 

(f) claim or enforce any right of contribution against any co-surety.

 

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10.2. Proof at the Lender’s Request

 

If requested by the Lender the Guarantor shall:

 

(a) exercise any right of proof or claim in the winding-up, administration, voluntary arrangement, bankruptcy or estate of any Principal on behalf of the Lender and hold any dividend or other money received in respect of such proof or claim upon trust for the Lender to the extent of the Principals’ Obligations; and

 

(b) hold upon trust for the Lender any money which it may receive or recover from any co-surety by virtue of any rights of contribution.

 

10.3. Monies held on Trust

 

If while the Guarantor remains under any liability to the Lender under this Guarantee, any monies or other property or assets shall be received or recovered by the Guarantor in breach of any provisions of this Clause 10 (Deferral of Guarantor’s Rights), such monies or other property or assets shall, to the extent of such liability, be held upon trust to pay or transfer the same to the Lender.

 

11. Suspense Account

 

The Lender may at any time place and keep to the credit of a separate interest bearing suspense account any monies received under this Guarantee for so long and in such manner as the Lender may determine without any obligation to apply such monies or any part of them in or towards the discharge of the Principals’ Obligations. In the event of any proceedings in or analogous to bankruptcy, liquidation, composition or arrangement of or concerning any Principal, the Lender may notwithstanding any payment made under this Guarantee prove for a claim and agree to accept any dividend or composition in respect of the whole or any part of the Principals’ Obligations as if this Guarantee had not been given.

 

12. Other Means of Payment

 

Lender may make a demand under this Guarantee:

 

(a) before making any demand on any Principal or any Principal’s estate or any other person or enforcing any other guarantee or security for the Principals’ Obligations; and

 

(b) for the payment of the ultimate balance after resorting to other means of payment, or for the balance due at any time notwithstanding that the Lender has not resorted to other means of payment (in which case the Guarantor shall not be entitled to any benefit from such other means of payment so long as the Principals’ Obligations remain outstanding).

 

13. Expenses

 

13.1. Costs

 

The Guarantor shall pay to the Lender on demand all reasonable costs and expenses (including, but not limited to, legal fees) from time to time paid or incurred by the Lender in connection with taking, perfecting, preserving, defending or enforcing this Guarantee or in exercising any right or power under or in connection with this Guarantee, and shall indemnify the Lender against all such costs and expenses.

 

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13.2. Stamp Duty

 

The Guarantor shall pay on demand all stamp, documentary, registration and other similar duties and taxes of any kind and from any source, if any, to which this Guarantee may be subject or give rise and shall indemnify the Lender against any and all liability with respect to or resulting from any delay or failure by the Guarantor in making such payment.

 

13.3. Value Added Tax

 

Where this Guarantee requires the Guarantor to re-imburse the Lender for any costs or expenses the Guarantor shall at the same time pay and indemnify the Lender against any value added tax (or any tax of a similar nature) incurred by the Lender in respect of the costs and expenses to the extent that the Lender determines that it is not entitled to credit or repayment of the value added tax (or other tax of a similar nature).

 

14. Miscellaneous

 

14.1. Additional Security

 

This Guarantee is in addition to and is not in any way prejudiced by any bill, note, guarantee, mortgage, charge or other security now or subsequently held by the Lender for any of the Principals’ Obligations.

 

14.2. No Deduction or Withholding

 

All payments made by the Guarantor to the Lender under this Guarantee shall (save insofar as required by law to the contrary) be paid in full without set-off or counterclaim and free and clear of and without any deduction or withholding or payment for or on account of any present or future tax, levy, duty, impost or other charge or withholding of a similar nature. If the Guarantor shall be required by law to effect any such deduction or withholding or payment the Guarantor shall immediately pay to the Lender such additional amount as will result in the immediate receipt by the Lender of the full amount which would otherwise have been received had no such deduction or withholding or payment been made.

 

14.3. Set-off

 

The Lender may set-off any matured obligation owed by the Guarantor to the Lender against any obligation (whether or not matured) owed by the Lender to the Guarantor regardless of the place of payment, or currency of either obligation. If the obligations are in different currencies, the Lender may convert either obligation at a market rate of exchange for the purpose of the set-off in an amount estimated by it in good faith to be the amount of that obligation.

 

14.4. Waivers; Rights Cumulative

 

No delay or omission of the Lender in exercising any right, power or privilege (each a “ right ”) under this Guarantee or otherwise available to it at law shall impair such right, or be construed as a waiver of such right nor shall any single or partial exercise of any such right preclude its further exercise or the exercise of any other right. The rights and remedies provided in this Guarantee are cumulative and not exclusive of any rights or remedies provided by law and may be waived only in writing and specifically.

 

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14.5. Severability

 

Any provision of this Guarantee which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Guarantee or affecting the validity or enforceability of such provision in any other jurisdiction.

 

14.6. Certificates and Determinations

 

A certificate or determination by the Lender of the amount of the Principals’ Obligations outstanding at any time or of any other amount payable by the Guarantor under this Guarantee is, in the absence of manifest error, conclusive evidence for all purposes of this Guarantee as against the Guarantor.

 

14.7. Currency Indemnity

 

14.7.1. The Guarantor’s liability under this Guarantee is to pay to the Lender the full amount of the Principals’ Obligations in the currency in which they are for the time being denominated. If, for any reason, any payment due from the Guarantor under or in connection with this Guarantee is made or is satisfied in a currency (the “ Other Currency ”) other than the currency in which the relevant payment is due (the “ Contractual Currency ”), then to the extent that the payment (when converted into the Contractual Currency at the rate of exchange on the date of payment or, in the case of the liquidation or insolvency of the Guarantor, at the rate of exchange on the latest date permitted by applicable law for the determination of liabilities in such liquidation or insolvency) actually received by the Lender falls short of the amount expressed to be due under the terms of this Guarantee, the Guarantor shall, as a separate and independent obligation, indemnify the Lender and hold the Lender harmless against the amount of such shortfall.

 

14.7.2. For the purpose of this Clause “rate of exchange” means the rate at which the Lender is able on the relevant date to purchase the Contractual Currency with the Other Currency and shall take into account any premium and other costs of exchange.

 

15. Benefit of this Guarantee

 

15.1. Assignment by the Lender

 

The Lender may assign or transfer all or any part of its rights under this Guarantee in connection with the assignment of its rights and obligations in accordance with the terms of Section 8.14 (Benefit of Agreement) of the Loan Agreement. The Guarantor shall enter into any documents reasonably specified by the Lender to be necessary to give effect to such assignment or transfer.

 

15.2. No Assignment by the Guarantor

 

The Guarantor may not assign or transfer all or any part of its rights and/or obligations under this Guarantee.

 

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15.3. Disclosure of Information

 

The Lender may not disclose such information about the Guarantor unless such disclosure is made in compliance with Section 8.1 (Confidentiality) of the Loan Agreement.

 

16. Notices and Demands

 

16.1. Address

 

The Guarantor’s address and fax number for any notice, demand or other communication under or in connection with this Guarantee are set forth in Section 8.5 (Notices) of the Loan Agreement. Any such notice, demand or other communication shall also be effective if sent to the Guarantor’s registered office or the address of the Guarantor last known to the Lender.

 

16.2. Method and Receipt

 

Any notice, demand or other communication to be given or made pursuant to this Guarantee to the Guarantor may be given or made in such manner and be deemed delivered at such time specified under Section 8.5 (Notices) of the Loan Agreement.

 

16.3. English language

 

Any notice given under or in connection with this Guarantee must be in English.

 

17. Governing Law

 

17.1. This Guarantee shall be governed by and construed in accordance with the laws of Hong Kong. The parties hereto hereby submit to the non-exclusive jurisdiction of the Hong Kong Courts.

 

17.2. The submission of the parties hereto to the jurisdiction of the Hong Kong Courts shall not restrict the right of the Lender to take proceedings in connection with this Guarantee in any other courts having, claiming or accepting jurisdiction in respect of matters pertaining to this Guarantee, including but not limited to the California Courts, nor shall the taking of proceedings in any one or more jurisdictions preclude the taking of proceedings in any other jurisdiction whether concurrently or not.

 

17.3. The Guarantor hereby irrevocably consents to the granting of any relief and/or the issue of any process in connection with any legal action or proceedings in connection with this Guarantee, including the making, enforcement or execution of any judgment or order against any of the property, assets or revenues of the Guarantor whatsoever.

 

EXECUTED as a Deed and delivered on the date stated at the beginning of this document.

 

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EXECUTED and DELIVERED )
as a DEED by   BORQS HONG KONG LIMITED )

 

Acting by:    /s/ Pat Chan  
Name: Pat Chan  
Title: Chief Executive Officer  

 

in the presence of :

 

/s/ Anthony K. Chan  
Witness name: Anthony K. Chan  
Witness occupation: Sup Corporate Finance  
  Borqs Hong Kong Limited  

 

EXECUTED and DELIVERED )
as a DEED by   PARTNERS FOR GROWTH IV, L.P. )

 

Acting by: Partners for Growth IV, LLC  
Its: General Partner  
     
Name: Andrew Kahn  
Title: Managing Member  
     
Witnessed by:  
     
Name: Kathy Adams  
Title: CCO  

 

/s/ Kathy Adams  
Witness name:   Kathy Adams  
Witness occupation:   CCO  

 

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Exhibit 10.53

 

 

 

 

 

 

 

Date: 26 August 2016

 

 

 

 

BORQS Hong Kong Limited

as Chargor

 

Partners for Growth IV, L.P.

as Lender

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DEBENTURE

 

(constituting a fixed and floating charge over all the assets of

BORQS Hong Kong Limited )

  

 

 

 

Execution version

 

THIS DEED (this “ Deed ”) is made as a deed this 26th day of August 2016,

 

BETWEEN:

 

(1) BORQS HONG KONG LIMITED , a private company limited by shares incorporated under the laws of Hong Kong with registration number 1151010 and registered address at Office B, 21/F., Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon (the “ Chargor ”); and

 

(2) PARTNERS FOR GROWTH IV, L.P. , a Delaware limited partnership, with its principal place of business at 1660 Tiburon Blvd., Suite D, Tiburon, CA 94920 USA (the “ Lender ”).

 

IT IS AGREED as follows:

 

1. Definitions and Interpretation

 

1.1. Definitions

 

Unless otherwise defined herein, capitalised terms used in this Deed have the meaning given to such terms in the Loan Agreement (as defined below). In addition, in this Deed unless the context otherwise requires, the following expressions shall have the following meanings:

 

Bank Accounts ” means all present and future bank accounts held in the name of the Chargor from time to time, including but not limited to the bank accounts listed in Schedule 1 hereto;

 

Charged Assets ” means all assets listed in Clause 2.2, excluding any Excluded Property;

 

CPO ” means the Conveyancing and Property Ordinance (Cap. 219 of the Laws of Hong Kong);

 

Encumbrance ” means any mortgage, charge, pledge, lien (otherwise than arising by statute or operation of law) or other encumbrance, priority or security interest, deferred purchase, title retention, leasing, sale-and-repurchase, sale-and-leaseback arrangement whatsoever over or in any property, assets or rights or interest of whatsoever nature or any agreement for any of the same;

 

Exchange Rate ” means the rate for converting one currency into another currency which the Lender determines to be prevailing in the relevant foreign exchange market at the relevant time, such determination to be conclusive and binding (except in the case of manifest error);

 

Guarantee ” means the Hong Kong law deed of guaranty and indemnity dated on or about the date hereof between the Chargor and the Lender;

 

HK$ ” means Hong Kong Dollars, the lawful currency for the time being of Hong Kong;

 

Hong Kong ” means the Hong Kong Special Administrative Region of the People's Republic of China;

 

Loan Agreement ” means the California law loan and security agreement dated on or about the date hereof between the Lender as lender and the Guarantor as the borrower;

 

Party ” means a party to this Deed;

  

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Receiver ” means each of the receivers and/or receivers and managers appointed under this Deed, any of the other Loan Documents or under the powers conferred on the Lender by any law or regulation whether appointed simultaneously or to act jointly and/or severally or to act in place of any one or more receivers and/or receivers and managers previously appointed under this Deed or otherwise, and includes all delegates, attorneys or agents of any such Receiver;

 

Secured Obligations ” means all present and future obligations and liabilities of the Guarantor and any other person to the Lender under the Loan Agreement, the Guarantee, this Deed and the other Loan Documents, whether actual or contingent and whether owed or incurred alone or jointly and/or severally with another and as principal or as surety or in any other capacity or of any nature;

 

Security ” means the Encumbrances created by or pursuant to this Deed;

 

Security Period ” means the period beginning on the date of this Deed and ending on the date on which all the Secured Obligations have been unconditionally and irrevocably paid and discharged in full and the Lender has no further commitment under or pursuant to the Loan Documents; and

 

Shares ” means the assets listed in Clause 2.2(a)(ii), including but not limited to the shares listed in Schedule 1 hereto, but excluding any Excluded Property.

 

1.2. Construction

 

Any reference in this Deed to:

 

(a) the Lender or the Chargor or any other person includes its respective successors in title, permitted assigns and/or permitted transferees;

 

(b) a Clause is a reference to a clause of this Deed;

 

(c) this Deed , the Loan Agreement , the Guarantee or any other agreement or document is a reference to this Deed, the Loan Agreement, the Guarantee or such other agreement or document as the same may have been, or may from time to time be, amended, varied, supplemented or novated;

 

(d) the Secured Obligations includes a reference to any part of them;

 

(e) the singular shall include the plural and vice versa;

 

(f) a person includes any person, firm, company, corporation, government, state or agency of a state or any association, trust or partnership (whether or not having a separate legal personality) and any other entity or two or more of the foregoing; and

 

(g) any statute or statutory provision or ordinance shall include any statute or statutory provision or ordinance which amends, extends, consolidates or replaces the same (whether before or after the date of this Deed) or which has been amended, extended, consolidated or replaced by the same and shall include any order, regulation, instrument or other subordinate legislation made under the relevant statute or statutory provision or ordinance.

   

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Apart from a permitted assignee of the Lender pursuant to Clause 20.3, a person who is not a party to this Deed has no rights under the Contracts (Rights of Third Parties) Ordinance (Cap. 623 of the laws of Hong Kong) to enforce or enjoy the benefit of any term of this Deed.

 

2. Grant of Security

 

2.1. Covenant to Pay

 

The Chargor covenants to pay and discharge in full the Secured Obligations on demand made by the Lender at any time and to provide cash cover on demand in respect of any contingent or future obligations.

 

2.2. Charge

 

As continuing security for the payment and discharge of the Secured Obligations, the Chargor agrees to charge and hereby charges to the Lender:

 

(a) by way of first fixed charge:

 

(i) all present and future book and other debts, receivables, monies, revenues, royalties, claims and things in action due or owing to or purchased or otherwise acquired by the Chargor (including all credit balances and deposits of the Chargor with the Lender or any other bank or financial institution and any monies credited to any suspense account by the Lender, together with the debts represented by them, and any surplus arising on a realisation of any Encumbrance whether in favour of the Lender or any other person), the proceeds of the same, all legal, beneficial or equitable interests and rights in trust (including any beneficial interest, claim or entitlement in or to the assets of any occupational retirement scheme belonging to or held by the Chargor, the benefit of all discretionary payments and the proceeds of any claim or receivable of the Chargor not itself capable of being charged and the full benefit of all guarantees, indemnities, Encumbrances, rights of set-off, security reservations of proprietary rights, rights of tracing and all other rights and remedies in respect of the same or otherwise);

 

(ii) all present and future shares, namely all right, title and interest held by the Chargor in and to all stocks, shares, debentures, bonds or other securities or investments and all other interests of the Chargor in any person and all rights, benefits and advantages arising in respect of or incidental to the same;

 

(iii) all present and future uncalled capital, goodwill and all patents, patent applications, inventions, trademarks and service marks and applications therefor, trade names, registered designs, copyrights, know-how and other intellectual property rights held by the Chargor and all licences and all rights, benefits and advantages arising in respect of or incidental to the same;

  

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(iv) all present and future real property and all rights and interests in or affecting land (or the proceeds of sale of land or the documents of title to land) of the Chargor and all buildings, structures, fixtures (including trade fixtures), owned by the Chargor, including the full benefit of all Encumbrances, options, agreements, rights and interests of the Chargor over or affecting land of the Chargor and all fixed plant, other plant, machinery, fittings and equipment and all other chattels now or at any time after the date of this Deed belonging to the Chargor and its interest in any plant, machinery, equipment or chattels in its possession, including the benefit of all contracts and warranties relating to the same (excluding any of the same for the time being forming part of its stock in trade or work in progress);

 

(v) all present and future rights under any sale or purchase agreements and distributorship or any similar agreements entered into by it, any letters of credit issued in its favour and all bills of exchange and other negotiable instruments held by it;

 

(vi) all present and future benefits of all licences, quota, consents and authorities (statutory or otherwise) held in connection with its business or the use of any asset charged by any other sub-paragraph in this Clause 2.2 and the right to recover and receive all proceeds and/or compensation which may be payable to it in respect of them; and

 

(vii) all present and future benefits in respect of all contracts and policies of insurance of whatever nature which are from time to time taken out by or on behalf of the Chargor or (to the extent of such interest) in which the Chargor has an interest and all claims and returns of premiums in respect of them; and

 

(b) by way of first floating charge, the undertaking and all present and future property, assets and rights of the Chargor, whatsoever and wheresoever not otherwise effectively charged by way of first fixed charge by Clause 2.2(a),

 

in each case, excluding any Excluded Property, and provided that if any asset cannot be secured without consent of a third party, this Agreement will constitute security over all proceeds and other amount receivable from such asset.

 

2.3. Crystallisation

 

The Lender may, by notice in writing to the Chargor, convert the floating charge referred to in Clause 2.2(b) into a specific fixed charge as regards all or part of the Charged Assets described therein, if an Event of Default has occurred and is continuing, or the Lender considers those assets to be in danger of being seized or sold under any distress, execution or sequestration or to be otherwise in jeopardy.

  

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The floating charge referred to in Clause 2.2(b) shall (in addition to the circumstances in which the same shall occur under general law) automatically be converted into a specific fixed charge:

 

(a) if the Chargor takes steps to create any subsequent Encumbrance (other than Permitted Liens) on any of the Charged Assets without the prior approval of the Lender;

 

(b) on the convening of any meeting of the members of the Chargor to consider a resolution to wind up the Chargor (or not to wind up the Chargor);

 

(c) immediately prior to the presentation of a petition (other than a frivolous or vexatious petition) to wind up the Chargor; or

 

(d) if any person levies or attempts to levy distress, execution or sequestration against any of the Charged Assets.

 

2.4. Documents Supporting Security

 

In furtherance of the Security created under this Deed, the Chargor shall at its own cost, deliver or procure that there shall be delivered to the Lender the following (in each case, in form and substance satisfactory to the Lender):

 

(a) any documents necessary or conducive to enable the Lender to register such Charged Assets in its name or in the name of its nominee(s); and

 

(b) all documents necessary and satisfactory to the Lender in order to effect a valid transfer of any Charged Assets following an Event of Default.

 

2.5. Registration

 

The Chargor shall at its own cost:

 

(a) immediately after the execution of this Deed:

 

(i) register the Security with the Hong Kong Companies Registry in accordance with Section 335 of the Companies Ordinance (Chapter 622 of the Laws of Hong Kong);

 

(ii) notify each Company in which the Chargor has Shares of the Security;

 

(b) promptly and in any event within three (3) Business Days from and including the date of execution of this Deed, deliver or procure that there shall be delivered to the Lender:

 

(i) evidence of the registration of the Security with the Hong Kong Companies Registry;

 

(ii) a copy of the acknowledgement of the Security by each company in which the Chargor holds Shares; and

 

(iii) a copy of the written notice of charge to each bank where Bank Accounts are held substantially in the form as set out in Schedule 2 hereto; and

  

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(c) use its best efforts to obtain written acknowledgement of the notice(s) sent in accordance with Clause 2.5(b)(iii) by each relevant bank as soon as practical after the date of execution of this Deed.

 

3. Continuing Security

 

(a) The Security is continuing and shall extend to the ultimate balance of all the Secured Obligations regardless of any intermediate payment or discharge in whole or in part. This Deed shall remain in full force and effect as a continuing security for the duration of the Security Period.

 

(b) This Deed is in addition to, without prejudice to, and shall not merge with, any other right, remedy, guarantee or Encumbrance which the Lender may at any time hold for any Secured Obligation.

 

(c) This Deed may be enforced against the Chargor without the Lender first having to take recourse to any other right, remedy, guarantee or Encumbrance held by or available to it.

 

4. Covenants

 

4.1. General Covenants

 

The Chargor covenants that it will observe and perform each of the following covenants and undertakings in relation to its business, property and assets or (as the case may be) the Charged Assets, except as expressly permitted under the Loan Documents:

 

(a) conduct and carry on its business in a proper and efficient manner and not make any substantial alteration in the nature or mode of conduct of its business;

 

(b) keep or cause to be kept proper books of accounts relating to its business and from time to time within a reasonable time after being requested by the Lender, furnish the Lender with such information about the assets, business and financial condition of the Chargor as the Lender may require;

 

(c) use commercially reasonable endeavours to duly and punctually pay and discharge all debts, obligations and liabilities, and all rents, rates, taxes, outgoings and impositions payable in respect of any premises now or from time to time after the date of this Deed owned, tenanted, occupied or used by the Chargor and, when required, produce to the Lender receipts or other evidence satisfactory to the Lender that such payments have been made, or (as the case may be) such obligations and liabilities have been discharged;

 

(d) (i) use commercially reasonable endeavours to take all steps to maintain, preserve and protect its revenues and assets (tangible and intangible) and maintain and (where applicable) take out insurances in respect of its business, undertaking, property and assets and against such risks and contingencies as is prudent (given the industry practice in relation to the business, undertaking, property or asset concerned) with the interest of the Lender noted on the policies and with the policies containing such provisions for the benefit of the Lender as the Lender may require; (ii) on demand produce to the Lender the policies of such insurances and proof of payment of all premiums and other monies necessary for effecting and keeping such insurances; and (iii) immediately upon receipt pay to the Lender and pending such payment hold on trust for the Lender all monies received by the Chargor by virtue of any insurances maintained or effected by it (whether or not effected pursuant to the above) for application in making good the loss or damage in respect of which such monies are received or, at the option of the Lender, for payment to such account(s) as the Lender may specify;

  

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(e) if so required by the Lender, give notice (in such form as the Lender may require) to any person requiring payment into such account(s) as the Lender may specify of all monies due or to become due to the Chargor from that person;

 

(f) deposit with the Lender all certificates and documents of title, duly executed transfers and any other documents relating to the Charged Assets as the Lender may from time to time require;

 

(g) use its commercially reasonable endeavours to observe and perform all covenants and stipulations (under any agreement, law, regulation or otherwise) from time to time affecting any of the Charged Assets, take such action as may from time to time be necessary or desirable to preserve and maintain the Charged Assets or any registration thereof, and not do or omit to be done any act, matter or thing whereby any provision of any applicable law, decree, order or regulation from time to time affecting any of the Charged Assets is infringed;

 

(h) if requested to do so by the Lender, make entries in any public register or give such notices as the Lender may consider appropriate to record the existence of this Deed, any security created by it or the restrictions contained in it;

 

(i) not declare any dividends or pay any similar distribution to shareholders or redeem or purchase its own shares unless explicitly permitted under the Loan Agreement or with the prior written consent of the Lender;

 

(j) inform the Lender immediately on contracting to purchase any estate or interest in real property and provide to the Lender such information in relation to the same as the Lender may from time to time require;

 

(k) keep all its buildings and erections and all the plant, machinery, equipment, accessories, fixtures, fittings, vehicles and other effects and every part of them in good and substantial repair and in good working order and condition, and not to pull down or remove any of the same without the prior written consent of the Lender;

 

(l) not make any application under the Buildings Ordinance (Cap. 123 of the Laws of Hong Kong) to carry out any development of any of the immovable property for the time being owned by the Chargor;

 

(m) not call up or receive in advance of calls any of the uncalled capital for the time being of the Chargor;

  

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(n) not continue its existence in a jurisdiction outside of the Cayman Islands or attempt or resolve to do so; and

 

(o) generally not to do or cause or permit to be done anything which may in any way jeopardise or otherwise prejudice the value of the Charged Assets as a whole or the Security and not (without the prior written consent of the Lender) incur any expenditure or liabilities of an exceptional or unusual nature.

 

4.2. Negative pledge and Disposals

 

The Chargor shall not do or agree to do any of the following without the prior written consent of the Lender, except as expressly permitted under the Loan Documents:

 

(a) create or permit to subsist any Encumbrance on any Charged Asset other than Permitted Liens;

 

(b) sell, transfer, lease, lend or otherwise dispose of (whether by a single transaction or a number of transactions and whether related or not) the whole or any part of its interest in any Charged Asset (other than the Charged Assets subject to the floating charge under Clause 2.2(b)); or

 

(c) take or permit the taking of any action which may result in the rights attaching to any Charged Asset being altered.

 

4.3. Subsequent Encumbrances

 

If the Lender receives notice (actual or otherwise) of any subsequent Encumbrance, assignment or other disposition affecting the Charged Assets or any interest in the Charged Assets or the proceeds of sale thereof, the Lender shall be deemed to have opened a new account when such notice was received and as from that time all payments in respect of or on account of the Secured Obligations shall be deemed to have been credited to the new account and shall not, as between the Chargor and the Lender, operate to reduce the amount of the Secured Obligations outstanding when such notice was received.

 

4.4. Lien

 

The Lender shall have and shall be authorised to exercise a lien over all property of the Chargor (excluding any Excluded Property) coming into the possession or control of the Lender, for custody or any other reason and whether or not in the ordinary course of banking business, with power for the Lender to sell such property to satisfy the Secured Obligations if an Event of Default has occurred and is continuing.

 

4.5. Voting Rights and Dividends

 

(a) Until an Event of Default occurs, the Chargor shall be entitled to:

 

(i) receive and retain all dividends, distributions and other monies paid on or derived from the Shares; and

  

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(ii) exercise all voting and other rights and powers attaching to the Shares, provided that it must not do so in a manner which has the effect of changing the terms of the Shares (or any class of them) or of any related rights or is prejudicial to the interests of the Lender.

 

(b) At any time following the occurrence of an Event of Default, the Lender may effectuate the transfer for all or any Shares on behalf of the Chargor in favour of itself or such other person as it may select and all dividends, interest payments, distributions of an income nature or other monies which may be paid on or in respect of the Shares, if received by the Chargor or its nominee(s), shall be paid over to (and pending such payment shall be held on trust for) the Lender and may be applied, at the discretion of the Lender, in or towards discharging the Secured Obligations.

 

5. Further Assurances

 

5.1. Further action

 

The Chargor shall, at its own expense, promptly on request do all acts and execute all documents as the Lender or a Receiver may reasonably specify (and in such form as the Lender or a Receiver may reasonably require) for:

 

(a) creating, perfecting or protecting the Security intended to be created by this Deed or any other Loan Document;

 

(b) facilitating the realisation of any Charged Asset;

 

(c) facilitating the exercise of any rights, powers and remedies exercisable by the Lender, or any Receiver or any delegate in respect of any Charged Asset or provided by or pursuant to the Loan Documents or by law; or

 

(d) creating and perfecting Security in favour of the Lender over any Charged Asset located in any jurisdiction outside Hong Kong equivalent or similar to the Security intended to be created by or pursuant to this Deed or any other Loan Document.

 

This includes:

 

i. the re-execution of this Deed or such Loan Document;

 

ii. the execution of any legal mortgage, charge, transfer, conveyance, assignment, assignation or assurance of any property, whether to the Lender or to its nominee; and

 

iii. the giving of any notice, order or direction and the making of any filing or registration,

 

which, in any such case, the Lender may think expedient.

  

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5.2. Loan Documents

 

The Chargor shall take all such action as is available to it (including making all filings and registrations) as may be necessary for the purpose of the creation, perfection, protection or maintenance of any Security conferred or intended to be conferred on the Lender by or pursuant to the Loan Documents.

 

6. Power to remedy

 

6.1. Power to remedy

 

If at any time the Chargor does not comply with any of its obligations under this Deed, the Lender (without prejudice to any other rights arising as a consequence of such non-compliance) shall be entitled (but not bound) to rectify that default. The Chargor irrevocably authorises the Lender and its employees and agents by way of security to do all things which are necessary or desirable to rectify that default.

 

6.2. Mortgagee in possession

 

The exercise of the powers of the Lender under this Clause 6 shall not render it liable as a mortgagee in possession.

 

6.3. Monies expended

 

The Chargor shall pay to the Lender on demand any monies which are expended by the Lender in exercising its powers under this Clause 6 together with interest at the Default Rate from the date on which those monies were expended by the Lender (both before and after judgment).

 

7. Representations and Warranties

 

7.1. Representations and Warranties

 

The Chargor represents and warrants to the Lender in addition to any warranties implicit under any applicable law that:

 

(a) it is duly incorporated and validly existing under its place of incorporation as a limited liability company with power to carry on its business as it is now being conducted and to own its assets and is in good standing;

 

(b) it has the power and authority to enter into and perform this Deed and no limitation on its powers will be exceeded by doing so;

 

(c) this Deed constitutes its legal, valid and binding obligations, enforceable in accordance with its terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar Legal Requirements relating to creditors' rights generally);

 

(d) neither the execution of this Deed nor the creation of any of the charges contained in this Deed contravenes, or is inconsistent or in conflict with, any provision of its constitutional documents or any applicable enactment, law, decree, order, regulation, authorisation, franchise, consent, permit, security, instrument, agreement or document binding upon or affecting the Chargor or any of its undertaking, property, assets or rights;

  

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(e) this Deed creates those Encumbrances it purports to create and is not liable to be avoided or otherwise set aside on the liquidation of the Chargor in whole or in part;

  

(f) the Chargor is now and will during the subsistence of this Deed be the sole legal and beneficial owner of the Charged Assets and has good title to (and has full right and authority to charge and assign under this Deed) the Charged Assets and the Charged Assets are free from any Encumbrance or other rights or interests in favour of third parties (other than the Security and Permitted Liens);

 

(g) as at the date of this Deed, the contents of Schedule 1 hereto, and the other information and reports furnished by the Chargor to the Lender in connection with the negotiation and preparation of this Deed and/or in connection with the advance or continuance of any facilities are true and accurate in all material respects, and not misleading and do not omit material facts and all reasonable enquiries have been made to verify the facts and statements contained in them; and

 

(h) no litigation, arbitration or administrative proceedings are current or, to its knowledge, pending or threatened, which might, if adversely determined, have a material adverse effect on the business or financial condition of the Chargor and its Subsidiaries (or any of them) or the ability of the Chargor to perform or discharge any of the Secured Obligations.

 

7.2. Times when Representations and Warranties are made

 

The representations and warranties set out in this Clause 7 are:

 

(a) made on the date of this Deed; and

 

(b) except for Clause 7.1(g), deemed to be repeated by the Chargor every day with reference to the facts and circumstances then existing until this Deed is discharged.

 

7.3. Acknowledgement of Reliance

 

The Chargor acknowledges that the Lender has entered into this Deed in reliance upon the representations and warranties set out in Clause 7.1.

 

8. Enforcement of Security

 

8.1. When Security becomes enforceable

 

The Security (and any powers implied by statute) shall become immediately enforceable upon the occurrence of an Event of Default and shall remain so for so long as such Event of Default is continuing.

  

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8.2. Statutory powers

 

The power of sale and other powers conferred to the Lender pursuant to the CPO (as amended or extended by this Deed) shall be immediately exercisable upon and at any time after the occurrence of any Event of Default and for so long as such Event of Default is continuing.

 

8.3. Enforcement

 

After the Security has become enforceable, the Lender may in its absolute discretion enforce all or any part of the Charged Assets in such manner as it sees fit.

 

8.4. Powers on Enforcement

 

At the same time as or at any time after this Deed has become enforceable, the Lender may, without prejudice to any other rights available to the Lender in respect of the Secured Obligations or to any other security held for or in respect of the Secured Obligations:

 

(a) dispose of the Charged Assets or any part thereof in such manner and for such consideration (whether payable or deliverable immediately or by instalments) as the Lender considers appropriate; and/or

 

(b) effect the transfer of any and all of the Charged Assets into its name or the name(s) of its nominee(s) and/or without liability on the part of the Lender in the event of loss, act in all respects as the legal or beneficial owner of the Charged Assets and assume the management and control of any subsidiary companies; and/or

 

(c) apply all payments, dividends, interest payments, distributions or other monies accruing on the Charged Assets in or towards satisfaction of the Secured Obligations; and/or

 

(d) dispose of all or any of the Lender's other rights under this Deed for such consideration (whether payable or deliverable immediately or by instalments) and in such manner as the Lender considers appropriate.

 

8.5. Statutory Restrictions

 

No restrictions imposed by any applicable law on any immediate or other power of sale, application of proceeds or on any other right or on the consolidation of mortgages or other Encumbrance shall apply to this Deed, the Lender or any Receiver or to any Encumbrance given to the Lender pursuant to this Deed.

 

8.6. Valid Receipt

 

Upon any such sale or other disposition and upon any other dealing or transaction under the provisions of this Deed, the receipt of the Lender or any Receiver for the purchase money of the property or asset sold or for any other monies paid to or other consideration received by the Lender or any Receiver shall effectually discharge the purchaser or person paying or giving the same therefrom and from being concerned to see to the application or being answerable for the loss, non-application or mis-application thereof.

  

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8.7. Protection of Third Party

 

No person (including a purchaser) dealing with the Lender, any Receiver, their respective delegate or sub-delegate or any of their respective agents will be concerned to enquire:

 

(a) whether the Secured Obligations have become payable;

 

(b) whether any power which the Lender or the Receiver is purporting to exercise has become exercisable;

 

(c) whether any money remains due under any Loan Document; or

 

(d) how any money paid to the Lender or to the Receiver is to be applied.

 

8.8. Exercise of Rights not Foreclosure

 

If the Lender exercises the rights conferred on it by Clause 8.4, the same shall not be treated as an absolute appropriation of or foreclosure on the Charged Assets to the exclusion of the Chargor and in extinguishment of its interests therein, unless the Lender otherwise notifies the Chargor (whether before or after the relevant appropriation or foreclosure has been effected), in which latter event any such appropriation or foreclosure shall be treated as a sale of the Charged Assets at a fair market value and the Secured Obligations shall be reduced by an equivalent amount.

 

8.9. Lender may purchase Charged Assets

 

In the event of any disposal pursuant to Clause 8.4, the Lender may itself purchase the whole or any part of the Charged Assets free from any rights of redemption on the part of the Chargor which are hereby waived and released.

 

8.10. No Claims against the Lender

 

(a) The Chargor shall not have any right or claim against the Lender and the Lender shall not have any liability of any nature whatsoever to the Chargor or any other person in respect of any loss arising out of any disposal of the Secured Obligations or the disposal or exercise of any other rights under this Deed or any part thereof, however such loss may have been caused, and whether or not a better price could or might have been obtained on such disposal, by either deferring or advancing the date of such disposal or otherwise howsoever, except for any loss caused by the gross negligence or wilful misconduct of the Lender.

 

(b) Neither the Lender nor any Receiver shall be liable to account as a mortgagee in possession in respect of all or any part of the Charged Assets or be liable for any loss upon realisation or for any neglect, default or omission in connection with the Charged Assets to which a mortgagee or a mortgagee in possession might otherwise be liable.

 

9. Receivership

 

9.1. Appointment of Receiver

 

On or at any time after the occurrence of an Event of Default or, if the Chargor so requests the Lender in writing, the Lender may, without further notice, legal process or any other action with respect to the Chargor appoint any one or more persons to be a Receiver under this Deed of all or any part of the Charged Assets and may from time to time fix his remuneration (which shall be of such amount as may be agreed from time to time between the Lender and the Receiver) and may remove any Receiver so appointed and/or appoint another in his place or in place of any Receiver whose appointment may for any reason have terminated.

  

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9.2. Receiver Agent of the Chargor

 

Each Receiver shall be the agent of the Chargor, and the Chargor shall be solely responsible for his acts or defaults and for his remuneration.

 

9.3. Rights of the Receiver

 

Each Receiver shall have all the rights conferred on any mortgagee and/or receiver under the CPO as well as the following rights:

 

(a) to take possession of, collect and get in the Charged Assets, exercise all voting or other powers or rights available to a registered and/or beneficial (as appropriate) owner of the Charged Assets in such manner as such Receiver may think fit and to take, defend or abandon any proceedings in the name of the Chargor or otherwise as may seem expedient;

 

(b) to carry on or authorise or concur in carrying on the business or any part of the business of the Chargor and to manage, conduct, reconstruct, amalgamate or diversify the business of the Chargor or any part of it (including power to acquire, develop or improve properties or other assets) without being responsible for loss or damage;

 

(c) to raise or borrow money from or incur any other liability to the Lender or others on such terms with or without security as such Receiver may think fit and so that any such security may be or include a charge on the Charged Assets ranking in priority to this security or otherwise;

 

(d) to sell by public auction or private contract, let, surrender or accept surrenders, grant leases, options, rights of pre-emption, tenancies or licences or otherwise dispose of or deal with the Charged Assets in such manner, for such consideration and generally on such terms and conditions as such Receiver may think fit, with full power to convey or otherwise transfer such Charged Assets in the name of the Chargor or other estate owner. Any such consideration may be cash, debentures or other obligations, shares, stock or other consideration and may be payable immediately or by instalments spread over such period or periods as he shall think fit and so that any consideration received or receivable shall immediately be and become charged with the payment and discharge of the Secured Obligations. Plant, machinery, equipment, accessories and other fixtures and fittings may be severed and sold separately from any premises of the Chargor containing them and such Receiver may apportion any rent and the performance of any obligations affecting the premises sold without the consent of the Chargor;

 

(e) to promote the formation of companies with a view to such companies purchasing the Charged Assets or otherwise;

  

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(f) to make any arrangement, settlement or compromise or enter into or complete, cancel, abandon or disregard any contracts which such Receiver shall think expedient in the interests of the Lender;

 

(g) to make and effect all repairs, renewals and improvements and to maintain, renew, take out or increase insurances in relation to the Charged Assets;

 

(h) to appoint and remunerate any person for any of the purposes of this Deed and/or to guard or protect the Charged Assets for such periods as such Receiver may determine and to dismiss the same or any other person appointed by the Chargor;

 

(i) to make calls, conditionally or unconditionally on the members of the Chargor, in respect of uncalled capital, with the same powers of enforcing payment of any calls so made as are, by the constitutional documents of the Chargor, conferred upon its directors and to the exclusion of the directors’ powers in that regard;

 

(j) to do anything which such Receiver shall think necessary or expedient to preserve, protect, maintain or manage the Charged Assets; and

 

(k) to sign any document, execute any deed (with authorisation to use the common seal of the Chargor for such purposes) and generally, on behalf and at the cost of the Chargor (notwithstanding liquidation of the Chargor or any similar event), to do or omit to do anything incidental to the matters referred to in this Clause 8.3 or to the realisation of this security or which the Chargor could do or omit to do in relation to the Charged Assets and to use the name of the Chargor for all the above purposes.

 

9.4. More Than One Receiver

 

If more than one person is appointed as a Receiver under this Deed, such persons shall throughout the duration of their office (unless the documents appointing them state otherwise) be entitled to exercise all or any of the powers conferred on a Receiver under this Deed individually.

 

10. Sale of Charged Assets

 

10.1. Statutory Restrictions

 

No restrictions imposed by any applicable law on any immediate or other power of sale, application of proceeds or on any other right or on the consolidation of mortgages or other Encumbrances shall apply to this Deed, the Lender or any Receiver or to any Encumbrance given to the Lender pursuant to this Deed.

 

10.2. Indemnity

 

Any sale or other disposition by or on behalf of the Lender or any of its nominees or any Receiver under the provisions of this Deed may be made upon such terms for the safety and protection of the purchaser or upon such terms as to indemnity as the Lender or such Receiver may think fit.

  

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10.3. Valid Receipt

 

Upon any such sale or other disposition referred to in Clause 10.2 and upon any other dealing or transaction under the provisions of this Deed, the receipt of the Lender or any Receiver for the purchase money of the property or asset sold or for any other moneys paid to or other consideration received by the Lender or any Receiver shall effectually discharge the purchaser or person paying or giving the same therefrom and from being concerned to see to the application or being answerable for the loss, non-application or mis-application thereof.

 

10.4. Enquiries by Purchaser

 

No purchaser or other person shall be bound or concerned to see or enquire whether the right of the Lender or any of its nominees or agents or any Receiver to exercise any of the rights conferred by this Deed has arisen or not, or be concerned with notice to the contrary, or with the propriety of the exercise or purported exercise of such rights.

 

10.5. Limitation of Liability

 

Neither the Lender nor any Receiver shall be liable for any losses which may arise:

 

(a) in the exercise or non-exercise of any of their rights;

 

(b) by reason of any entry into possession of the Charged Assets to account as mortgagee in possession;

 

(c) on realisation of the Charged Assets; or

 

(d) as a result of any default or omission for which a mortgagee in possession may be liable,

 

except for any loss caused by the gross negligence or wilful misconduct of the Lender or Receiver.

 

11. Power of Attorney

 

11.1. Appointment

 

For the purpose of securing the interest of the Lender in the Charged Assets and the performance of its obligations to the Lender, the Chargor, irrevocably, by way of security, appoints the Lender and separately each Receiver and any of their delegates or sub-delegates severally to be its attorney (with full power to appoint substitutes and to sub-delegate including power to authorise the person so appointed to make further appointments, in both cases, with regard to the Charged Assets) on behalf of and in the name of the Chargor or otherwise, to execute, seal and deliver and otherwise perfect and do all such deeds, agreements, acts and things which:

 

(l) (before the Security becomes enforceable) the Chargor is obliged to do under this Deed, but has not done;

  

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(m) (after the Security becomes enforceable) the Chargor is or may become obliged to do under this Deed; and/or

 

(n) (after the Security becomes enforceable) otherwise may be required for or deemed proper on or in connection with the full exercise of all or any of the rights conferred by this Deed on the Lender or on any Receiver and its rights to give full force and effect to the terms and conditions contained in this Deed.

 

This power of attorney is coupled with an interest and is irrevocable and shall remain irrevocable as long as this Deed remains outstanding.

 

11.2. Ratification

 

The Chargor ratifies and confirms and agrees to ratify and confirm any deed, agreement, act or thing which any attorney appointed under this Deed may lawfully execute, seal, deliver or do.

 

12. Expenses and Indemnity

 

12.1. Expenses

 

The Chargor will pay the Lender, on demand, all the Lender’s and Receiver’s expenses (including legal and out-of-pocket expenses) incurred:

 

(a) in connection with the negotiation, preparation and execution of this Deed and any amendment to, or waiver or consent or release of or under, this Deed; and/or

 

(b) in contemplation of, or in connection with, the preservation, enforcement or exercise of any rights under this Deed.

 

12.2. Indemnity

 

The Chargor will indemnify the Lender and the Receiver, on demand, against all losses, actions, claims, expenses, demands and liabilities whether in contract, tort or otherwise now or after the date of this Deed incurred by the Lender or the Receiver (except for any losses, actions, claims, expenses, demands and liabilities caused by the gross negligence or wilful misconduct of the Lender or the Receiver):

 

(a) for anything done or omitted in the exercise or purported exercise or non-exercise of the rights contained in this Deed;

 

(b) as a result of any breach by the Chargor of any of its covenants or other obligations to the Lender or any other person;

 

(c) in consequence of any payment in respect of the Secured Obligations (whether made by the Chargor or any other person) being impeached or declared void for any reason whatsoever; and/or

  

  17  

 

 

(d) as a result of any taxes, duties, rates or outgoings assessed upon or payable in respect of the Charged Assets or in connection with the entry into preservation, enforcement or exercise of any rights under this Deed.

 

12.3. Documentary Duties and Taxes

 

The Chargor will pay all documentary stamp, registration and other duties or similar taxes, including any payable by the Lender, which are imposed on or are payable in connection with this Deed.

 

12.4. Default Interest

 

The amounts payable under this Clause 12 shall carry interest at the Default Rate after as well as before judgment from the date on which they were incurred by the Lender or any Receiver (as the case may be) and such amounts and interest shall form part of the Secured Obligations.

 

13. Application of Proceeds

 

13.1. Order of Application

 

All monies received or recovered by any Receiver and/or by the Lender from the Chargor pursuant to this Deed shall, subject to any claims ranking in priority to the Secured Obligations to the extent of such priority, be applied, in or towards discharging, in the following order of priority:

 

(a) the amount of all fees and remuneration of, and all other costs, charges, expenses and liabilities incurred by the Lender and/or each Receiver in connection with or as a result of the exercise of their respective rights, including the remuneration of each Receiver, or otherwise in relation to this Deed or any other agreement entered into between the Chargor and the Lender in such order as the Lender or any Receiver may from time to time determine;

 

(b) all other Secured Obligations in such order as the Lender may from time to time determine; and

 

(c) the Chargor and/or the claims of those entitled to any surplus.

 

13.2. Currency Conversion

 

The Lender and/or each Receiver may convert any monies received, recovered or realised under this Deed (including the proceeds of any previous conversion under this Clause 13.2) from their existing currency of denomination into such other currency of denomination as the Lender and/or any Receiver may think fit and any such conversion shall be effected at the Exchange Rate. If and to the extent that the Chargor fails to pay any amount due on demand, the Lender and/or each Receiver may in its absolute discretion without notice to the Chargor purchase at any time after the demand has been made so much of any currency as the Lender and/or any Receiver considers necessary or desirable to cover the Secured Obligations at the Exchange Rate and the Chargor agrees to indemnify the Lender and each Receiver against the full cost (including all costs, charges and expenses) paid.

  

  18  

 

 

13.3. Currency Indemnity

 

If the currency of a sum due from the Chargor under this Deed (the “ contractual currency ”) or a sum due from the Chargor under any judgment or order relating to this Deed in the contractual currency is converted from the contractual currency into another currency for the purpose of:

 

(a) making or filing a claim or proof;

 

(b) obtaining a judgment or order; or

 

(c) enforcing a judgment or order,

 

the Chargor will indemnify the Lender against any loss or liability incurred as a result of any difference between (i) the rate of exchange used to convert the sum in question from the contractual currency into the other currency and (ii) the rate or rates of exchange at which the Lender, in the ordinary course of business, can purchase the contractual currency with the other currency on receipt of a sum paid to it in full or part satisfaction of that claim, proof, judgment or order.

 

Any amount due from the Chargor under this Clause 13.3 will be a separate and independent debt and will not be affected by judgment being obtained for any other sum due under or in respect of this Deed. The term “ rate of exchange ” in this Clause 13.3 includes any premium and exchange costs payable in connection with the purchase of the contractual currency with the other currency.

 

14. Protection of Lender

 

14.1. Suspense Account

 

Any moneys paid to or received by the Lender in respect of the Secured Obligations or under this Deed may be applied in or towards satisfaction of the Secured Obligations or placed to the credit of such account as the Lender may determine with a view to preserving its rights to prove for the whole of the Secured Obligations.

 

14.2. No Withholding

 

Payments by the Chargor shall be made to the Lender as specified by the Lender without any set-off, counterclaim, withholding or condition of any kind except that, if the Chargor is compelled by law to make such withholding, the sum payable by the Chargor shall be increased so that the amount actually received by the Lender is the amount it would have received if there had been no withholding.

 

14.3. Claw Back

 

If the Lender considers that an amount paid by the Chargor or any other person is capable of being avoided or otherwise set aside (on the liquidation of the Chargor or otherwise) then that amount shall not be considered to have been paid for the purposes of this Deed. Furthermore, the Lender may in its absolute discretion concede or compromise any claim that any payment, security or other disposition is liable to be avoided, reduced or repaid.

  

  19  

 

 

14.4. Conditional Discharge

 

Any release, discharge or settlement under this Deed shall be conditional upon no payment or discharge in respect of the Secured Obligations by the Chargor or any other person being avoided, reduced or repaid for any reason and the Lender shall be entitled to enforce this Deed if such condition is not fulfilled as if such release, discharge or settlement had not occurred.

 

14.5. Set-Off

 

The Lender may at any time without notice:

 

(a) combine or consolidate all or any of the Chargor’s accounts with the Lender;

 

(b) apply any credit balance to which the Chargor is entitled on any account with the Lender or any other moneys owing to the Chargor in or towards satisfaction of the Secured Obligations; or

 

(c) in the absolute discretion of the Lender, refuse to permit the withdrawal or utilisation of any deposit or moneys for such period as the Lender may consider appropriate (notwithstanding the terms of the deposit or moneys and whether or not any Secured Obligation has become due).

 

For these purposes, the Lender is authorised to purchase, at the Exchange Rate, such other currencies as may be necessary to effect such application with the monies standing to the credit of such account.

 

15. Trusteeship

 

The Chargor declares that:

 

(a) as and when the security created by this Deed shall become enforceable, it will hold all the Charged Assets (subject to the Chargor’s right of redemption) upon trust to convey, assign, transfer or otherwise dispose of or deal with the same in such manner and to such person as the Lender shall direct; and

 

(b) it shall be lawful for the Lender to appoint new trustees of the Charged Assets from time to time in place of the Chargor or in place of any trustee appointed under this power.

 

16. Redemption of Prior Encumbrances

 

On or at any time after the Security has become enforceable, the Lender may:

  

  20  

 

 

(a) redeem any prior Encumbrance against the Charged Assets;

 

(b) procure the transfer of that Encumbrance to itself; and/or

 

(c) settle and pass the accounts of the prior mortgagee, chargee or encumbrancer; any accounts so settled and passed shall be conclusive and binding on the Chargor;

 

and all principal moneys, interest, costs, charges and expenses of and incidental to any such redemption and/or transfer shall be paid by the Chargor to the Lender on demand.

 

17. Delegation

 

The Lender and any Receiver may:

 

(a) delegate by power of attorney or in any other manner to any person any right exercisable by them under this Deed on such terms (including power to sub-delegate) as the Lender or any Receiver (as the case may be) sees fit; and/or

 

(b) employ agents, managers, employees, advisers and others on such terms as the Lender or any Receiver (as the case may be) sees fit for the purposes of this Deed.

 

Neither the Lender nor any Receiver will in any way be liable or responsible to the Chargor for any loss or liability arising from any act, default, omission or misconduct on the part of any such delegate or sub-delegate.

 

18. No Waiver

 

No failure or delay by the Lender or any Receiver to exercise any right under this Deed or otherwise will operate as a waiver of that right or any other right, nor will any single or partial exercise of any such right preclude any other or further exercise of that right or the exercise of any other right.

 

19. Remedies Cumulative

 

The rights of the parties or any Receiver under this Deed are cumulative and do not exclude or restrict any other rights.

 

20. Assignment

 

20.1. Successors and Permitted Assigns

 

This Deed shall be binding upon and enure to the benefit of each party to this Deed and its successors in title and permitted assigns.

 

20.2. Assignment by the Chargor

 

The Chargor shall not be entitled to assign or transfer any of its rights, benefits or obligations under this Deed without the prior written consent of the Lender.

  

  21  

 

 

20.3. Assignment by the Lender

 

The Lender may assign all or any of its rights under this Deed to any person in accordance with the terms of Section 8.14 (Benefit of Agreement) of the Loan Agreement.

 

21. Notices

 

21.1. In Writing and Methods of Delivery

 

Any notice, demand or other communication under this Deed shall be sent in accordance with Section 8.5 (Notices) of the Loan Agreement.

 

21.1. Deemed Giving of Notice and Receipt

 

Any such notice, demand or other communication shall be deemed effective in such manner and at such time specified under Section 8.5 (Notices) of the Loan Agreement.

 

22. Severance

 

If any provision of this Deed is not or ceases to be legal, valid, binding and enforceable under the law of any jurisdiction, neither the legality, validity, binding effect or enforceability of the remaining provisions under that law nor the legality, validity, binding effect or enforceability of that provision under the law of any other jurisdiction shall be affected.

 

23. Counterparts

 

This Deed may be executed in any number of counterparts and by different parties on separate counterparts, each of which is an original but, together, they constitute one and the same agreement.

 

24. Amendments

 

No amendment to this Deed will be effective unless in writing and executed by all the Parties.

 

25. Governing Law and Jurisdiction

 

25.1. Governing Law

 

This Deed is governed by and will be construed in accordance with Hong Kong Law.

 

25.2. Hong Kong Jurisdiction

 

The parties submit to the non-exclusive jurisdiction of the Hong Kong courts and each party waives any objection to proceedings in Hong Kong on the grounds of venue or inconvenient forum.

 

25.3. Waiver of Sovereign Immunity

 

To the extent that the Chargor may, in any jurisdiction, be entitled to claim for itself or its assets immunity from suit, execution, attachment (whether in aid of execution, before judgement or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed), the Chargor irrevocably agrees not to claim and irrevocably waives such immunity to the full extent permitted by the laws of such jurisdiction.

  

  22  

 

 

SCHEDULE 1

Asset Information

 

(a) Offices / locations where movable assets are held

 

Borqs Hong Kong Limited

Office B, 21/F., Legend Tower, 7 Shing Yip Street

Kwun Tong, Kowloon, Hong Kong

 

Borqs Beijing Ltd.

Tower A, Building B23, Universal Business Park

No. 10 Jiuxianqiao Road, Chaoyang District

Beijing 100015, China

 

Borqs Software Solutions Private Limited

Prestige Al-Kareem, NO.3 Edward Road, Civil Station

Corporation Division NO.72

Bangalore, Karnataka, INDIA 560052

 

(b) Intellectual Property Rights

 

As listed on Schedules A, B, C and D attached to the

Borqs HK – Intellectual Property Security Agreement

 

(c) Shares

 

Direct ownership:

i) 1 out of 10,000 shares of Borqs Software Solutions Private Limited
ii) 100% of Borqs Beijing Ltd.
iii) 55% of Bozz Solutions, Inc.
iv) 60% of Borqs KK
v) 100% of Borqs Korea Branch Office

 

Indirect ownership:

i) 100% of Beijing Big Cloud Century Technology Limited
ii) 100% of Borqs Wireless Ltd.
iii) 100% of Beijing Borqs Software Technology Co., Limited
iv) 100% of Borqs Beijing Ltd. Shenzhen Branch Office
v) 49.9% of Br. Droid Desenvolvimento De Software S.A.
vi) 100% of Beijing Big Cloud Network Technology Co., Ltd.
vii) 79% of Yuantel (Beijing) Investment Management Co., Ltd.
viii) 75.05% of Yuantel (Beijing) Telecommunications Technology Co. Ltd.

 

(d) Bank Accounts

 

Silicon Valley Bank - Account number 3300710367

SPD Silicon Valley Bank - Account number NRA 10010020000000602

HSBC - Account numbers 168-316727-838 multi-currency

  

  23  

 

 

SCHEDULE 2

Form of Notice

  

To: [ insert account bank ]

 

Date:

 

Dear Sirs,

 

NOTICE OF CHARGE

 

We hereby give you notice that we have charged to Partners For Growth IV, L.P. (the “ Lender ”) all our rights, title and interest in our bank account[s] held with you with account number[s] [●] (including any renewal or redesignation thereof) (the “Accounts[s] ”) and all monies standing to the credit of the Account from time to time under a deed of debenture dated [●] 2016 (the “ Debenture ”).

 

We hereby irrevocably and unconditionally instruct you that, with effect from the service of a notice by or on behalf of the Lender on you notifying you that an event of default has occurred under the Debenture: (i) any then existing payment instructions affecting the Account[s] shall immediately and automatically be terminated and payments and communications in respect of the Account[s] should be made to the Lender and (ii) all rights, title and interest in the Account[s] shall vest in the Lender.

 

This letter is governed by the laws of Hong Kong.

 

Please acknowledge receipt of this notice by signing the acknowledgement enclosed and returning it to us with a copy to the Lender:

 

PARTNERS FOR GROWTH IV, L.P.

1660 Tiburon Blvd., Suite D

Tiburon, CA 94920 USA

Yours faithfully,

 

   
For and on behalf of [●]  

 

Form of Acknowledgement

 

To: [Chargor]

Copy to: PARTNERS FOR GROWTH IV, L.P.

 

We acknowledge receipt of the Notice of Charge dated [●] 2016 and confirm that we will comply with the terms set out in the Notice of Charge. We further confirm that, following receipt of the notice of an event of default as set out in the Notice of Charge we will not act in relation to the Account[s] except as instructed by the Lender or any persons authorised by the Lender and we shall send all statements and other notices in relation to the Account[s] to the Lender.

  

   
For and on behalf of [ insert account bank ]  

   

  24  

 

 

IN WITNESS of which this Deed has been duly executed by the Chargor as a deed and duly executed by the Lender.

 

EXECUTED and DELIVERED )
as a DEED by   BORQS HONG KONG LIMITED )

 

Acting by:   /s/ Pat Chan  
Name: Pat Chan  
Title: Chief Executive Officer  

 

in the presence of :

 

/s/ Anthony K. Chan  
Witness name: Anthony K. Chan  
Witness occupation:   Sup Corporate Finance  
  Borqs Hong Kong Limited  

 

EXECUTED and DELIVERED )
as a DEED by   PARTNERS FOR GROWTH IV, L.P. )

 

Acting by:   Partners for Growth IV, LLC  
Its: General Partner  
     
Name: Andrew Kahn  
Title: Managing Member  
     
Witnessed by:  
     
Name: Kathy Adams  
Title: CCO  

 

/s/ Kathy Adams  
Witness name: Kathy Adams  
Witness occupation:   CCO  

 

  25  

Exhibit 10.54

 

INTELLECTUAL PROPERTY SECURITY AGREEMENT

 

This Intellectual Property Security Agreement (this “Agreement”) is entered into as of August 26, 2016 (the “Effective Date”), by and between PARTNERS FOR GROWTH IV, L.P. (“PFG”) and BORQS Hong Kong Limited, a private company limited by shares under Hong Kong law, registered with the Companies Registry under number 1151010 and with its principal address at Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong (“Grantor”), with reference to the following facts:

 

A. PFG and Grantor (as Borrower), are parties to that certain Loan and Security Agreement of even date with this Agreement (as amended from time to time, the “Loan Agreement”). (Capitalized terms used herein have the meaning assigned in the Loan Agreement.)

 

B. Grantor has guaranteed the Obligations of each Borrower under the Loan Agreement pursuant to a Debenture of even date with the Loan Agreement, pursuant to which Grantor has granted to PFG a security interest in all Charged Assets. Charged Assets include without limitation certain Intellectual Property (including without limitation the Intellectual Property described herein) owned by Grantor.

 

Grantor agrees as follows:

 

1. To secure performance of all of its “Obligations” as defined in the Loan Agreement, Grantor grants to PFG a security interest in all of Grantor’s right, title and interest in Grantor’s “Intellectual Property”, including without limitation (i) the trademarks and servicemarks listed or required to be listed from time to time on Schedule A hereto, whether registered or not, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks, and (ii) the patents and patent applications listed or required to be listed from time to time on Schedule B hereto and all like protections including, without limitation, all improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same, (iii) all copyrights, maskworks, software, computer programs and other works of authorship listed or required to be listed from time to time on Schedule C hereto, and all extensions and renewals thereof, (iv) all domain names and domain name rights owned by it and used in connection with its business and that of its Subsidiaries, all legal and equitable rights in domain names and ownership thereof, domain registry, domain servers, web hosting and related contracts, services and facilities (collectively, “Domain Rights”) listed or required to be listed from time to time on Schedule D hereto, and all extensions and renewals thereof, and (iv) all rights to recover for past or future infringement of any of the foregoing, and (v) all right, title and interest in and to any and all present and future license agreements with respect to any of the foregoing, and (vi) all present and future accounts, accounts receivable and other rights to payment arising from, in connection with or relating to any of the foregoing and provided that if any asset cannot be secured without consent of a third party (and such consent is not given), this Agreement will constitute security over all proceeds and other amounts receivable from such asset.

 

 

 

 

2. Grantor represents and warrants that (i) listed on Schedule A hereto are all trademark registrations and pending registrations owned or controlled by Grantor, (ii) listed on Schedule B are all patents and patent applications owned or controlled by Grantor, (iii) listed on Schedule C are all copyrights, software, computer programs, mask works, and other works of authorship owned or controlled by Grantor which are registered with the United States Copyright Office and the copyright registry of each other applicable jurisdiction, wherever located, and (iv) listed on Schedule D are all Domain Rights in which Grantor has any legal, contractual or equitable right. Grantor shall: (a) protect, defend and maintain the validity and enforceability of its intellectual property, other than intellectual property of immaterial business and monetary value that Grantor’s executive management has made a determination not to maintain; (b) promptly advise PFG in writing of material infringements of its intellectual property; and (c) not allow any intellectual property material to Grantor’s business to be abandoned, forfeited or dedicated to the public without PFG’s written consent. If, before the Obligations have been paid and/or performed in full, Grantor shall (i) adopt, use, acquire or apply for registration of any trademark, service mark or trade name, (ii) apply for registration of any patent or obtain any patent or patent application; (iii) create or acquire any published or material unpublished works of authorship material to the business that is or is to be registered with the U.S. Copyright Office or any non-U.S. equivalent or other Governmental Body; or (iv) register or acquire any domain name or domain name rights, then the provisions of Section 1 shall automatically apply thereto, and Grantor shall provide PFG written notice thereof concurrently with delivery of Borrower’s monthly compliance certificate. Grantor shall further provide PFG with all information and details relating to the foregoing and shall take such further actions as PFG may reasonably request from time to time to perfect or continue the perfection of PFG’s interest in such intellectual property.

 

3. This Agreement is being executed and delivered pursuant to the Loan Agreement; nothing herein limits any of the terms or provisions of the Loan Agreement, and PFG’s rights hereunder and under the Loan Agreement are cumulative. This Agreement, the Loan Agreement and the other Loan Documents set forth in full all of the representations and agreements of the parties with respect to the subject matter hereof and supersede all prior discussions, oral representations, oral agreements and oral understandings between the parties. This Agreement may not be modified or amended, nor may any rights hereunder be waived, except in a writing signed by the parties hereto; provided, however, and notwithstanding the foregoing, PFG may amend the Schedules hereto from time to time when it becomes aware of new Intellectual Property subject to this Agreement. In the event of any litigation between the parties based upon, arising out of, or in any way relating to this Agreement, the prevailing party shall be entitled to recover all of its costs and expenses (including without limitation attorneys’ fees) from the non-prevailing party. This Agreement and all acts, transactions, disputes and controversies arising hereunder or relating hereto, and all rights and obligations of PFG and Grantor shall be governed by, and construed in accordance with the internal laws (and not the conflict of laws rules) of the State of California.

 

  2  

 

 

4. Grantor agrees that simultaneously with the execution of this Agreement, and thereafter upon any amendment of Schedule A , Schedule B, Schedule C or Schedule D , the appropriate entities constituting Grantor shall execute notices in the forms appended hereto (each, a “ Notice ”), as appropriate, with respect to all of the pledged Intellectual Property, now owned or hereafter acquired, and shall deliver each Notice to PFG for the purpose of recordation at the U.S. Patent and Trademark Office or the U.S. Copyright Office, with any patent or trademark registry outside of the United States or otherwise, as appropriate. Whether or not Grantor executes such a Notice reflecting new Intellectual Property, Grantor hereby irrevocably appoints PFG as its lawful attorney-in-fact without any further authorization to file such notices, liens or other instruments as may be customary from time to time for PFG to perfect security interests in Grantor’s Intellectual Property. With respect to the power of attorney granted in the attached Domain Rights Collateral Agreement and Notice, so long as no default has occurred and is continuing under the Loan Documents, PFG shall not take any action referenced therein in the name of Grantor.

 

[Signature Page Follows]

 

  3  

 

 

Address of Grantor: BORQS Hong Kong Limited  
     
Office B, 21/F, Legend Tower    
7 Shing Yip Street, Kwun Tong    
Kowloon, Hong Kong By: /s/ Pat Chan         
  Name: Pat Chan  
  Title: Sole Director  
     
  By:   
  Name:    
  Title: Director  
     
Address of PFG: PARTNERS FOR GROWTH IV, L.P.  
Partners for Growth IV, L.P.    
1660 Tiburon Blvd., Suite D    
Tiburon, California 94920    
     
  By:   
  Name:    
  Title: Manager, Partners for Growth IV, LLC  
  Its: General Partner  

 

Intellectual Property Security Agreement Signature Page

 

  4  

 

 

SCHEDULE A

 

BORQS Hong Kong Limited

 

Trademark Schedule

 

Serial Number - Registration Number   Date   Mark   Owner
             
None at Effective Date            
             
             
             
             
             
             
             
             
             
             
             
             

 

  5  

 

   

SCHEDULE B

 

BORQS Hong Kong Limited

 

Patent Schedule

 

Patent/Application Number   Title   Owner
         
None at Effective Date        
         
         
         
         
         
         
         
         
         
         
         
  6  

 

 

SCHEDULE C

 

BORQS Hong Kong Limited

 

COPYRIGHTS

 

Copyright Number   Date   Title / Work   Owner
             
None at Effective Date            
             
             
             
             

 

  7  

 

 

SCHEDULE D

 

BORQS Hong Kong Limited

 

Domain Name   Domain Host   Admin Contact   Owner   Expiry
                 

borqs.com

 

www.verio.com

 

Steve Lee

+86-139-0139-5984

  Pat Chan, assigns to Borqs Hong Kong Ltd.  

July 5, 2020

                 
                 
                 
                 
                 
                 
                 
                 
                 

 

  8  

 

 

TRADEMARK COLLATERAL AGREEMENT AND NOTICE

 

This Trademark Collateral Agreement and Notice dated as of August __, 2016 (“Trademark Agreement”), is between BORQS Hong Kong Limited, a private company limited by shares under Hong Kong law, registered with the Companies Registry under number 1151010 and with its principal address at Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong (“ Assignor ”) and Partners for Growth IV, L.P., 1660 Tiburon Blvd., Suite D, Tiburon, California 94920 (“ Assignee ”) pursuant to a Loan and Security Agreement, an Intellectual Property Security Agreement of even date herewith by and among Assignor and Assignee (the “ IP Security Agreement ”) and pursuant to certain other loan documents referenced therein (collectively, the “ Loan Documents ”).

 

WHEREAS, Assignor is the owner of certain trademarks, including all federal applications and/or registrations therefor, together with the goodwill of the business connected with the use of and symbolized thereby, as listed on Exhibit 1 hereto (the “ Marks ”); and

 

WHEREAS, Assignee has agreed to extend certain credit to Assignor on condition that the Assignor pledge and grant to Assignee as collateral for the Obligations (as defined in the Loan Documents) a security interest and lien in and to the Marks and all proceeds thereof and all other related claims and rights as more fully described in the IP Security Agreement in favor of the Assignee, by and among Assignor and Assignee;

 

NOW THEREFORE, for good and valuable consideration, as security for the due and timely payment and performance of the Obligations, Assignor hereby pledges and grants to Assignee a security interest and lien in and to the Marks and all proceeds thereof and gives notice of such security interest and the existence of such Security Agreement providing therefor.

 

Executed as of the date first above written.

 

Assignor:   Assignee:
     
BORQS Hong Kong Limited   PARTNERS FOR GROWTH IV, L.P.
     
By             By              
Name:      Name:   
Title: Director   Title: Manager, Partners for Growth IV, LLC
      Its General Partner
       
By      
Name:       
Title: Director    

 

  9  

 

 

EXHIBIT 1

 

BORQS Hong Kong Limited

 

Trademark Schedule

 

Serial Number - Registration Number   Date   Mark   Owner
             
             
             
             
             
             
             
             
             
             
             
             
             
             

 

  10  

 

 

PATENT COLLATERAL AGREEMENT AND NOTICE

 

This Patent Collateral Agreement and Notice dated as of August __, 2016 (“Patent Agreement”), is between BORQS Hong Kong Limited, a private company limited by shares under Hong Kong law, registered with the Companies Registry under number 1151010 and with its principal address at Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong (“ Assignor ”) and Partners for Growth IV, L.P., 1660 Tiburon Blvd., Suite D, Tiburon, California 94920 (“ Assignee ”) pursuant to a Loan and Security Agreement, an Intellectual Property Security Agreement of even date herewith by and among Assignor and Assignee (the “ IP Security Agreement ”) and pursuant to certain other loan documents referenced therein (collectively, the “ Loan Documents ”).

 

WHEREAS, Assignor is the owner of certain United States patents and/or patent applications as listed on Exhibit 1 hereto (the “Patents”); and

 

WHEREAS, Assignee has agreed to extend certain credit to Assignor on condition that the Assignor pledge and grant to Assignee as collateral for the Obligations (as defined in the Loan Documents) a security interest and lien in and to the Patents and all proceeds thereof and all other related claims and rights as more fully described in the IP Security Agreement in favor of the Assignee, by and among Assignor and Assignee;

 

NOW THEREFORE, for good and valuable consideration, as security for the due and timely payment and performance of the Obligations, Assignor hereby pledges and grants to Assignee a security interest and lien in and to the Patents and all proceeds thereof and gives notice of such security interest and the existence of the IP Security Agreement providing therefor.

 

Executed as of the date first above written.

 

Assignor:   Assignee:
     
BORQS Hong Kong Limited   PARTNERS FOR GROWTH IV, L.P.
     
By             By              
Name:      Name:   
Title: Director   Title: Manager, Partners for Growth IV, LLC
      Its General Partner
       
By      
Name:       
Title: Director    

 

  11  

 

 

EXHIBIT 1

 

BORQS Hong Kong Limited

 

Patent Schedule

 

 

Patent/Application Number   Title   Owner
         
         
         
         
         
         

 

  12  

 

 

COPYRIGHT COLLATERAL AGREEMENT AND NOTICE

 

This Copyright Collateral Agreement and Notice dated as of August __, 2016 (“Copyright Agreement”), is between BORQS Hong Kong Limited, a private company limited by shares under Hong Kong law, registered with the Companies Registry under number 1151010 and with its principal address at Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong (“ Assignor ”) and Partners for Growth IV, L.P., 1660 Tiburon Blvd., Suite D, Tiburon, California 94920 (“ Assignee ”) pursuant to a Loan and Security Agreement, an Intellectual Property Security Agreement of even date herewith by and among Assignor and Assignee (the “ IP Security Agreement ”) and pursuant to certain other loan documents referenced therein (collectively, the “ Loan Documents ”).

 

WHEREAS, Assignor is the owner of certain copyrightable works which are the subject of United States copyright registrations and/or copyright applications as listed on Exhibit 1 hereto (the “ Copyrights ”); and

 

WHEREAS, Assignee has agreed to extend certain credit to Assignor on condition that the Assignor pledge and grant to Assignee as collateral for the Obligations (as defined in the Loan Documents) a security interest and lien in and to the Copyrights and all proceeds thereof and all other related claims and rights as more fully described in the IP Security Agreement in favor of the Assignee, by and among Assignor and Assignee;

 

NOW THEREFORE, for good and valuable consideration, as security for the due and timely payment and performance of the Obligations, Assignor hereby pledges and grants to Assignee a security interest and lien in and to the Copyrights and all proceeds thereof and gives notice of such security interest and the existence of the IP Security Agreement providing therefor.

 

Executed as of the date first above written.

 

Assignor:   Assignee:
     
BORQS Hong Kong Limited   PARTNERS FOR GROWTH IV, L.P.
     
By             By              
Name:      Name:   
Title: Director   Title: Manager, Partners for Growth IV, LLC
      Its General Partner
       
By      
Name:       
Title: Director    

 

  13  

 

 

EXHIBIT 1

 

BORQS Hong Kong Limited


COPYRIGHT SCHEDULE

 

Copyright Number   Date   Title / Work   Owner
             
             
             
             
             
             

 

  14  

 

 

DOMAIN RIGHTS COLLATERAL AGREEMENT AND NOTICE

 

This Domain Rights Collateral Agreement and Notice dated as of August 26, 2016 (“Domain Agreement”), is between BORQS Hong Kong Limited, a private company limited by shares under Hong Kong law, registered with the Companies Registry under number 1151010 and with its principal address at Office B, 21/F, Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong (“ Assignor ”) and Partners for Growth IV, L.P., 1660 Tiburon Blvd., Suite D, Tiburon, California 94920 (“ Assignee ”) pursuant to a Loan and Security Agreement, an Intellectual Property Security Agreement of even date herewith by and among Assignor and Assignee (the “ IP Security Agreement ”) and pursuant to certain other loan documents referenced therein (collectively, the “ Loan Documents ”).

 

WHEREAS, Assignor is the owner of certain Domain Rights as defined in the Loan Documents which are, as of the date hereof, as listed on Exhibit 1 hereto (the “ Domain Rights ”); and

 

WHEREAS, Assignee has agreed to extend certain credit to Assignor on condition that the Assignor pledge and grant to Assignee as collateral for the Obligations (as defined in the Loan Documents) a security interest and lien in and to the Domain Rights and all proceeds thereof and all other related claims and rights as more fully described in the IP Security Agreement in favor of the Assignee, by and among Assignor and Assignee;

 

NOW THEREFORE, for good and valuable consideration, as security for the due and timely payment and performance of the Obligations: (1) Assignor hereby pledges and grants to Assignee a security interest and lien in and to the Domain Rights and all proceeds thereof and gives notice of such security interest and the existence of the IP Security Agreement providing therefor; and (2) Assignor hereby irrevocably appoints PFG as its lawful attorney-in-fact without any further authorization to take any action and file any notice on behalf of Assignor that Assignor itself could file in respect of its Domain Rights, including without limitation, to transfer Domain Rights, change administrative contacts in respect of Domain Rights, maintain Domain Rights, and provide instructions to domain hosting services and any domain name registrars.

 

Executed as of the date first above written.

 

Assignor:   Assignee:
     
BORQS Hong Kong Limited   PARTNERS FOR GROWTH IV, L.P.
     
By /s/ Pat chan     By              
Name: Pat chan       Name:   
Title: Sole Director   Title: Manager, Partners for Growth IV, LLC
      Its General Partner
       
By      
Name:       
Title: Director    

 

  15  

 

 

EXHIBIT 1

 

BORQS Hong Kong Limited

 

Domain Name   Domain Host   Admin Contact   Owner   Expiry
                 

borqs.com

 

www.verio.com

 

Steve Lee

+86-139-0139-5984

  Pat Chan, assigns to Borqs Hong Kong Ltd.  

July 5, 2020

                 
                 
                 
                 
                 
                 
                 
                 
                 

  

  16  

Exhibit 10.55

 

SUBORDINATION AGREEMENT

 

between SPD Silicon Valley Bank Co., Ltd. and Partners for Growth IV, L.P.

 

Borrower:       BORQS Hong Kong Limited

 

Guarantor:        BORQS International Holding Corp

 

This Subordination Agreement (this “Agreement”) dated August 15, 2016, is between Partners for Growth IV, L.P. , a Delaware limited partnership (“Creditor”), and SPD Silicon Valley Bank Co., Ltd. , a PRC banking institution (“SSVB”).

 

Recitals

 

A. The above-referenced named Borrower (“Borrower”) has requested and/or obtained loans and/or other credit accommodations from SSVB which may be secured by their respective assets and property, and the obligations of Borrower have been guaranteed by the above-named Guarantor.

 

B. Creditor has extended credit to Borrower and/or may later extend other credit to Borrower under that certain Loan and Security Agreement and related documents dated as of August 15, 2016, as may be amended from time to time (the “PFG Debt Documents”).

 

C. To induce SSVB to extend credit to Borrower and make further extensions of credit to or for Borrower, or to purchase or extend credit pursuant to any instrument or writing on which Borrower is liable or to grant renewals or extensions of any loan, extension of credit, purchase, or other accommodation, Creditor will subordinate: (a) all of Borrower's indebtedness and obligations to Creditor, existing now or later (the “Subordinated Debt”) to all of Borrower's indebtedness and obligations to SSVB, existing now or later, consisting of principal indebtedness under the Facility Agreement for working capital loans dated as of August 31, 2015 as amended from time to time (the “Senior Debt Document”) in an amount up to US$5,000,000, plus principal under a facility agreement between SSVB and a PRC subsidiary of Borrower in an amount up to RMB15,000,000, plus (i) interest and all collection costs (including attorneys’ fees), (ii) all interest accruing after any bankruptcy, reorganization or similar proceeding, (iii) the amount of all Protective Advances, and (iv) all other products and/or credit services facilities up to $25,000 in the aggregate at any given time (collectively, the “Senior Debt”); and (b) all of Creditor's security interests to all of SSVB's security interests in the Borrower's property securing the Senior Debt, each in accordance with the terms of this Agreement.

 

THE PARTIES AGREE AS FOLLOWS:

 

1. Creditor subordinates to SSVB any security interest or lien that it has in any property of Borrower (to the extent perfected and enforceable). Despite attachment or perfection dates of Creditor’s security interest and SSVB’s security interest, SSVB’s security interest in all assets of Borrower is prior to Creditor’s security interest.

 

2. Except as otherwise expressly provided in this Agreement, all Subordinated Debt payments are subordinated to all of Borrower’s obligations to SSVB for the Senior Debt.

 

3. Except as expressly allowed pursuant to the below provisions of this Section 4 below, Creditor will not (a) demand or receive from Borrower any part of the Subordinated Debt, by payment, prepayment, or otherwise, (b) exercise any remedy against any of Borrower’s property, or (c) accelerate the Subordinated Debt, or begin to or participate in any action against Borrower in any way related to the Subordinated Debt, until all the Senior Debt is paid. This does not prohibit Creditor from converting any Subordinated Debt into equity securities of Borrower.

 

   

 

 

4. Except as otherwise provided in this Section 4 :

 

(a) Creditor may receive (i) regularly scheduled payments on the Subordinated Debt, including, without limitation, regularly-scheduled, non-accelerated payments of fees, costs, principal and interest (including default interest) that are contemplated under the PFG Debt Documents, a true and correct final copy of which has been delivered to SSVB (the “Permitted Payments”). Notwithstanding the foregoing, Creditor agrees that if there shall have occurred and continues an event of default (however denominated) under any of the documents evidencing or otherwise related to the Senior Debt (or if there would be such an event of default immediately after giving effect to any such Permitted Payment), and Creditor shall have received written notice thereof at the address set forth below Creditor’s signature block (a “Blockage Notice”) from SSVB imposing a Blockage Period as defined below (which notice shall be deemed to have been validly served, given, delivered, and received upon the earlier of: (x) the first business day after transmission by facsimile or hand delivery or deposit with an internationally-recognized express courier delivery service; or (y) the first business day following a business day on which notice has been sent by electronic mail to an authorized representative of a party, if confirmed concurrently by facsimile or promptly by any other authorized mode of delivery as set forth herein, then no Permitted Payment shall be demanded or received by Creditor until the end of such a Blockage Period (and Creditor shall pay to SSVB any such payments so received). In any 360 day period, no more than one (1) Blockage Period may be imposed.

 

(b) Notwithstanding anything to the contrary in this Agreement, upon the occurrence of an event of default under and as defined in the documents evidencing the Subordinated Debt and subject to the rights and priorities of SSVB as described in this Agreement, Creditor may accelerate the Subordinated Debt and may exercise all of its rights and remedies with respect to such an event of default; provided, however , Creditor may commence such exercise of remedies and enforcement actions only after providing SSVB with 10 business days prior written notice of Creditor’s intent to commence such exercise of remedies or enforcement actions and so long as SSVB has not delivered a Blockage Notice to Creditor prior to the expiration of such a 10 business day notice period (which Blockage Notice, if sent by SSVB, prevents Creditor from taking any such actions during the Blockage Period); provided further, however , any payment, distribution, security, or proceeds that Creditor receives in connection with the exercise of any of its rights and remedies shall first be turned over to SSVB for application to the Senior Debt up to the full amount of the Senior Debt outstanding at such time (provided that if such amounts are applied to the Senior Debt, such application shall not result in the Senior Debt being “paid” as against the Borrower for the purposes of Creditor subrogation). Additionally, notwithstanding anything to the contrary in this Agreement but subject to the rights and remedies of SSVB as described in this Agreement, Creditor may accelerate the Subordinated Debt upon commencement of any insolvency, bankruptcy, receivership, custodianship, or similar proceeding for the liquidation or dissolution of Borrower. Notice to SSVB in accordance with this paragraph shall be sent to SSVB at the address set forth below its signature block below and shall be deemed to be validly delivered and received in accordance with the notice provision set forth in the first paragraph of this Section 4 .

 

(c) As used in this Agreement, (i) “Blockage Period” shall mean a period of time beginning upon the delivery of the Blockage Notice as set forth above and ending on the earlier to occur of 60 days following such date or SSVB’s written consent to such termination and (ii) “Protective Advances” shall mean all sums up to a maximum amount of $100,000 expended by SSVB which were determined by SSVB to be necessary or appropriate to: (1) protect the priority, validity and enforceability of the liens and security interests which secure the Senior Debt and the instruments evidencing the Senior Debt; (2) prevent the value of the collateral for the Senior Debt from being diminished (assuming the lack of such a payment within the necessary time frame could potentially cause such collateral to lose value); (3) protect any of such collateral from being damaged, impaired, mismanaged or taken; or (4) cure any default or non-performance of obligations of Borrower as required by the Loan Agreements.

 

5. If Creditor sends the Borrower a notice of default related to the Subordinated Debt, Creditor shall use best efforts to promptly deliver a copy of the notice of default to SSVB, but failure to do so shall not be a breach of this Agreement nor, in and of itself, affect any of Creditor’s rights in respect of the Subordinated Debt

 

  2  

 

 

6. Creditor must deliver to SSVB in the form received (except for endorsement or assignment by Creditor) any payment, distribution, security or proceeds it receives on the Subordinated Debt other than according to this Agreement, provided that if SSVB applies such turnover to the Senior Debt, such application shall not result in the Senior Debt being “paid” as against the Borrower for the purposes of Creditor subrogation.

 

7. These provisions remain in full force and effect, despite Borrower's insolvency, reorganization or any case or proceeding under any bankruptcy or insolvency law, and SSVB's claims against Borrower and Borrower’s estate will be fully paid before any payment is made to Creditor. Creditor agrees not to encourage any other person or entity to initiate or prosecute any claim, action or other proceeding: (a) challenging the enforceability of SSVB's claim; (b) challenging the enforceability of any liens in assets securing SSVB; (c) asserting any claims which the Borrower may hold with respect to SSVB; or (d) seeking the equitable subordination of the Senior Debt or any aspect of SSVB's claim.

 

8. Until the Senior Debt is paid, Creditor irrevocably appoints SSVB as its attorney-in-fact, with power of attorney with power of substitution, in Creditor’s name or in SSVB’s name, for SSVB’s use and benefit without notice to Creditor, to do the following in any bankruptcy, insolvency or similar proceeding involving Borrower:

 

(a) File any claims for the Subordinated Debt for Creditor if Creditor does not do so at least 30 days before the time to file claims expires, and

 

(b) Accept or reject any plan of reorganization or arrangement for Creditor and vote Creditor's claims in respect of the Subordinated Debt in any way it chooses.

 

9. Creditor shall immediately affix a legend to the instruments evidencing the Subordinated Debt stating that the instruments are subject to the terms of this Agreement. No amendment of the documents evidencing or relating to the Subordinated Debt shall directly or indirectly modify the provisions of this Agreement in any manner which might terminate or impair the subordination of the Subordinated Debt or the subordination of the security interest or lien that Creditor may have in any property of Borrower. By way of example, such instruments shall not be amended to (a) increase the rate of interest with respect to the Subordinated Debt, or (b) accelerate the payment of the principal or interest or any other portion of the Subordinated Debt.

 

10. This Agreement is effective until the Senior Debt Document has been terminated and all of the Senior Debt has been paid in full. If, after full payment of the Senior Debt and termination of the Senior Debt Document, SSVB must disgorge any payments made on the Senior Debt, this Agreement and the relative rights and priorities provided in it, will be reinstated as to all disgorged payments as though the payments had not been made, and Creditor will immediately pay SSVB all payments received under the Subordinated Debt to the extent the payments would have been prohibited under this Agreement. At any time without notice to Creditor, SSVB may take actions it considers appropriate on the Senior Debt such as terminating advances, increasing the principal, extending the time of payment, increasing interest rates, renewing, compromising or otherwise amending any documents affecting the Senior Debt and any collateral securing the Senior Debt, and enforcing or failing to enforce any rights against Borrower or any other person. No action or inaction will impair or otherwise affect SSVB's rights under this Agreement. Creditor waives the benefits, if any, of any statutory or common law rule that may permit a subordinating creditor to assert any defenses of a surety or guarantor, or that may give the subordinating creditor the right to require a senior creditor to marshal assets, and Creditor agrees that it shall not assert any such defenses or rights.

 

11. This Agreement shall be binding upon, and shall inure to the benefit of, any heirs, successors and assigns of Creditor and SSVB. This Agreement is for Creditor’s and SSVB’s benefit and not for the benefit of Borrower or any other party. If Borrower is refinancing any of the Senior Debt with a new lender, upon SSVB’s request of creditor, Creditor will enter into a new subordination agreement with the new lender on substantially the terms of this Agreement.

 

  3  

 

 

12. This Agreement may be executed in two or more counterparts, each of which is an original and all of which together constitute one instrument.

 

13. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to conflicts of law principles. Subject to clause (c) of this Section 13, Creditor and SSVB submit to the jurisdiction of the state and federal courts located in Santa Clara County, California. CREDITOR AND BANK WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.

 

(b) WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers. All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed. If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief. The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all discovery rules and order applicable to judicial proceedings in the same manner as a trial court judge. The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies. The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

 

(c) Notwithstanding the submission of the parties to the federal and state courts located in Santa Clara County, California, the parties also submit to the non-exclusive jurisdiction of the courts of Hong Kong.

 

14. This Agreement is the entire agreement about this subject matter, and supersedes prior negotiations or agreements. Creditor is not relying on any representations by SSVB or Borrower in entering into this Agreement. Creditor will keep itself informed of Borrower’s financial and other conditions. This Agreement may be amended only by written instrument signed by Creditor and SSVB.

 

15. If there is an action to enforce the rights of a party under this Agreement, the party prevailing will be entitled, in addition to other relief, all reasonable costs and expenses, including reasonable attorneys’ fees, incurred in the action.

 

16. Each of the undersigned hereby represents and warrants that (a) the execution and delivery of this Agreement and the consummation of the transactions contemplated herein have each been duly authorized by all necessary action on the part of such party, and (b) this Agreement has been duly executed and delivered and constitutes a legal, valid and binding obligation of such party, enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or other similar laws of general application relating to or affecting the enforcement of creditors’ rights or by general principles of equity.

 

[Signature page follows.]

 

  4  

 

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first written above.

 

“Creditor”   “SSVB”
     
PARTNERS FOR GROWTH IV, L.P.   SPD SILICON VALLEY BANK CO., LTD.
     
By: /s/ Philip Lawson                  By: /s/ Harvey Lum                 
     
Title: Manager, Partners for Growth IV LLC   Title: Vice President, head of Risk Management
     

Address: 1660 Tiburon Blvd, Suite D

Tiburon, CA, USA 94920

 

Address: 21/F, Block B, Baoland Plaza,

No. 588 Dalian Road, Shanghai, 200082

     
Telephone (415) 793-2883   Telephone (86 21) 3596 3068
     
Facsimile (415) 781-0510   Facsimile (86 21) 3596 3099
     
Email: notices@pfgrowth.com; geoff@pfgrowth.com   Email: hlum@spd-svbank.com

  

 

[Signature page to Subordination Agreement]

  5  

 

Exhibit 10.56

     

 

 

 

 

 

 

 

 

 

 

授信协议

Facility Agreement

流动资金贷款类授信

For working capital loans

 

(文件编号/Ref No.: CL201508001)

  

 

 

      

第一部分  签署页 /Part I Execution Page 变更协议编号 /Agreement Ref. No.: CL201508001

  

签署页

Execution Page

     

融资行

Financing Bank

客户

Client  

   

浦发硅谷银行有限公司

SPD SILICON VALLEY BANK CO., LTD.  

播思微系统香港有限公司

BORQS Hong Kong Limited

   

住所地

with address at  

住所地

with address at  

   

上海市杨浦区大连路 588 号宝地广场 B 21

200082 

 

21/F, Block B, Baoland Plaza,

No. 588, Dalian Road, Shanghai 200082 

Office B, 21/F., Legend Tower, 7 Shing Yip Street,
Kwun Tong, Kowloon, Hong Kong
   

以上当事人在本协议中简称为 融资行

hereinafter referred to as “Financing Bank”  

以上当事人在本协议中简称为 客户

hereinafter referred to as “Client”  

   

 

上述各方当事人在此同意并接受本变更协议中所述之全部条款; 客户特此确认, 就本协议项下有关条件和条款, 融资行已向客户作出充分的说明和解释, 客户已理解、同意、承认该等条款。

 

The parties above hereby agree to and accept all terms and conditions set forth in this Amendment Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Financing Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Client completely.

     

有鉴于此, 上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

  

  1  

 

  

第二部分 特别条款 /Part II Special Provision 协议编号 /Agreement Ref. No.: CL201508001

    

特别条款

SPECIAL PROVISION

   

根据本协议 ( 下称 本协议 ”) 条件和条款, 融资行同意向客户提供如下授信额度 ( 下称 额度 ”) :

Pursuant to the terms and conditions of this Agreement (“the Agreement”), the Financing Bank agrees to make the facility available to the Client(s) as below (“the Facility”):

   

额度  

Facility Amount

 

授信总额度:  

美元 3,000,000.00

大写金额 : 美元叁佰万元整

 

Total Facility Amount : USD3,000,000.00

 

IN WORDS: THREE MILLION US DOLLAR

 

基准币种: 美元
可选币种: 不适用

Base Currency : USD

Optional Currency : N/A

 

额度期限 / 最终到期日
Facility Validity Period/ Final Maturity Date

最终到期日:

2017 09 30

 

Final Maturity Date :
September 30 th , 2017
可动用期 ( 提款期 )
Availability Period
(Drawdown Period)
除在本协议第四部分 - 业务条款中另有约定外, 额度的可使用的期限最晚为不超过最终到期日 Unless otherwise provided for any Product hereof in Part IV – Specification respectively, the Facility hereof is available for utilization until the Final Maturity Date.

额度用途

Facility Purpose

 

本协议项下额度用途为: 融资行向客户提供的本协议第四部分 - 业务条款中可办理的业务类型中确定的各类用途以及经融资行同意的其他用途 Purposes as specified for any Product hereof in Part IV - Specification, or any other purposes Financing Bank agrees otherwise

业务类型

Product Type

 

应收账池贷款 ( 短期融资 )

 

定期贷款 ( 中期融资 )

 

Pooled A/R Loan (Short-term Finance)

Term Loan (Mid-term Finance)

 

授信类型  

Facility Type

 

循环授信 , 但本协议第四部分 - 业务条款中另有约定的除外

Revolving facility, unless otherwise provided for any Product in Part IV – Specification

 

具体内容参见本协议第三部分 - 一般条款以及本协议第四部分 - 业务条款的规定

 

Please see details in Part III - General Provision and Part IV – Specification.

 

  2  

 

  

第二部分 特别条款 /Part II Special Provision 协议编号 /Agreement Ref. No.: CL201508001

 

双方补充约定条款 ( 如有 )

Other Supplementary Stipulations (If Any)

 

1 、 关于管理团队变动的约定 / Management Team Change Specification

 

关于业务、管理人员、所有权的变动方面, 客户不得:

 

a)     从事或允许其子公司 ( 如有 ) 从事客户及其子公司目前从事业务或合理相关业务之外的业务;

 

b)     清算或者解散;

 

c)    (i) 高级管理层发生变动, 该高级管理人员不再担任原职务 ; (ii) 订立任何下述交易或一系列相关交易: 在该交易前不是客户股东的主体, 通过实施这样的交易或一系列相关交易, 而持有客户股票达到超过 40% 的表决权( 但不包括以下述两种情况: 其一是客户通过首次公开发行出售股票; 其二是获得风险投资, 并且在交易结束前融资行已获悉并认可该风险投资者, 且客户向融资行提供说明交易条款的材料) 。

 

With regard to the changes in Business, Management, Ownership, each Client hereby shall not :

 

(a)   engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Client and such Subsidiary, as applicable, or reasonably related thereto;

 

(b)   liquidate or dissolve;or

 

(c)   (i) have a change in senior management who ceases to hold such office[s] with Client; or (ii) enter into any transaction or series of related transactions in which the stockholders of Client who were not stockholders immediately prior to the first such transaction own more than 40% of the voting stock of the Client immediately after giving effect to such transaction or related series of such transactions (other than by the sale of the Client’s equity securities in a public offering or to venture capital investors so long as Client identifies to the Financing Bank the venture capital investors prior to the closing of the transaction and provides to the Financing Bank a description of the material terms of the transaction). 

 

2 、 关于股权或控制权变动的约定 / Change in Ownership and Control

 

约定同上 

Same as above.

 

3 、 关于所有业务品种均应遵循的财务约定 /General Financial Covenants for all product-types

 

客户应确认其在合并报表层面上满足和维持: 

The Client shall confirm to obtain and maintain under this Agreement on a consolidated basis:

 

(1)  每月最小流动比率: 1.25:1.00 

Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00

  

流动比率定义为: ( 非绑定现金 + 应收帐款净额 ) 除以 ( 流动负债 - 递延收入 )  

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

  

(2)  每 季 度 最 低 EBITDA : USD500,000.00

Minimum quarterly EBITDA of: USD500,000.00

  

注: 该财务约束指标从 2015 年第三季度开始测算且 2016 年度的财务约束指标将在收到最新的财务预算后重新设定。  

Note: This financial covenant shall be tested starting from Q3 2015 and the financial covenant for 2016 will be adjusted upon receipt of updated financial forecast. 

 

(3)  偿债备付率: 2X 

Debt Service Coverage Ratio of: 2X

 

偿债备付率定义为: 每季度 EBITDA / 每季度所有银行借款应还本息金额。  

Debt Service Coverage Ratio is defined as quarterly EBITDA divided by quarterly principal and interest payment of all bank debt.

 

  3  

 

  

第二部分 特别条款 /Part II Special Provision 协议编号 /Agreement Ref. No.: CL201508001

  

4 、 其他约定 / Others

 

为便于融资行监控客户的流动性情况, 客户及本授信合同项下的所有担保人应维持其主要账户开立于融资行, 且自本协议签署之日起 120 天内, 客户及各担保人应确保业务回笼资金通过在融资行开立的资金回笼账户办理。 

In order for the Financing Bank to monitor the liquidity of the client, the Client and any Guarantors under this facility shall maintain its primary bank account(s) with the Financing Bank. Within 120 days upon entering into this agreement, the proceeds of sales and other accounts receivable of the Client and the guarantors should be collected through the bank account for proceeds collection which opened at the Financing Bank.

 

未取得融资行同意的情况下, 客户、本授信合同项下的任何担保人及远特( 北京) 通信技术有限公司不得将其任何资产转让给第三方, 同时, 不得产生其他银行或第三方的额外债务( Red Lion Capital 的美元 3,000,000.00 授信除外) 。

Without the consent from the Financing Bank, the Client, any Guarantors under this facility and Yuantel (Beijing) Telecommunications Technology Co., Ltd. will not be allowed to grant any of its assets to third party or obtain additional indebtedness from other banks or third party (except for up to USD3,000,000.00 from Red Lion Capital).

  

在本授信合同有效期内, 客户在融资文件项下任何债务均应当优先于客户在 Red Lion Capital 的任何债务。  

Within the period of this agreement, any indebtedness of the client from Red Lion Capital shall be subordinate to any indebtedness of the client from the Financing Bank.

 

自本协议签署后, 客户应向融资行支付美元 15,000.00 (或总授信额的 0. 50%) 的贷款安排费。  

Upon entering into this agreement, USD15,000.00 (or 0.50% of total facility amount) Facility Fee will be due and payable to the Financing Bank.

  

关于资料提交, 自本协议签署后, 客户应: 

Upon entering into this Agreement, the client shall:

 

(1)     于每月结束之后 30 天内提供公司准备的合并的月度财务报表;  

submit Monthly Company prepared consolidated financial statements within 30 days of each month end;

 

(2)     于每月结束之后 30 天内提供应收账款账龄及应付账款账龄报告;  

Submit Accounts Receivable Aging and Payable Aging Report within 30 days of each month end;

 

(3)     于每月结束之后 30 天内提供合规证书;  

submit Monthly Compliance Certificate within 30 days of each month end;

 

(4)     于每月结束之后 30 天内提供借款基础证书;  

submit Monthly Borrowing Base Certificate within 30 days of each month end;

 

(5)     在董事会通过和/或年底前 30 天内提供经公司董事会通过的合并的的财务运营计划;  

submit Annual Board-approved consolidated financial projections within 30 days from Board approval and/or year end;

 

(6)    于每一年度结束之后 270 天内提供经注册会计师审计的合并的年度财务报表;  

submit Annual CPA-Audited consolidated financial statements within 270 days from year end;

 

(7)    其他经融资行合理要求的报告。  

submit such other reports which may be reasonably requested by the Financing Bank.

  

关于资料提交, 自本协议签署后, 播思通讯技术( 北京) 有限公司( 公司注册号: 110000450022704 , 作为本协议之“担保人”) 应:  

Upon entering into this Agreement, Borqs Beijing Ltd. (Company No. 110000450022704, the Guarantor under this Agreement) shall:

 

(1) 于每月结束之后 30 天内提供应收账款账龄及应付账款账龄报告;

Submit Accounts Receivable Aging and Payable Aging Report within 30 days of each month end;

 

(2) 每年对公司的应收账款进行审计。首次应收账款审计应于本协议签署之日起 180 天内完成;

AR Field Exam shall be conducted annually. The initial AR Field Exam should be done 180 days after upon entering into this agreement;

 

(3) 其他经融资行合理要求的报告。

submit such other reports which may be reasonably requested by the Financing Bank.

 

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

  

一般条款

GENERAL PROVISION

     

1. 额度

1. Facility

 

1.1 额 度

1.1  Facility

 

(a)   根据本协议规定, 融资行将向本授信协议 ( “授信协议”或“本协议” ) 列明的一个或多个客户 ( 以下分别或统称为 客户 ”) 提供最多不超过授信总额度之授信 ( “授信总额度” ) 。前述授信总额度由本协议第二部分 - 特别条款规定。

(a)  Pursuant to the terms and conditions of the clauses of this facility agreement (“Facility Agreement” or “Agreement”), the Financing Bank will extend to one or more Clients (individually or collectively the “Client”) a facility not exceeding the stipulated total facility amount of this Agreement (“Total Facility Amount”). The Total Facility Amount will be provided in Part II - Special Provision.

 

(b)   在任何时候, (i) 融资行按照本协议及其相关文件已经向本协议项下所有客户发放且未获偿还融资的基准币种金额, 与 (ii) 融资行按照客户的要求向第三方出具的所有尚未解除支付义务或未经客户足额偿付的支付义务或承诺 ( 无论其是否属于或有负债 ) 所涉基准币种金额之和, 不得超过本协议第二部分 - 特别条款中规定的授信总额度。提用额度涉及基准币种以外的其他可选币种时, 为计算目的, 由融资行依据本协议约定换算为基准币种金额。

(b)  At no time shall the sum of (i) the Base Currency Amount of all finance outstanding funded in accordance with this Agreement or other related documents by the Financing Bank to all Clients hereof but not yet repaid, and (ii) the Base Currency Amount of all outstanding amounts in relation to the payment obligations or undertakings of the Financing Bank made to any third party per the request of the Client, for which the Financing Bank’s obligation of payment (whether relating to the contingent liabilities or not) has not been released or reimbursed, exceed the Total Facility Amount specified in Part II - Special Provision. In case of any Optional Currency permitted hereunder and for the purpose of calculation, the Optional Currency shall be converted into Base Currency in accordance with the stipulations hereunder.

 

(c)   若以授信总额度减去: (1) 融资行已经向本协议项下所有客户发放且未获偿还融资的基准币种金额、及 (2) 按照客户的要求对外出具的所有尚未解除支付义务或未经客户足额偿付的支付承诺 ( 无论其是否属于或有负债 ) 所涉基准币种金额, 其余额即本协议项下“可用额度”。本协议履行期内, 融资行将以其认为合适的方式和汇率随时计算可用额度, 并在其认为合适的时候通知客户。

(c)  After netting out from the Total Facility Amount: (i) the Base Currency Amount of all finance outstanding funded in accordance with this Agreement or other related documents by the Financing Bank to all Clients hereof but not yet repaid, and (ii) the Base Currency Amount of all outstanding amounts in relation to the payment obligations or undertakings of the Financing Bank made to any third party as per the request of the Client, for which the Financing Bank’s obligation of payment (whether relating to the contingent liabilities or not) has not been released or reimbursed, the difference shall constitute the facility amount available to be utilized by the Client under this Agreement(“Available Facility Amount”). During the performance of this Agreement, the Available Facility Amount will be calculated by the Financing Bank at its sole discretion with respect to the calculation method and exchange rate(s) as deemed appropriate. The Financing Bank may notify the Clients if and when it deems necessary.

  

(d)   任何时候, 本协议项下之客户只能在可用额度内提用本协议项下额度; 并且, 若客户拟提用的额度所属之具体业务品种还规定有子额度的, 客户还应受限于该子额度可用余额的限制。若一项额度的提用申请可能或将导致授信总额度或具体业务品种子额度的突破, 则融资行有权拒绝客户对此等额度的提用。

(d)  Any utilization under the Facility hereunder by the Client hereof shall at no time exceed the Available Facility Amount; and further, if a sub-limit of the Facility is established under certain product type under this Agreement, any funding under such sub-limit facility shall still be subject to the available balance of the sub-limit. If a loan funding request for facility utilization may or will cause the aggregate financed amount to exceed either the Total Facility Amount or any of such sub-limit amount allowed under this Agreement, the Financing Bank shall be entitled to reject such request of the Client.

 

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

  

(e)   本协议所称“基准币种”系规定在本协议第二部分 - 特别条款中。

(e)  The Base Currency mentioned in this Agreement shall be determined in Part II - Special Provision.

 

(f)   本协议所称“基准币种金额”意指以基准币种标记的货币金额, 或者, 若一项金额系以基准币种以外的其他币种标记的, 则指由融资行以其自行决定的汇率将该其他币种转换为基准币种后的金额。

(f)  The Base Currency Amount mentioned in this Agreement refers to any amount denominated in the Base Currency or, if an amount is not denominated in the Base Currency, the corresponding amount of the Base Currency after being converted from such amount at the exchange rate determined by the Financing Bank at its sole discretion.

 

(g)   本协议所称“可选币种”意指本协议项下客户可以选择提用的除基准币种以外的其他币种, 具体由本协议第二部分 - 特别条款规定。

(g)  The Optional Currency mentioned in this Agreement refers to any currencies other than the Base Currency, which may be chosen for facility utilization and will be provided in Part II - Special Provision.

 

(h)   为免疑义, 本协议所称“授信总额度”及“可用额度”并不应被视为构成对融资行对客户在本协议项下最终实际提用额度的任何承诺、担保或义务; 此等额度仍应根据本协议相关条款规定, 由融资行最终决定。

(h) For avoidance of doubt, the Total Facility Amount and the Available Facility Amount referenced in this Agreement shall not be deemed as a commitment, guarantee or obligation of the Financing Bank to fund such facility amount to the Client. Final determination regarding such amounts shall be made by the Financing Bank in accordance with this Agreement, and at the sole discretion of the Financing Bank.

 

1.2 额度的可动用期

1.2 Availability Period

 

(a) 额度的可动用期分别由该额度所属具体业务品种之业务条款  ( 见第四部分 - 业务条款 ) 中规定的可动用期确定, 且该可动用期之届满日均不应晚于本协议第二部分 - 特别条款规定的最终到期日。若该具体业务品种业务条款对该品种额度未规定可动用期的, 则该品种额度的可动用期为本协议第二部分 - 特别条款规定之整个额度期限。

(a) The Availability Period of the facility hereof will be provided in the business clauses of each product type (see Part IV - Specification), and the last date of such Availability Period shall be no later than the Final Maturity Date provided in Part II - Special Provision. In case there is no Availability Period provided for a product type specified in the associated Specification, the Availability Period of such product type shall be the overall Facility Validity Period provided in Part II - Special Provision.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

(b) 客户应在本协议允许的可动用期内向融资行提出办理具体种类业务的申请。除非融资行另行同意, 具体业务品种项下额度的可动用期届满后, 该业务品种的未提用额度将立即自动取消; 并且, 除非融资行另行同意, 本协议第二部分 - 特别条款规定的额度期限 ( 或最终到期日 ) 届满后, 本协议项下所有业务品种的未提用额度均立即自动取消, 且本协议项下所有融资应视为立即到期应付。

(b) Any request of Facility utilization shall be submitted to the Financing Bank within the Availability Period permitted under this Agreement. Unless otherwise permitted by the Financing Bank, upon the expiration of the Availability Period of any certain product type, the unutilized portion of the Facility under such product type would be cancelled automatically and immediately. Also, unless otherwise permitted by the Financing Bank, upon the expiration of the Facility Validity Period (or Final Maturity Date) provided in Part II - Special Provision, the unutilized portion of the Facility under all product types under this Agreement would be cancelled automatically and immediately, and all outstanding finance hereunder shall be deemed as due and payable immediately.

 

1.3 具体业务品种和额度的使用

1.3 Product Type and Utilization of Facility

 

(a)   本协议项下额度可通过第二部分 - 特别条款中列明的具体业务品种形式进行提用。任一具体业务品种项下额度应由融资行全权审核并决定是否向客户提供。受限于本协议规定的授信总额度及其他子额度, 客户可一次或分次使用额度办理业务。除非经融资行以书面确认某具体业务项下额度使用无需逐笔申请, 否则客户均应逐笔提出业务申请并根据融资行要求签署和提交相应的业务文件。

(a)  The Facility under this Agreement can be utilized by the Client under the specified product type(s) permitted in Part II - Special Provision. Each product type may be made available and drawn by the Client, subject to the approval by the Financing Bank at its sole discretion. Subject to the Total Facility Amount and any sub-limit hereof, the Client may request Facility utilization in one lump sum or in several drawings. Except for the product type on which the Financing Bank has confirmed in writing that no case-by-case application is required for each facility utilisation under such product type, each facility utilization hereof shall be made available based on a separate request, and related application documents shall be signed and submitted by the Client in accordance with the requirements of the Financing Bank.

 

(b)   就本协议项下任一业务品种额度而言, 除非本协议第四部分有关业务条款另有规定, 否则当客户已部分或全部履行了相关融资的清偿义务或融资行已被充分解除了对外付款责任或被充分偿付后, 客户已清偿 / 释放 / 补偿部分所涉之授信额度将予以恢复, 并可于可动用期内再次提用。

(b)  For any product type under the Facility hereof, unless otherwise stated in Part IV – Specification related to such product type, when the Client has repaid the finance hereunder in whole or in part, or any payment obligation of the Financing Bank has been released or reimbursed completely, the repaid/released/reimbursed portion of such Facility may be re-borrowed by the Client during the Availability Period.

 

(c)   客户理解并同意, 除本协议第四部分 ( 业务条款 ) 中另有其他约定外, 本协议项下的额度为非承诺性的。客户同意, 无论是否为承诺性额度或本协议是否已实际签署, 融资行有权按其绝对酌定, 审核客户提供的额度提用申请及相关文件、独立判断该申请是否满足本协议的相关约定及融资行政策, 并 最终决定是否接受该申请; 但即使满足前述要求, 若客户申请使用额度时, 存在以下任一情形的, 融资行仍然有权拒绝客户的申请:

(c)   The Client acknowledges and agrees that unless otherwise stated in Part IV-Specification, the Facility shall be deemed as an uncommitted facility. The Client agrees that, regardless of the commitment of the facility given by the Financing Bank or whether this Agreement is executed or not, the Financing Bank may, after its review of any application and related documents in relation to the Facility utilization submitted by the Client, make its independent judgment as to whether or not the application satisfies the requirements of the Agreement and the internal policy of the Financing Bank, and at its sole discretion, decide whether or not to accept such application. However, even if the aforesaid requirements are fully satisfied, the Financing Bank shall reserve its right to decline such application under any of (but not limited to) the following circumstances:

 

(i)   按融资行的绝对酌定, 融资行未能以其可接受的条件获 得足够数量的外汇资金; 或融资行或客户履行本协议项下之义务将会导致违反任何适用之法律、法规或合规要求的;

(i)   Based on the sole independent judgment of the Financing Bank, it fails to obtain sufficient foreign exchange funds with acceptable terms and conditions; or it becomes unlawful, illegal, or out of compliance with any regulatory rules for the Client or the Financing Bank to perform its obligations under the Agreement;

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

  

(ii)   本协议依据监管要求需被调整、修订、补充的, 在该等 调整、修订、补充完成之前。

(ii)   Before the completion of any adjustment of, amendment or supplement to the Agreement if such adjustment, amendment or supplement is required by any regulatory authority.

 

1.4 额度的调整与取消

1.4 Alteration and Cancellation of Facility

 

就本协议项下的任何非承诺性额度, 融资行有权单方决定并在通知客户后调整或取消任何额度, 包括要求客户提前清偿已使用的额度及 / 或要求客户增加担保。上述决定自相关通知送达客户之日起生效, 客户同意放弃一切抗辩权。

For any uncommitted portion of this Facility, the Financing Bank may at its sole discretion, upon notice to the Client, change or withdraw any utilization(s), including requiring a prepayment of any part of utilized Facility and/or more security. The notice to the Client will be effective on its delivery date and the Client hereby agrees to waive all claimant rights.

   

2. 先决条件

2. CONDITIONS PRECEDENT

 

就每一客户而言, 除非融资行已经收到在形式和实质上令其满意的下列所有先决条件文件并满足下述条件及融资行不时要求的其他文件或条件, 否则融资行没有义务为客户提供本协议项下任何授信:

For each Client hereof, unless all required documents /conditions set forth below and any other document/condition required from time to time by the Financing Bank are fully received/deemed as satisfied by the Financing Bank in form and substance satisfactory to the Financing Bank, the Financing Bank shall have no obligation to make any of the Facility available to the Client:

 

2.1   经证实为真实的客户的下列文件原件的复印件:

2.1 The certified true photocopy of the following original documents of the Client:

 

(a)   最新经年检合格及有效的营业执照正本、副本;

(a) the latest and effective business license of the Client (the original and the copy), for which the latest annual review has been passed;

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

(b)   最新及有效的外商投资企业批准证书及相关商务部批复 ( 如有 ) ;

(b)  the latest and effective Certificate of Approval for the Establishment of Enterprises with Foreign Investment and the related approval of the Ministry of Commerce, if any;

 

(c)   最新及有效的公司组织机构代码证正本;

(c)  the latest and effective Organization Code Certificate (the original);

 

(d)   现时有效的税务登记证正本、副本;

(d)  the current and effective Tax Registration C ertificate (the original and a copy);

 

(e)   当前有效的外汇登记证;

(e)  the current and effective Foreign Exchange Registration Certificate;

 

(f)   最新的客户公司章程;

(f)  the latest Articles of Association;

 

(g)   中国人民银行发放的客户贷款卡号码与密码, 且有关查询结果令融资行满意;

(g)  the reference number and the password of the Client’s Credit Information Card that is issued by the People's Bank of China, and the related enquiry result is satisfactory to the Financing Bank;

 

(h) 由经融资行认可的会计师事务所出具的验资报告,证明客户的注册资本已经根据其有效的章程规定而足额缴纳;

(h)  a capital verification report that is issued by a certified accounting firm recognized by the Financing Bank, evidencing that the registered capital of the Client has been paid in full compliance with its valid Articles of Association;

 

(i) 客户法定代表人的签字样本、身份证 / 护照;

(i) the specimen of signature and the ID card/passport of the legal representative of the Client;

 

(j)   最近财务年度的客户经审计的财务报告 ( 若有 ) , 或如本协议附件四就具体业务另行要求的财务资料 ( 若融资行要求 ) ;

(j)  the audited financial statement of most recent fiscal year of the Client (if any), or otherwise as stated in Part IV Specification for certain product type (if required by the Financing Bank);

 

(k)   经证实为真实的、形式及内容经融资行认可的、关于批准本协议及相关文件的签署、送达、执行及具体条件的董事会决议或其他有权决定机构的决议, 该等决议应对有权签字人作出授权, 另外还应提交董事会成员名单或批准机构的成员名单以及其经验证无误的真实签字样本。

(k)  the board resolution or any other resolution made by a competent authorities, which is certified as true and in form and substance satisfactory to the Financing Bank, approving the signing, delivery, performance of, and the terms and conditions of this Agreement and other related documents; such resolution shall also contain the contents on the authorization of the authorized person(s) who signs, and the member list of the board or such other competent authorities shall also be provided together with the specimens of their signatures which are certified as true;

 

(l)   被授权代表客户签署本协议及客户向融资行所提交其他相关文件人员的经验证无误的真实签字样本。

(l)  the specimens of the signatures of the related authorized person(s) to sign on this Agreement and any other related documents presented to the Financing Bank, which are certified as true;

 

(m)   经客户公章证实为真实的、形式及内容经融资行认可的关于客户公司情况说明的公司信息完善表 ( 如融资行要求 )

(m)  the corporate information perfection certificate (if required by the Financing Bank), which is certified with its company chop as true and in form and substance satisfactory to the Financing Bank, stating the detailed information of the Client;

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

2.2 经证实为真实的担保人的下列文件原件的复印件:

2.2 The certified true photocopy of the following original documents of the security provider:

 

(a)   最新及有效的担保人营业执照 ( 如为外国实体的, 则为其注册登记证明文件 ) 、最新及有效的公司组织机构代码证正本 ( 如有 ) 及设立批准文件 ( 如有 ) ;

(a)  the latest and effective business license (for foreign entity, the registration certificate), the latest and effective Organization Code Certificate (the original, if any) and the related approval for the establishment (if any);

 

(b)   最新的担保人公司章程;

(b)  the latest Articles of Association;

 

(c)   担保人的现时股东名单;

(c)  the member list of the current shareholders;

 

(d)   担保人身份证明文件 ( 自然人适用 ) ;

(d)  the identity document (for the natural person);

 

(e)   中国人民银行发出的担保人的贷款卡或其担保配号, 且查询结果令融资行满意 ( 如适用 ) ;

(e)  the Credit Information Card or the guarantee number of the security provider that is issued by the People's Bank of China, and the related enquiry result is satisfactory to the Financing Bank (if applicable);

 

(f)   经证实为真实的、形式及内容经融资行认可的、关于批准相关担保文件签署、送达、执行及具体条件的董事会决议或其他有权决定机构的决议, 该等决议应对有权签字人作出授权, 另外还应提交担保人董事会成员名单或批准机构的成员名单以及其经验证无误的真实签字样本。

(f)  the board resolution or any other resolution made by a competent authority (acceptable to the Financing Bank), which is certified as true and in form and substance satisfactory to the Financing Bank, approving the signing, delivery, performance, and the terms and conditions of the related Security documents; such resolution shall also contain the contents on the authorization of the authorized person(s) who signs, and the member list of the board or such other competent authorities shall also be provided together with the specimens of their signatures which are certified as true;

 

(g)   被授权代表担保人签署有关担保文件及向融资行所提交其他相关文件的人员的经验证无误的真实签字样本。

(g)  the specimens of the signatures of the security provider’s authorized person(s) who sign on the Security documents and any other related documents presented to the Financing Bank, which are certified as true;

 

2.3 经客户有权签字人有效签署的本协议。

2.3 The Agreement duly signed by the authorized signatories of the Client.

 

2.4 经有效签署的担保文件并且已令融资行满意地完成为担保权设立所需的所有必要的批准与登记 ( 若有 )

2.4 All Security documents that have been executed duly and all necessary approval and registration(if any) have been completed to the satisfaction of the Financing Bank.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

2.5 客户在本协议项下到期应付的所有税费 ( 含与本协议有关的印花税 ) 、成本和支出已经全部支付或将于首次提款之前支付的证明。

2.5 Evidences that all taxes and fees, costs and expenses hereof have been paid by the Client or will be paid before the first drawdown of the Facility hereof.

 

2.6 如融资行要求客户就其资产进行投保的, 客户已提供令融资行满意的保险 ( 或保险批单 ) 以及保险费发票复印件, 且有关保险已将融资行设定为保险第一受益人;

2.6 If there is any requirement provided by the Financing Bank concerning the insurance over the Client’s assets, the related insurance policy (or the insurance endorsement) and the copy of insurance premium invoice deemed satisfactory to the Financing Bank shall be submitted by the Client, evidencing that the Financing Bank should be the first beneficiary of the foregoing insurance proceeds.

 

2.7 如融资行提供本协议项下的额度需获得监管机构的批准或完成监管机构要求的其它程序, 该等监管机构的批准或程序已获得或完成。

2.7 If there is any other approval or procedure required to be completed for the Financing bank to provide the Facility hereof, such approval or procedure has been obtained or completed;

 

2.8 融资行要求的与本次融资相关的所有银行账户已按融资行要求开立。

2.8 All necessary bank accounts required by the Financing Bank and in connection with the Facility have been opened at the Financing Bank per the requirements of the Financing Bank.

 

2.9 由融资行认可的律师事务所分别根据各授信文件所适用的不同法律所出具的内容和形式均令融资行合理满意的法律意见书已出具 ( 如融资行要求 )

2.9 The legal opinion(s) to be issued in accordance with the governing law(s) of related finance documents with contents and form satisfactory to the Financing Bank (if required), has(have) been issued.

 

2.10 融资行不时合理要求或认为有必要满足的其他先决条件。

2.10 Any other conditions precedent that the Financing Bank reasonably requires from time to time or deemed necessary.

 

2.11 除上述要求外, 每一客户每次提用本协议项下任何额度时, 还应当符合以下条件:

2.11 Besides the requirements mentioned above, each Client hereof shall also satisfy the following conditions before each utilization of the Facility hereof:

 

(a)   距提款日之前不少于三 (3) 个营业日向融资行提交《提款通知书》 ( 或符合融资行要求的其他额度提用申请文件 ) ;

(a)  submit the drawdown notice (or any other application documents for facility utilization request as required by the Financing Bank) no later than 3 Business Days before the intended drawdown date;

 

(b)   提款日须在额度可动用期内, 且须为营业日;

(b)  the intended drawdown date shall be a date within the availability period, and shall be a Business Day;

 

(c)   有足够的可用额度及 / 或具体业务品种子额度;

(c)  sufficient Facility and the sub-limit for the related product type for such drawdown is available;

 

(d)   本协议项下所有客户在本协议项下所做的各项陈述、保证、承诺和约定依照当时存续的事实及情形在所有方面仍是真实和准确的;

(d)  any representations, warranties, undertakings and covenants made by any Client under this Agreement remain genuine and accurate in all aspects according to the fact and situation when the Facility is utilized;

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

(e)   就本协议项下授信所提供的担保及担保文件仍然符合融资行的要求;

(e)  all the security and the Security documents provided hereunder remain in compliance with the requirements of the Financing Bank;

 

(f)   无违约事件或潜在的违约事件发生;

(f)  no Event of Default or potential Event of Default;

 

(g)   提款或额度提用符合本协议第四部分 ( 业务条款 ) 中的先决条件要求 ( 如有 ) , 并符合当时有效的、包括中国银行业监督管理委员会 ( “中国银监会” ) 、中国人民银行 (“ 人民银行 ”) 及外汇管理局等在内的监管机构不时发布的监管政策或要求。
(g)  the drawdown or the Facility utilization shall satisfy the conditions precedent provided in Part IV – Specification (if any), and shall also be in compliance with the effective regulatory policies or requirements published from time to time by the regulatory authorities such as the China Banking Regulatory Commission(“CBRC”), the People’s Bank of China(“PBOC”), the State Administration of Foreign Exchange(“SAFE”) or others.

 

2.12 为免疑义, 客户申请的预计提用授信的日期与实际提用授信的日期不一致时, 以实际提用授信日为准。实际提用授信日以融资行有关会计凭证 ( 如借款借据 ) 记载为准。

2.12 For the avoidance of the doubt, if the intended facility utilization date applied by the Client is not the same as the actual date on which the Facility is utilized, the actual date of facility utilization prevails. The actual date of facility utilization shall be that specified by the Financing Bank in its related accounting certificates (such as the borrowing receipt).

 

3. 陈述与保证

3. REPRESENTATIONS AND WARRANTIES

 

本协议项下每一客户在此均向融资行作出如下陈述与保证; 该等陈述与保证应视为由该客户在其每次使用额度时重复做出并持续有效:

Each Client under this Agreement hereby represents and warrants to the Financing Bank as below; and such representations and warranties shall be deemed as being restated by the Client when each Facility utilization request is made under this Agreement and shall be kept effective on an ongoing basis:

 

3.1 本协议项下每一客户均为根据中华人民共和国 ( “中国” ) 法律注册成立并有效存续的法律实体, 对其资产享有完全的合法权利并有权开展经营活动。

3.1 Each Client hereof shall be a legal entity duly incorporated and valid under the laws of the People's Republic of China (“PR China”), who has full power, authority and legal right to own its assets and to carry on its business.

 

3.2 本协议项下每一客户均有权签署本协议及其相关文件, 有权行使相关权利及履行相关义务, 且已就前述文件签署和履行之授权采取了任何所需之公司行为或其他行为。

3.2 Each Client hereof shall have full power and authority to enter into this Agreement and any related documents and to exercise its rights and perform its obligations hereunder, and all corporate and other action required to authorize its execution thereof and the performance of its obligations hereunder has been duly taken.

 

3.3 本协议项下每一客户签署本协议以及履行其在本协议项下的义务, 均不会违反任何对客户适用或对其资产或收入适用的法律、法规、司法裁决、授权、协议、合同或客户的其他义务 ( 且该等违反可能对客户的经营或财务状况或其在本协议项下之履约能力产生重大不利影响 )

3.3 It is not in breach of or in default under any law, regulation, judgment order, authorisation, agreement, contract or obligation applicable to it or its assets or revenues for the execution or the performance of this Agreement by any Client hereof, whereby such breach may lead to a material adverse effect on the Client’s business or financial condition or its ability to perform the obligations under the Agreement.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

3.4 本协议项下每一客户均未卷入任何可能对其履约能力产生重大不利影响 ( 依融资行的单独判断, 下同 ) 的诉讼、仲裁、行政程序或类似程序 , 亦未发生任何可能导致其卷入该等诉讼程序或类似仲裁程序的情形或威胁, 客户的高级管理人员或其资产或收入也没有遭遇上述情形或威胁。

3.4 Each Client is not involved in any litigation, arbitration, administrative proceedings or such similar procedures, which in the opinion of the Financing Bank may lead to a material adverse effect on the Client’s ability to perform its obligations hereof, is involved by any Client hereof, or may result in any situation or threat in relation to the foregoing occurs to any Client hereof or any Client’s senior management team or any of their assets or revenues.

 

3.5 本协议项下每一客户或其任何资产或收入均未卷入任何清算、破产、重整、兼并合并、分立、重组、解散、关闭、歇业或类似法律程序 , 亦未发生被指定接管人、管理人、托管人等任何可能导致涉及该等法律程序的情形。

3.5 Neither the Client nor any of its assets/ revenues is involved with liquidation, bankruptcy, reorganization, merger and acquisition, division, restructure, dissolution, closure, winding-down or any other similar legal proceedings or any such event as the designation of a taker-over, administrator or trustee, or any other circumstances which may lead to the foregoing legal procedure occurred.

 

3.6 本协议项下每一客户均保证向融资行提供的本协议项下或与本协议相关的全部资料、信息等在所有重要方面均是真实、有效、准确、完整, 客户保证无任何未知晓或隐瞒任何没有向融资行披露但将影响融资行的授信决定的重要事实或信息。

3.6 Each Client hereof warranties that all the materials and information supplied by the Client(s) to the Financing Bank under or in connection with the Agreement are genuine, valid, accurate and complete in all material respects, and each Client hereof confirms there is no material fact or information that such Client is not aware of or is concealed but if disclosed, may affect the determination of the Financing Bank on whether or not to provide the Facility hereunder.

 

3.7 本协议项下每一客户截至本协议签署之日均没有发生任何经营、资产或财务等状况方面的重大不利变化 ( 依融资行合理判断 ) , 也没有发生或存续任何违约事件或 ( 根据有关通知或随时间的流逝或前述两者 ) 将构成违约事件的情形。

3.7 Each Client hereof warranties that up to the execution date of this Agreement, there is no material adverse change (subject to the reasonable judgment of the Financing Bank) in the business, assets or financial conditions of any Client hereof, nor any Event of Default or any situation that, based on certain related notice about such occurrence, and/or in the passage of time, may lead to an Event of Default which has occurred or is in occurrence.

 

3.8 对于客户自身提供的财产担保, 本协议项下每一客户均保证其对该等担保财产享有充分的财产所有权, 其有权处分和转让该等担保财产; 并且, 除非系法律另有要求或已经融资行同意, 该等担保财产未处于任何第三方占有或保管下; 对于以知识产权提供担保的, 本协议项下每一客户均保证, 除 (i) 本协议客户在其日常业务经营过程中向它的客户所授予的非排他性许可及 (ii) 客户已在向融资行提交的公司信息完善表中已经披露的有关许可外, 其应为该等知识产权的唯一权利人。

3.8 With respect to any property security provided by the Client, each Client hereof warrants that it has full ownership rights over such security property and shall have the rights and power to transfer the security property; unless otherwise required by the laws or agreed by the Financing Bank, such security property is not in possession of any third party. For the security of intellectual property right, each Client hereof warrants that it is the sole right-holder of such intellectual property right, except for the circumstances of: (i) any non-exclusive licenses granted to its customers in the ordinary course of business, and (ii) the licenses described in the corporate information perfection certificate which is delivered by the Client to the Financing Bank in connection herewith.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

   

3.9 本协议项下每一客户均在此保证, 除经融资行允许的投资外, 其不拥有任何股票、合伙权益或其他权益证券。如融资行认为必要, 前述“融资行允许的投资”可由融资行另行后附并作为本协议附件。

3.9 Each Client hereof hereby warrants that it does not own any stock, partnership interest or other equity securities except for the investments permitted by the Financing Bank (“Permitted Investments”). If deemed necessary and appropriate by the Financing Bank, the foregoing “Permitted Investments” will be provided otherwise by the Financing Bank and attached to this Agreement as a schedule.

 

每一客户同时保证和承诺, 在本协议履行期内, 将根据融资行要求, 及时向融资行提交与业务品种有关合规证书及 / 或借款基础证书 ( 如要求 ) ; 该等文件的当前格式已附于本协议附件作参考, 但出具时最终应以融资行不时更新后最新版本为准。

Each Client hereof also warrants and undertakes that during the period of this Agreement, it shall, as per the request of the Financing Bank, promptly provide to the Financing Bank the Compliance Certficate and/or the Borrowing Base Certificate (if required); current format of such documents are attached in the Schedules of this Agreement for reference, but it shall anyway be subject to the latest version updated by the Financing Bank from time to time at the time of issuing.

 

4. 承诺和约定

4. UNDERTAKINGS AND COVENANTS

 

本协议项下每一客户在此均向融资行作出如下承诺; 该等承诺和约定应视为由该客户在其每次使用额度时重复做出并持续有效:

Each Client under this Agreement hereby undertakes and covenants to the Financing Bank as below; and such undertakings and covenants shall be reaffirmed by the Client when each Facility utilization request is made under this Agreement and shall be kept effective on an ongoing basis:

 

4.1 本协议项下每一客户均承诺只将本协议项下授信用于本协议规定的用途。

4.1 Each Client hereof confirms that it shall only use the Facility hereunder for the Purposes allowed herein.

 

4.2 本协议项下每一客户均应当按期足额偿还或支付本协议项下的任何到期应付债务 ( 包括与本协议相关的任何应付款项或费用 ) , 并严格根据本协议履行相关义务。

4.2 Each Client hereof shall fully and timely repay or pay any debt due and payable under this Agreement (including any payable fees or charges in connection herewith), and strictly perform the obligations under the Agreement.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

4.3 对于适用法律法规所要求的所有审核、授权、登记、许可及批准手续, 本协议项下每一客户应依法办理、取得并遵照执行, 并 ( 在任何规定的时限内 ) 保持其持续有效性, 以使客户能合法签署本协议并履行其义务, 并使之具有合法性、有效性、可执行性及被接受认可; 如果融资行要求, 客户应当立即出具上述相关证明。

4.3 Each Client hereof shall obtain, comply with the terms of and do all that is necessary to maintain in full force and effect (within any specified time limits needed) all verifications, approvals, registrations, licenses and consents required by applicable laws and regulations, to enable the Client lawfully to enter into and perform its obligations under the Agreement and to ensure the legality, validity, enforceability or admissibility thereof and, if required by the Financing Bank, promptly provide evidence of the same.

 

4.4 本协议项下每一客户均应自担费用并根据融资行的要求, 及时提供担保并签署相关文件及办理登记, 并执行融资行的合理指令办理担保相关事宜, 或按照本协议或融资行的要求增加担保。

4.4 Each Client hereof shall, per the request of the Financing Bank and at its own cost, promptly provide the security hereof, execute the related security documents and make registration and handle any issues in relation to the security as reasonably directed and required by the Financing Bank; the Client shall also provide the additional security pursuant to the stipulations of this Agreement or requirements of the Financing Bank.

 

4.5 本协议项下每一客户均应维持其商业存在并合理有效地从事经营, 还应遵守适用的相关法律、法规、授权、合同或其他义务以及按时纳税, 并在所有方面遵守其适用的所有法律。

4.5 Each Client hereof shall maintain its commercial existence and conduct its business in a proper and efficient manner. In addition, it shall comply with the applicable laws, regulations, authorisations, agreements and other obligations, pay all taxes timely, and comply with all of the laws applied in all respects.

 

4.6 本协议项下每一客户均应确保其在本协议项下的债务在任何情况下至少与客户其他无担保债务及非条件性、非附属性债务进行平等的按比例受偿。

4.6 Each Client hereof shall ensure its obligations under this Agreement should, at any time, rank at least pari passu with all the unsecured, unconditional and unsubordinated obligations of the Client.

 

4.7 本协议项下每一客户均应根据融资行要求, 在每个会计年度结束后 120 ( 或融资行同意的其他更长时间 ) 内提供经审计的财务报表 ( 中文版及 / 或英文版, 视融资行要求 ) , 以及在每月结束后的 30 天内提供其准备的、未经审计的上月度财务报表 ( 中文版及 / 或英文版, 视融资行要求 )( 融资行另行同意的情形除外 ) 。客户应根据融资行的不时要求及时向融资行提供所需的额外财务信息或其他信息。

4.7 Each Client hereof shall, at request of the Financing Bank, submit its audited financial statements (in English and/or Chinese language, to be determined by the Financing Bank) within 120 days (or any other longer period otherwise agreed by the Financing Bank) after the end of each financial year, and, its company-prepared and unaudited financial statements of last month (in English and/or Chinese language, to be determined by the Financing Bank) within 30 days of each month end (unless otherwise agreed by the Financing Bank). The Client shall supply the additional financial or other information as per the request of the Financing Bank requests from time to time.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

4.8 本协议项下每一客户均应根据融资行的不时要求, 提供与其在本协议项下履约能力有关的其他财务及经营信息, 并在发生名义金额达到客户净资产 10% 及以上的关联交易时, 立即将融资行要求的相关交易细节通知融资行。

4.8 Each Client hereof shall provide related financial and business information in relation to the Client's ability to perform its obligations under the Agreement, as the Financing Bank may request from time to time, and shall promptly inform the Financing Bank of the details required by the Financing Bank in relation to any related transactions whose nominal amount is equal to or exceeds 10 percent of the Client’s net assets.

 

4.9 本协议项下每一客户均应进行或安排他人进行所有其他与本协议相关的必要的或合适的行为和事项, 包括 ( 但不限于 ) 协助融资行遵守中国人民银行的信贷登记要求, 并在贷款融资期间一直向融资行提供客户的有效的中国人民银行信贷登记咨询系统 ( 以下简称“信贷登记系统” ) 号码和客户的有关密码。

4.9 Each Client hereof shall on its own or through a third party, undertake all other actions and things deemed necessary or appropriate in connection with this Agreement, including (but not limited to) items that will help the Financing Bank comply with the credit registration requirements of PBOC and provide the Financing Bank at all times during the lifetime of the Facility with the valid PBOC Credit Reporting and Consulting System ("CRCS") number and password of the Client.

 

4.10 [ 如为外商投资企业, 则适用 ] 本协议项下每一客户均应确保在本协议项下的境外担保发生融资行书面通知担保履约后的三个营业日内到客户所在地的外汇管理局办妥有关外债登记手续。客户应确保其被要求履约时应拥有足够的投注差 ( 投注差是指借款人的投资总额与其注册资本的差额 ) 以成功办理上述登记手续; 客户承诺其将会及时通知融资行其投注差不时发生的任何变更, 并在投注差不足以办理担保履约外债登记时采取所有必要的措施并自担有关成本以恢复足够之投注差。

4.10 [Foreign Invested Enterprise shall be applicable to this clause] Each Client hereof shall ensure that it should complete the related foreign debt registration in relation to the offshore security hereof duly with the local State Administration of Foreign (“SAFE”) within 3 Business Days after the Financing Bank notifies the Client in writing that such offshore security has been called upon. The Client shall ensure that it shall have sufficient Capital Gap (being defined as the difference between the total investment amount and the registered capital of the Client) to complete the procedures for the above foreign debt registration successfully; the Client agrees that it shall promptly notify the Financing Bank of any change to its Capital Gap, and in any case of inadequacy, the Client shall take all necessary measures and bear all related costs to reinstate sufficient amount needed to fill such Capital Gap for the completion of related foreign debt registration.

 

4.11 发生以下任一情况时, 本协议项下任一客户均应立即毫不迟延地书面通知融资行:

4.11 Upon the occurrence of any of the following, each Client hereof shall, immediately and without any delay, inform the Financing Bank in writing of such event:

 

(a) 任何客户的名称、地址、法定代表人、授权人员及公司章程发生变化;  

(a) any changes in any Client's name, location, legal representative, authorized person and the amendment to its Articles of Association;

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

(b)   任何客户或其高级管理人员或其关联企业卷入任何诉讼、仲裁、行政程序或其他类似程序, 并且有可能对该客户在本协议项下的履约能力造成重大不利影响 ( 依融资行合理判断 ) ;

(b)  any litigation, arbitration or administrative proceedings or other actions that involves or causes a threat against any Client or its senior management team or any of its related enterprise which may, in the reasonable opinion of the Financing Bank, have a material adverse effect on the Client’s ability to perform any of its obligations under the Agreement;

 

(c)   发生任一违约事件或 ( 根据有关通知或随时间的流逝 ) 可能构成违约事件的任何情况 ( 依融资行合理判断 ) ;

(c)  the occurrence of any Event of Default or situation that, based on certain notice and/or in the passage of time, may lead to an Event of Default (subject to the reasonable judgment of the Financing Bank);

 

(d)   任何客户的经营、资产或财务等状况发生重大不利变化 ( 依融资行合理判断 ) ; 及

(d)  the occurrence of any material adverse change in relation to the business, assets, financial or other conditions of any Client hereof (subject to the reasonable judgment of the Financing Bank); and

 

(e)   任何客户发生其他可能影响客户在本协议项下债务履行能力的重大不利事项 ( 依融资行合理判断 )

(e)  the occurrence of any other material adverse event that may affect any Client’s ability to fulfil its obligations under this Agreement (subject to the reasonable judgment of the Financing Bank).

 

4.12 未经融资行事先书面同意, 本协议项下客户不得:

4.12 Without the prior written consent of the Financing Bank, any Client hereof shall not:

 

(a)   对于客户的收入或资产的全部或任何主要部分, 通过一项或多项交易或一系列交易 ( 无论是否相关 ) 进行出售、出租、转让或进行其他处分;

(a)  sell, lease, transfer or dispose in any other manner, through one or several or a series of transactions (whether they are related or not), all or any of the majority part of its revenues or assets;

 

(b)   进行对外投资或增加任何第三方债务;

(b)  make outbound investment or increase its indebtedness from any third party;

 

(c)   就其现有的或未来的收入或资产为任何第三方设定或允许设定抵押、质押、留置等担保权益或任何权利负担, 但本协议签署之前已经存在的或经融资行同意的除外;

(c)  create or permit to create any mortgage, pledge, lien and other security interest or any other encumbrances over its current or future revenues or assets, for any third party, except for those existing before the signing of this Agreement or otherwise agreed and permitted by the Financing Bank;

 

(d)   减少本协议签署时的客户章程中所规定的注册资本;

(d)  decrease the registered capital provided in the Articles of Association at the date hereof;

 

(e)   改变客户的经营性质、经营范围; 及

(e)  change the nature or scope of any Client’s business; or

 

(f)   与任何他人进行合并、重组或兼并, 并在融资行看来, 将对客户履行本协议项下的义务的能力造成重大不利影响。  

(f)  enter into any merger, reorganization or consolidation with any third party, which, subject to the reasonable judgment of the Financing Bank, would lead to a material adverse effect on the Client’s ability to fulfil any of its obligations under this Agreement.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

4.13 只要本协议仍然有效, 若监管机构 ( 包括但不限于中国银监会、中国人民银行及外汇管理局 ) 对与贷款或授信有关的任何方面发布新的政策或规定的, 本协议项下客户确认将配合融资行就该等新政策或规定的遵守采取所有适当的行动, 以使本协议的履行以及融资行依据本协议提供贷款或授信始终符合监管要求; 本协议项下客户应按照融资行的通知配合履行相关义务, 及 / 或签署相关补充文件 ( 如融资行要求 ) 。若客户违反本款承诺的, 融资行保留拒绝客户进一步提用本协议项下任何额度或贷款以及提前收回全部或任何融资的权利。

4.13 As long as this Agreement remains in effect, if any new regulatory policy or regulation regarding the provision of the facility or loan is published by the regulatory authorities (including but not limited to CBRC, PBOC, SAFE), each Client hereof confirms that it shall take all proper actions in relation to staying in compliance with such policies or regulations, so as to ensure the performance of this Agreement and the provision of the loan or facility by the Financing Bank always in compliance with the regulatory requirements; any Client hereof shall, in accordance with the notice of the Financing Bank, assist to perform the related obligations, and/or sign the related supplementary documents(if required by the Financing Bank). If the Client fails to comply with the undertakings provided in this clause, the Financing Bank shall have the right to refuse any further facility utilization request or loan funding request made by the Client, and require the Client to repay any or all of the obligations under this Agreement to the Financing Bank prior to the original maturity date of the finance hereof.

 

4.14  客户在此不可撤销的确认和承诺, 将按照融资行要求及时支 付与本协议项下业务有关的各类费用; 具体种类和费率以融 资行不时公开适用者为准。

4.14 The Client hereby irrevocably confirms and undertakes that it would, as per the requirements of the Financing Bank, promptly pay all kinds of charges in relation to the business hereunder; and the types and fee standards shall refer to the criteria that the Financing Bank adopts publicly from time to time.

 

5. 关于贷款类额度提用的特别约定

5. SPECIAL COVENANTS CONCERNING THE DISBURSEMENT OF LOAN PROCEEDS

 

5.1 贷款类额度提用之支付条款

5.1 Disbursement

 

(a)   根据中国银监会发布的《流动资金贷款管理暂行办法》 ( 银监会令 2010 年第 1 号, 2010 2 12 日发布 ) , 融资行将对所发放贷款真实用途进行监督、控制及核实。倘若客户迄今尚未在融资行处开立过银行账户的, 则该客户承诺将在本协议项下申请任何提款前完成开立银行账户所需的一切手续。

(a)  In accordance with the Interim Measures for the Administration of Working Capital Loans (Order No.1, 2010, CBRC, Feb. 12, 2010) and related requirements, the Financing Bank is required to monitor, control and verify the true loan purpose. In case any Client has so far not yet opened a bank account with the Financing Bank, such Client undertakes it shall complete all formalities required for the opening of such account before any new loan drawdown under this Agreement can occur.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

(b)   贷款资金的具体支付方式将根据具体提款金额或对外付款金额及其他有关条件进行确定。贷款资金的支付方式分为“自主支付”或“受托支付”, 其中: “自主支付”系指客户提款后自行将贷款资金通过其账户支付给交易对象; “受托支付”系指融资行根据有关支持文件审核客户提款目的后, 依据客户的提款申请和支付委托, 将贷款通过客户账户直接支付给客户交易对象。本协议项下贷款类额度提用时的支付方式将根据有关具体业务条款以及本协议下述相关规定操作。          

(b)  The method of loan proceeds disbursement is to be determined in accordance with the loan advance amount or the amount needed to satisfy the outward payment as well as any other related conditions hereof. The disbursement method of loan proceeds can be in the form of either (i) the Independent Payment Method by Client (“ the Independent Payment Method ”) or (ii) the Entrusted Payment Method by the Financing Bank (“the Entrusted Payment Method”) . The Independent Payment Method means that the Client independently uses the loan funds to make payment through its account to its commercial counterparty. The Entrusted Payment Method means that the Financing Bank based on supporting documents verifies the loan purpose before accepting the Client’s drawdown application/notice and payment authorization to pay the loan proceeds through the Client’s account to his commercial counterparty directly. The disbursement of loan funds shall be made in accordance with the stipulations stated in the relevant Specifications and the disbursement method specified below.

 

就以下任一或全部情形, 流动资金类贷款应当采用受托支付方式:  

For Working Capital Loans, the Entrusted Payment Method shall apply under any or all of the following circumstances:

 

(i)    任何客户根据本协议申请的单次提款金额在等值人民币 500 万元以上 ( 为免疑义, 不含本数 ) ; 融资行有权对该金额根据其需要不时进行调整; 或  

(i)  any single payment of any Client under this Agreement of which the amount exceeds CNY[5,000,000.00] (for avoidance of doubt, exclusive of the number) or its equivalents in other currencies; the Financing Bank has the right to revise this amount at any time as considered appropriate; or

 

(ii)   融资行认为有必要采取受托支付方式的其他情形。  

(ii)  any other circumstance the Financing Bank considers necessary to apply the Entrusted Payment Method .

 

(c)  依据本协议实行受托支付时, 客户应当在提交的提款通知书中包括支付委托指令, 并连同相应的商务合同等证明材料提交融资行。融资行审核同意后, 将贷款资金及时 ( 通常在同一营业日 ) 通过客户账户支付给客户指定交易对象。客户请求的支付对象、支付金额等信息与相应的发票、商务合同等证明材料不符的, 融资行有权拒绝发放本次提款。客户应对该等商务合同等证明材料的真实性、准确性负责, 如因该等材料缺乏真实性、准确性导致的任何损失均由客户自行承担, 如因此导致融资行的任何损失的, 客户应全额予以赔偿以使融资行免受损失。

(c) If a payment is to be made by the Entrusted Payment Method, the Client shall submit to the Financing Bank a drawdown application/notice which contains a clause of payment authorization, together with the relevant transaction materials. After examination and consent, the Financing Bank shall promptly pay, generally within the same business day, the loan proceeds to the Client’s specified commercial counterparty related to such commercial transaction through the Client’s account. In case of any discrepancy between the information in the payment authorization letter/payment order  such as  the amount of payment or the payee  and  that stated in  the relevant transaction materials such as invoice or business contract, the Financing Bank shall have the right to decline such drawdown request. The Client shall guarantee the authenticity and accuracy of such materials including transaction contract, and will be liable for any loss arising from the lack of authenticity and accuracy of the said materials. In case there is any associated loss incurred by the Financing Bank, the Client shall reimburse the Financing Bank fully and keep the Financing Bank harmless from such losses.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

(d)   任何经由受托支付方式对外支付的款项, 如果由于客户在支付指令中提供的付款信息不完整或者不正确或任何其他原因被退回客户的原账户, 在客户重新提交正确的付款指令之前, 就该等退回款项, 融资行有权暂不贷记客户账户, 或者冻结已贷记客户账户的该等退回款项。

(d)  If any payment made by the Entrusted Payment Method is returned to the original account of the Client due to the incomplete and incorrect information in the payment order provided by the Client or any other reason whatsoever, the Financing Bank shall reserve the right not to credit such returned amount to the Client’s account for the time being or to freeze such returned amount if it has already been credited to the Client’s account until a new and correct payment order is provided by the Client to the Financing Bank.

 

(e)   依据本协议实行自主支付时, 客户应在每次提款前向融资行提供提款计划 ( 若有 ) 及用途说明, 并应在提款后每三个月内 ( 或融资行同意的其他时间 ) 向融资行提交贷款资金支付情况的汇总报告, 证明贷款资金的使用情况符合本协议项下之贷款用途。客户还应提供令融资行满意的与贷款用途匹配的任何与支付有关的发票、商务合同和支付凭证和 / 或融资行认可的其他证明材料, 供融资行进行核对。融资行有权不时通过账户分析、凭证查验或现场调查等方式核查贷款支付是否符合约定用途。

(e)  If payments are made by the Independent Payment Method , the Client shall provide the drawdown schedule (if any) and the loan purpose statement before each drawdown, and from the date of drawdown, provide to the Financing Bank summary reports periodically every 3 months (or any time as required by the Financing Bank), evidencing the proper utilization of the loan proceeds according to the loan purpose specified in this Agreement. The Client shall also be obliged to provide other evidences satisfactory to the Financing Bank and in compliance with the loan purpose for the Financing Bank’s checking and examination, including all invoices, business contracts and payment certificates in connection with the concerned payments or any other evidence acceptable to the Financing Bank. The Financing Bank shall have the right to check whether the payment conforms to the stipulated loan purpose through analysis of the account, inspection and verification of the vouchers, on-site investigation and other means from time to time.

 

(f)   若贷款采用自主支付方式的, 融资行有权在依融资行看来以下情形出现时将贷款支付方式立即变更为受托支付方式, 且融资行有权根据自行判断, 进一步采取包括但不限于停止放款并要求本协议项下全部或部分客户立即偿还所有贷款的措施: (i) 客户擅自改变贷款用途; (ii) 根据融资行合理判断, 客户信用状况下降、业务或财务状况恶化或贷款资金使用出现异常的; (iii)   客户通过化整为零方式 ( 即将本应为单笔大额贷款支付的申请分拆为多笔贷款支付申请, 降低单笔贷款支付金额 ) 规避受托支付方式 ( 根据有关交易资料诸如合同发票等进行判断 ) ; (iv) 融资行认为应该变更支付方式的其他情况。

(f) If payments are made by the Independent Payment Method and, in the opinion of the Financing Bank, any or all of the following circumstances occur, the Financing Bank shall have the right to immediately change the loan proceeds disbursement method from the Independent Payment Method to the Entrusted Payment Method, and further, subject to its sole judgment, the Financing Bank shall also have the right to take necessary measures including but not limited to the cease of additional loan funding and demand for all or part of the Clients to repay all the outstanding debts hereof immediately: (i) any misuse of loan funds by the Client(s); (ii) in the opinion of the Financing Bank, a deterioration in any Client’s credit standing, its business or financial conditions, or any abnormal usage of the loan funds; (iii) any Client’s avoidance of the Entrusted Payment Method through separation a single payment into several drawdowns /payments with smaller amounts (to be judged based on related transaction information such as business contract or invoice); (iv) any other circumstance the Financing Bank considers necessary to change the disbursement method.

  

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

5.2 贷款及财务信息提供、贷后检查和回笼资金管理

5.2 Related loan and financial Information Report, Post-loan Examination and Sale’s Proceeds Management

 

根据中国银监会关于流动资金类贷款管理的要求, 本协议项下每一客户均在此承诺并确认:

Subject to the regulatory requirements from CBRC concerning the management of working capital loans, each Client hereof undertakes and confirms the following:

 

(a) 客户有义务向融资行提供融资行审核和监管本协议项下流动资金贷款所需的所有信息, 包括但不限于: (i) 客户组织架构、公司治理情况; (ii) 客户经营范围、核心主业、生产经营、贷款期内经营规划和重大投资计划情况; (iii) 客户所在行业状况; (iv) 客户应收账款、应付账款、存货等真实财务状况; (v) 客户营运资金总需求和现有负债情况; (vi) 客户关联方及关联交易等情况; (vii) 贷款具体用途及与贷款用途相关的交易对手资金占用等情况; (viii) 还款来源情况, 包括资产负债表信息、生产经营产生的现金流、综合收益及其他合法收入等; (ix) 客户通过担保人担保 / ( 如有 ) 实现的偿债能力等情况。客户应承诺并确保该等信息在协议履行期内始终真实、有效、完整。

(a) The Client(s) hereof shall be obliged to provide all necessary information concerning the working capital loan for the review and supervision by the Financing Bank, including but not limited to (i) the organizational structure, corporate governance of the Client(s); (ii) each Client’s scope of business, core business, and production and/or operational status of the Client, its operation plan and any significant investment plan throughout the term of the Facility; (iii) the situation of the industry which the Client is engaged in; (iv) the Client’s account receivables, payables, inventory and other actual financial conditions of the Client; (v) the total working capital demand and current indebtedness of the Client; (vi) Client’s related parties and related transactions; (vii) the specific purpose of the loan and the use of funds by the counterpart in the transaction; (viii) the source of funds for repayment, including balance sheet cash, cash flow generated from operations, consolidated income and other legal income from production and operation; (ix) the Client’s loan repayment capability resulting from the liquidation of Security  (property  security  or guarantor).  The Client(s) hereof shall warrant and confirm that such information is consistently true, effective and complete during the lifetime of the Agreement.

  

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

(b)   融资行有权根据客户所属行业经营特点, 自行决定对客户采取定期与不定期现场检查与非现场监测, 了解客户最新经营、财务、信用、支付及还款能力、担保及融资数量和渠道变化等状况, 掌握各种可能影响客户在本协议项下之任何偿债能力的风险因素。本协议项下每一客户均对此应予以必要配合和同意, 客户应保存贷款资金使用记录或其他资料, 并按融资行要求及时提供前述材料。

(b)  The Financing Bank may, at its full discretion and based on the characteristics of the industry each Client belongs to, decide to take periodic or one-off on-site (or off-site) inspection on any Client hereof in order to understand the Client’s updated business operation and financial conditions, as well as its credit status, its loan repayment ability, security, the amount and other details of debt finance, the variation of distribution channels and any other risk factors that might affect any Client’s ability to repay any of its debt obligations hereunder. Each Client hereof agrees to provide necessary assistance in this regard. The Client hereof shall maintain all the usage record related to each loan funding or any other information, and promptly provide such information to the Financing Bank as requested.

 

(c)   客户确认将按照融资行要求开立或指定专门资金回笼账户并及时向融资行提供该账户资金进出情况; 若客户故意通过融资行指定账户以外的其他账户收取回笼资金或融资行认为其在资金回笼方面有重大不利情形的, 融资行有权向客户要求提前收回贷款。

(c)  Each Client hereof confirms that it shall, per request of the Financing Bank, open or designate a special account for the receipt of its sales proceeds and promptly provide to the Financing Bank its cash flow information of such account(s) to the Financing Bank. The Financing Bank reserves the right to demand early repayment of the loan if the Client is found to have purposely redirect sales proceeds to account(s) other than the account designated by the Financing Bank, or it is deemed by the Financing Bank that there is a material deterioration in the collection cycle.

 

(d)   客户承诺将满足融资行就流动资金贷款类额度使用提出的相关贷款支付管理、贷后管理及检查要求。

(d)  Each Client hereof undertakes that it shall meet the Financing Bank’s request in loan disbursement management, post-drawdown management and inspections in relation to the working capital loan.

 

6. 还款

6. REPAYMENT

 

本协议项下每一客户应当在本协议第四部分具体业务品种条款所规定的相关债务到期日清偿该品种有关债务, 并且, 无论本协议第四部分具体业务品种条款对还款时间是否有相反规定, 客户应在本协议第二部分 ( 特别条款 ) 规定的最终到期日前归还本协议项下所有业务种类项下的全部债务 ( 但经融资行另行同意的情形除外 )

Each Client hereof shall, in accordance with the stipulations on debt maturity date of the related facility product provided in the Specification in Part IV hereunder, repay the debts under such facility; in addition, regardless of any contrary provision on the repayment schedule under any Specifications in Part IV hereunder, all outstanding debts of any Client hereof under all Specifications in this Agreement shall be repaid fully on or before the Final Maturity Date specified in Part II (Special Provision) hereunder (unless otherwise agreed by the Financing Bank).

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

任何客户在还款时应以与融资资金相同的币种进行偿还; 为免疑义, 即使在根据司法判决取得人民币还款资金 ( 或债务币种以外的其他币种还款资金 ) 的情况下, 本协议项下客户仍有义务确保将该等还款资金通过结售汇转换为债务币种以清偿债权, 并在此后相应还款义务方可视为被解除。

For any repayment under this Agreement, any Client hereof shall use the same currency as one in which the financed funding is denominated; for avoidance of doubt, even if related funds (in CNY or any other currency other than one in which the financed funding is denominated) can be legally (via judicial judgment) made available for the repayment of the loan, the Client(s) hereof shall still be obliged to ensure that such funds would be converted into the debt original currency through the foreign exchange conversion (sell or purchase) so as to complete the repayment denominated in the same loan currency, and the corresponding repayment obligation of the Client under this Agreement will not be deemed as being completely fulfilled until the foregoing requirements on the loan repayments with the required currency have been satisfied.

 

7. 汇率约定

7. EXCHANGE RATE

 

本协议项下所有涉及抵销、计算授信额度或子额度、基准币种或可选币种的换算关系等事项中需要确定换算汇率的, 除非本协议另有明确约定, 均应由融资行按照其自行确定的汇率进行换算, 相关的汇率风险及损失均应由客户承担。

In the case where any foreign currency exchange rate is to be used to calculate the amount for, or set-off of the Total Facility Amount or the sub-facility limit(s) hereof, or is required during the determination of the conversion rate and method used for the Base Currency and the Optional Currencies or other similar issues, unless otherwise expressly provided in this Agreement, it shall be determined by the Financing Bank at its sole discretion, and any risk or loss resulting from therefore shall be borne by the Client.

   

8. 债务抵销及扣划授权约定

8. SET-OFF AND AUTHORIZATION TO DEDUCT

 

本协议项下每一客户均不可撤销的授权融资行, 若客户对于融资行有任何到期未清偿债务时, 融资行均有权无需事先通知, 即可将本协议项下客户在融资行任何账户中的款项 ( 不论该款项存期是否已到、币种如何 ) 直接用于偿付上述债务, 由此产生的利息或其他损失由客户承担。客户不可撤销地授权融资行有权为上述抵销目的, 以前述账户中全部或部分款项兑换或购买适当的货币以清偿债务 ( 相关汇率由融资行自行决定 ) , 因此导致的汇率风险因由客户承担。

Each Client hereof hereby irrevocably authorizes that the Financing Bank shall be entitled to, without any prior notice, set off any debt due and payable by the Client(s) with the amount in any of its account maintained at the Financing Bank (regardless of whether such amount of deposit is at maturity or not, or whatever the currency of such amount is denominated in); any loss in relation to the interest accrued therefore or other costs shall be borne by the Client(s). Each Client hereof hereby also irrevocably authorizes that the Financing Bank may use the entire or any part of the Client’s account balance to convert or purchase the appropriate currency as may be necessary for this purpose (the related exchange rate(s) shall be determined by the Financing Bank at its sole discretion), and   the   volatility   risks   resulting   from   such foreign exchange shall be borne by the Client(s).

 

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

9. 费用补偿约定

9. INDEMNITY

 

9.1 除非相关法律另有明确的相反规定, 客户应承担与本协议有关的谈判、准备、签订、登记、履行以及任何有关本协议的修改、补充、放弃和同意的费用和成本。

9.1 Unless expressly provided by the laws to the contrary, the Client(s) hereof shall be obliged to assume all costs and expenses in relation to the negotiation, preparation, entry into, registration or performance of this Agreement, and also those relating to any amendment to, supplement of or the waiver or consent with respect to this Agreement.

 

9.2 除非相关法律另有明确的相反规定, 对于融资行因追索本协议及相关文件项下的到期债务或保护及执行其权利而产生的一切成本、费用及支出, 包括但不限于法律服务费及其他费用、成本及收费以及其他实际发生的费用, 客户应全额补偿融资行。

9.2 Unless expressly provided by the laws to the contrary, the Client(s) hereof shall be obliged to indemnify the Financing Bank fully against all costs, expenses and expenditures in relation to the recourse or recovery of the creditor's rights under this Agreement and other related documents, and those in relation to the protection or exercising of the rights hereof, including but not limited to the legal or other fee, costs and charges or any other disbursements occurred in this regard.

 

10. 罚息与复利

10. PENALTY AND COMPOUND INTEREST

 

10.1 罚息适用于任何逾期或挪用的金额, 并应根据本协议的约定计收。

10.1 The penalty rate shall be applicable to the amounts overdue or misappropriated according to stipulations in the Agreement.

 

10.2 对任何到期应付而未付的利息 ( 包括复利 ) , 应以罚息利率计收复利, 复利按日计算, 计收期间为从应付利息未付之日直到融资行收到了全部的应付利息及复利为止。

10.2 The compound interest shall accrue on any interest due and payable but unpaid (including any compound Interest) at the penalty rate, which shall be calculated on a daily basis from the date when such interest becomes due until the date when the Financing Bank receives in full amount of the accrued and unpaid interest, as well as compound Interest.

 

11. 债务证明

11. EVIDENCE OF DEBT

 

融资行将按照其一贯的业务操作准则, 在其会计账簿上保持一套与本协议及所有相关文件所涉及的业务活动相关的会计账目及凭证。除明显错误外, 客户均承认该有关会计账目和凭证的记录是客户债务的有效证据。

The Financing Bank will, in accordance with its ordinary course of its business operation, keep a set of accounting items and supporting documents which are related to the business activities specified in this Agreement and other related documents. Unless for those being proven as an explicit error, each Client hereof hereby acknowledges that such accounting items and supporting documents shall be the effective evidences for the debt obligations of the Client. to the Financing Bank.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

12. 通知

12. COMMUNICATIONS

 

12.1 通知应采用挂号信、专人递送、传真或电子邮件的方式, 需要传递的通知或文件应送达到本协议开头签署页所列的当事方地址, 若有变更, 应提前至少 15 天书面通知对方。

12.1 Each communication hereunder shall be made by registered mail, courier delivery, facsimile or e-mail. The address used for any communication or delivered of documents between the concerned parties shall be one(s) stated on the Execution Page of this Agreement; in case of any change to the foregoing address, the changing party shall notify the other party by at least 15-day prior written notice.

 

12.2 通知或文件的送达确认方式如下: 采用传真或电子邮件方式的, 视为在发送之日送达; 采用挂号信方式的, 为挂号信寄发之日起的七个营业日后视为送达; 采用专人递送方式的, 视为在送到本协议签署页中载明的地址并签收后送达。 尽管有上述约定, 但向融资行发出或交付的所有通知、文件均须在融资行实际收到时被视为已经送达。 12.2 Any communication or delivery of document hereunder shall be deemed as effectively made as below: for the communication or delivery made by facsimile or e-mail, the date of sending; for the communication or delivery made by the registered mail, when 7 Business Days elapsed from the mailing date, for the communication or delivery made by courier delivery, when delivered at the address specified in the Execution Page of this Agreement and signed for receipt. N otwithstanding the foregoing, any communication or document to be made or delivered to the Financing Bank shall only be deemed effective on the day of actual receipt by the Financing Bank.

 

12.3 客户同意任何公文、传票、命令、判决或其他司法文件若寄到、送到或留置在其在本协议签署页中载明的地址即视为对客户生效并有约束力。

12.3 Each Client hereof agrees that any writ, summon, order, judgment or other legal documents shall be deemed duly and sufficiently served on it only if addressed to it and left at or sent by post to its address specified in the Execution Page of this Agreement.

 

13. 违约事件 13. EVENTS OF DEFAULT

 

13.1 下述任一事件均构成本协议项下全体客户在本协议项下之违约:

13.1 Each of the following events shall constitute and deemed as an Event of Default of all Clients under this Agreement:

 

(a)   任何客户未依本协议约定按时足额支付任何到期应付的本息或其他款项;

(a)  Any Client’s failure to pay any principal, interest or other sum due and payable under this Agreement on the due date ;

 

(b)   任何客户未遵守在本协议或相关文件中所作的陈述或保证, 或存在或被证明存在该等陈述与保证于被作出或视为被作出时在重大方面存在不真实或不正确之情形;

(b)  Any Client’s failure to comply with any representation or warranty made by such Client under this Agreement or any related document, or any representation or warranty hereof is or is proved to be unreal or incorrect in any material respect at the time when such representation or warranty is made or deemed to be made;

 

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

(c)   任何客户未履行或遵守本协议第 3 条、第 4 条、第 5 条中规定的全部承诺, 或违反本协议其他条款;

(c)  Any Client’s failure to perform or observe any of its undertakings or covenants under Clause 3, Clause 4 or Clause 5 hereof, or any other provisions of this Agreement;

 

(d)   任何客户卷入或可能卷入清算、破产、重整、接管等法律程序, 或发生被指定接管人、管理人、托管人或类似人员等情形, 或其任何或全部资产或收入遭遇上述程序或情形;

(d)  In any situation where any Client hereof is or will be involved in any liquidation, bankruptcy, reorganization, takeover or any other similar legal proceedings, or any receiver, administrator, trustee or other similar staff is designated to take over any Client hereof, or any or all of the assets or revenues of any Client hereof is involved in the aforesaid proceeding or situations;

 

(e)   任何客户卷入或可能卷入任何诉讼、仲裁、行政程序或其他类似程序或遭遇该类程序的威胁, 并且 ( 依融资行的合理判断 ) 有可能限制或对客户履行、执行或遵守本协议项下的义务的能力造成重大不利影响的;

(e)  In any situation where the Client is or will be involved in any litigation, arbitration, administrative proceedings or other similar proceedings or being threaten by the foresaid circumstances, which, in the reasonable judgment of the Financing Bank, may restrain or lead to a material adverse effect on the Client’s ability to perform, enforce or comply with its obligations under the Agreement;

 

(f)   任何客户的全部或主要资产或收入被扣押、查封、征收、强制执行或被采取了具有同样效力的其他措施, 或者任何客户的经营、资产或财务等状况发生重大不利变化, 或发生其他情况可能导致任何客户履行本协议项下的义务的能力受到重大不利影响;

(f)  In any situation where the majority or all of any Client’s assets or revenues are detained, seized, expropriated, or enforced under a compulsory enforcement proceedings or any other similar circumstances, or the occurrence of any material adverse change in the business, assets or financial condition of any Client, or other situations which may lead to a material adverse effect on any Client’s ability to perform its obligations under the Agreement;

 

(g)   任何客户利用关联交易或与关联方串通损害融资行利益;

(g)  In any situation where any Client infringes any benefits or interests of the Financing Bank as a result of its engagement with related parties in conspiracy and such related transactions;

 

(h) 任何客户的股东或控制权结构不再符合融资行在本协议项下所作要求;

(h) Any Client’s ownership and shareholder structure no longer meets the requirements set by the Financing Bank under this Agreement;

 

(i) 任何客户突破本协议约定的授信总额度、各子额度限额或财务指标约束 ( 如有 ) 的;

(i) Any breach or exceeding of the stipulated Total Facility Amount, any of the sub-limits under specifications or any other financial covenants (if any) by any Client hereof;

 

(j) 任何客户未按约定用途使用本协议项下授信额度或贷款的;

(j) Any Client’s failure to use the Facility/loan proceeds in accordance with the purposes as stipulated herein;

 

(k) 任何客户未按约定方式进行贷款资金支付的, 或任何客户故意以化整为零的方式规避受托支付, 或未及时履行发票等付款信息及资料提供义务, 或所提交资料虚假或与贷款用途不相符;

(k) Any Client’s failure to use the funds under the Facility in accordance with the disbursement method stipulated herein, or any such out-of-compliance situations arising from any Client’s attempt to avoid the mandatory requirement of the Entrusted Payment Method by splitting a large amount into several smaller drawdowns or payments, or not providing the payment information (including invoice information) and other materials in a timely manner, or the materials provided by any Client being false or inconsistent with the purposes of the Facility/loan hereof;

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

(l) 任何客户在以其为当事人之一的其他协议或文件项下发生违约事件, 并且 ( 依融资行合理判断 ) 可能限制或对客户履行、执行或遵守本协议项下的义务的能力造成重大不利影响; 为免疑义, 就本项而言, 只要发生以下任一情形, 即应视为已构成本条前述之“重大不利影响”: (i) 任何客户在其与融资行签署的除本协议以外的其他融资文件项下发生任何违约; 或 (ii) 任何客户在其与融资行以外的其他金融机构所签署的融资文件项下发生任何违约; 或 (iii) 任何客户在其与金融机构以外机构签署的合同项下发生违约, 且违约所涉金额达到等值 10 万美金的。

(l) Any occurrence of an event of default by any Client under the agreement or document to which such Client is a party, which, in the reasonable judgment of the Financing Bank, may lead to a restriction or material adverse effect on the Client’s ability to perform, enforce or comply with its obligations under the Agreement; For avoidance of any doubt, if, any of the following occurs, it shall constitute a material adverse effect stated in this clause: (i) any contractual breach of any Client hereof under any financing documents other than this Agreement, entered into by and between such Client and the Financing Bank; (ii) any contractual breach of any Client hereof under any finance document entered into by and between such Client and any financial institution other than the Financing Bank under this Agreement; or (iii) any contractual breach of any Client hereof under any agreement entered into by and between such Client and any party other than the financial institution, whereby the amount related to such default is equal to or exceeds USD10,000.00 or its equivalents in other currency;

 

(m) 任何担保文件未成立、被撤销、被解除或被宣布无效或不再具有可执行性, 或任何担保文件项下担保人或保证人发生违约的; 及

(m) If any of the security documents hereof becomes ineffective, or is canceled, dismissed, declared as null and void, or is no longer enforceable, or any security provider or guarantor defaults under the security documents hereof; and

 

(n) 发生任何其他情况或行为, 并 ( 依融资行自行判断 ) 有可能对客户的履约能力或融资行利益造成不利影响的。

(n) any other circumstances or acts, which, in the sole judgment of the Financing Bank, may lead to a material adverse effect on any Client's ability to perform this Agreement or the benefits of the Financing Bank.

 

13.2 一旦发生任一上述违约事件 ( 无论客户是否已向融资行发出了通知 ) , 只要融资行未得到满意的补救, 则融资行有权立即 通知本协议项下全部或部分客户并宣布取消全部或部分客户在本协议项下的全部 ( 或部分 ) 未使用之额度, 及 / 或要求任何客户立即偿还本协议项下全部 ( 或部分 ) 未清偿债务 ( 无论是否到期 ) ; 融资行有权在违约事件发生后视情形采取包括但不限于改变贷款资金支付方式、行使抵消权或扣划任何客户账户、执行担保项下权利以及中国法律允许的任何其他措施。

13.2 Upon the occurrence of any Event of Default provided herein (regardless of whether related notice has been given by the Client(s) to the Financing Bank), so long as such Event of Default has not yet been cured to the satisfaction of the Financing Bank, the Financing Bank shall have the right to notify any or all Clients hereof immediately and declare the cancellation of any or all of the unutilised facility provided herein, and/or require any Client hereof to immediately repay any or all outstanding debt amount under the Facility (regardless of whether or not due); in addition, the Financing Bank shall also have the right to take any or all measures (as the case may be) after the occurrence of  the  Event  of  Default:  change  the  disbursement method of loan proceeds, set off or deduct the accounts of any Client hereof, enforce the security interest under any collaterals or take any other measures permitted under the laws of the P.R. China.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

13.3 若本协议项下额度系用于贷款以外的其他产品 (“ 非贷款品种授信” ) , 例如开立信用证、保函或类似形式之或有债务性融资产品的, 则发生违约事件时, 本协议项下任何客户均应 根据融资行要求立即归还或补偿融资行此类产品的名义金额, 或提供令融资行满足的其他担保, 而无论融资行在非贷款品种授信项下之付款责任或垫付资金行为是否已实际发生。

13.3 In the event that any Facility hereof is used for the product type other than the loan (“Non-loan Facility”), such as for purpose of the issuance of the Letter of Credit, Letter of Guarantee or any such similar product type with contingent liability, then, upon the occurrence of the Event of Default, any Client hereof shall, per the requirements of the Financing Bank, immediately repay or indemnify the Financing Bank with the nominal amount obligation of such Non-loan Facility products, regardless of whether the actual liability under such Non-loan Facility has been borne or paid by the Financing Bank.  

 

14. 转让与转移

14. ASSIGNMENT AND TRANSFER

 

14.1 未经融资行事先书面同意, 本协议项下任何客户不得向第三方转让本协议项下的任何权利、利益或义务

14.1 Without the prior written consent of the Financing Bank, any Client hereof shall not assign or transfer any of its rights, benefits and obligations hereunder to other parties.  

 

14.2 本协议项下客户均在此同意并确认, 融资行有权 ( 无需另行征 求客户同意 ) 随时转让本协议项下的全部或部分权利、利益或义务, 并且有权在认为必要时向任何存在或潜在的受让方或相关人士披露客户的有关信息

14.2 Each Client hereof hereby agrees and confirms: the Financing Bank may, without obtaining consent from any Client hereof, assign or transfer any or all of its rights, benefits or obligations under this Agreement at any time ; also as deemed necessary, the Financing Bank shall have the right to disclose to any actual or potential assignee or related person such information about the Client(s) hereof at the time or manner in which the Financing Bank deems appropriate.

 

15. 生效条款

15. EFFECTIVENESS

   

15.1 本协议自融资行与客户有权签字人签字并加盖公章后生效, 并将持续有效直至客户履行完毕本协议项下的全部义务。

15.1 This Agreement shall become effective and in full force after it has been duly signed by the authorized person(s) of the Client(s) and the Financing Bank and sealed with related common chops, and shall remain effective until all the obligations of the Client(s) under this Agreement have been completely fulfilled to the Financing Bank’s satisfaction.

   

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

  

15.2 对本协议的任何变更应取得融资行的事先书面同意, 并应采取书面形式进行。

15.2 Any alteration to this Agreement shall be made with a prior written consent of the Financing Bank and executed in the written form.

 

16. 无预扣

16. NO WITHHOLDING

 

本协议下客户应付的所有款项应予全额支付, 无任何抵销或反索赔
或任何限制或条件, 也不附带任何税项或其他任何性质的扣减或预提。
如果客户或其他人、商行、公司或其他实体依据任何法律或法规须从任何付款中作出任何税务或其他扣减或预提, 客户应在支付该等款项时, 同时支付额外款项, 确保融资行收到的款项除去税务、扣减和预提后金额为如没有该等扣减或预提的情况下融资行应收到的全部款项。

All sums payable by the Client(s) under the Agreement shall be paid in full without set-off or counterclaim or any restriction or condition and free and clear of any tax or other deductions or withholdings of any nature. If any Client hereof or any other person, firm, company or other entity is required by any law or regulation to make any deduction or withholding on account of tax or otherwise from any payment, such Client shall, together with its payment due to the Financing Bank, pay such additional amount so as to ensure that the Financing Bank shall receive all amounts due that should have been received by the Financing Bank, as if there is no such deduction or withholding occurred.

   

17. 利率适用、调整和市场紊乱

17. INTEREST RATE SELECTION, ADJUSTMENT AND MARKET DISRUPTION

 

17.1 本协议项下适用之利率应当符合中国监管机构相关要求。客户在向融资行提交提款通知书之前, 应当事先向融资行询问所适用的利率。融资行应当根据本协议业务条款相关条款决定所适用利率的基础是基于 LIBOR WSJ PRIME RATE 或其他基础利率, 并告知客户在该笔提款/所提用额度所适用的利率。若客户提交提款通知书后发生市场变动, 融资行将相应通知客户且客户应接受该等修改后之利率。最终利率将以融资行之提款确认或书面确认为准。

17.1 The Interest Rate applied hereunder shall be compliant with the requirements of Chinese regulatory authorities. Before submitting the Drawdown Notice to the Financing Bank, the Client shall inquire with the Financing Bank the Interest Rate. The Financing Bank shall determine the base of the applicable interest rate whether on LIBOR, WSJ PRIME RATE or other base rate pursuant to the relevant stipulations herein, and inform the Client of the Interest Rate applicable for such loan drawdown or facility utilization. In case of market rate changes after the Client has submitted the Drawdown Notice, the Financing Bank will inform the Client accordingly and the Client agree to accept such revised Interest Rate. The final Interest Rate will be confirmed by the Financing Bank in writing in the Drawdown confirmation or other financial advice.

 

17.2 在额度期限内, 如果因任何原因融资行无法取得该作为利率 计算基础的 LIBOR WSJ PRIME RATE 或已约定的其他基础利率的, 则客户应与融资行就本协议项下的适用利率进行协商以确定利率标准, 如在协商开始后的十个营业日内无法达成一致意见, 则客户未使用之额度将被取消, 且客户立即偿还本协议项下所有未清偿债务 ( 无论是否到期 ) 。若额度系用于开立保函或信用证或类似形式之或有债务性融资产品的, 则客户应归还或补偿融资行此类产品的名义金额, 而无论融资行之付款责任或垫付资金行为是否已实际发生

17.2 If, during the Facility Validity Period hereof, the Financing Bank could not acquire the rate of LIBOR, WSJ PRIME RATE or other stipulated base rate to calculate the Interest Rate, the Financing Bank will negotiate with the Client(s) to set an applicable interest rate. If no agreement is reached within 10 Business Days, the Facility (to the extent unutilised) shall be cancelled and all outstanding amounts under this Agreement (regardless of whether or not due) shall be repaid immediately. In case of any Facility that is used for the issuance of Letter of Credit, Letter of Guarantee or any such similar product type with contingent liability, the Client(s) hereof shall immediately repay or indemnify the Financing Bank with the nominal amount of such products, regardless of whether the actual liability under such Non-loan Facility has been borne or paid by the Financing Bank.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

17.3 为免疑义:

17.3 For avoidance of any doubt:

 

“LIBOR” 是指伦敦银行同业拆放利率, 并以每个利息期开始之前两个银行营业日的中午 11 点钟左右 ( 伦敦时间 ) 由伦敦银行家协会在路透屏幕 LIBOR01 页面公布的数值为准。若上述 LIBOR 因故无法获得, 则本协议中的 “LIBOR” 是指在一个营业日结束营业时出现在路透屏幕 LIBOR 页面的伦敦银行间美元存款 ( 等值于本协议项下提款金额 ) 的利率报价之年利率; 若路透屏幕 LIBOR 页面出现了多个利率, 则本协议项下适用的利率应为上述多个利率的算术平均值。

“LIBOR” refers to the London Interbank Offered Rate as published by the British Bankers Association on “Reuters Screen LIBOR01 Page at or about 11 o’clock a.m. London time two Business Days before the beginning of the respective interest period. If for any reason such rate is not available, the term "LIBOR" shall mean the rate per annum appearing on Reuters Screen LIBOR Page as the London interbank offered rate for deposits in U.S. Dollars at the close of business on the immediately preceding Business Day or its equivalent for a sum of U.S. Dollars equal or comparable to the amount of the applicable advance; provided, however, if more than one rate is specified on Reuters Screen LIBOR Page, the applicable rate shall be the arithmetic mean of all such rates.

 

“WSJ PRIME RATE” 是指 Wall Street Journal Prime rate , 也即: 以下两者之较高者: (a)3.25% (b) Wall Street Journal 在其 “Money Rate” 部分不时公布为 “prime rate”( 最优惠利率 ) 的、且在美国届时有效的年利率; 倘若 Wall Street Journal 不再公布此等利率的, 则 WSJ PRIME RATE 应指融资行宣布为其 “prime rate”( 最优惠利率 ) 的、且在其美国加利福尼亚州的主要营业地届时有效的年利率, 即使该利率并非融资行的最低利率。

“WSJ PRIME RATE” refers to the Wall Street Journal Prime rate, which means the greater of (a) 3.25% and (b) the rate of interest per annum from time to time published in the “Money Rate” section of the Wall Street Journal as the “prime rate” then in effect in the United States of America; provided that if such rate of interest is no longer published therein, the “WSJ PRIME RATE” shall mean the rate of interest per annum announced by the Financing Bank as its “prime rate” in effect at its principal office in the state of California, even if it is not the Financing Bank’s lowest rate.

 

18. 印花税

18. STAMP DUTY

 

融资行和客户将根据《中华人民共和国印花税暂行条例》及其施行细则以及任何其他相关法律的规定, 依法缴付印花税。

The Financing Bank and the Client(s) shall pay the stamp duty in accordance with the Interim Regulations of the P.R. China on Stamp Duties, the related implementation rules and any other provisions in this regard.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

19. 多客户安排

19. MULTI-CLIENT ARRANGEMENT

 

19.1 为免疑义, 若本协议项下存在多个客户作为借款人的, 则除非本协议另有明确规定, 以下规则应适用:

19.1 For the avoidance of doubt, if more than one Client exists herein as the borrower, then, unless otherwise expressly provided in this Agreement, the following rules shall be applied:

 

(a)   本协议提及“客户”时, 均意指任一及 / 或所有客户;

(a)  In case that a “Client” is referred to in this Agreement, it means any and/or all Client(s) hereunder;

 

(b)   本协议项下所有有关客户义务的约定或规定, 均应理解为同时及 / 或分别适用于本协议项下每一客户;

(b)  All stipulations or provisions in relation to any Client’s obligations provided in this Agreement shall be understood as being binding and applicable simultaneously and/or separately to each Client hereof;

 

(c)   本协议中提及或由客户作出的陈述、保证或承诺事项等, 均视为每一单个客户分别作出此等陈述、保证或承诺事项;

(c)  Any representation, undertaking or covenant and similar matters referred to or made by “the Client” in this Agreement, shall be deemed as being separately made by each Client hereof;

 

(d)   本协议项下所有有关客户权利的约定或规定, 均可由每一单个客户分别独立行使;

(d)  Any stipulations or provisions in relation to the Client’s rights may be applicable and exercise separately by each Client hereof;

 

(e)   本协议中提及各项额度限额 ( 如授信总额度及任何其他子额度 ) 的计算、管理和控制时, 应理解为系就本协议项下所有客户关于该项额度的提用情况进行统计;

(e)  In the case of the calculation, management or control of any Facility limit hereunder (such as Total Facility Amount and any other sub-facility limit), the calculation under such limit(s) shall be understood as being based on all of the Clients heroef;

 

(f)   本协议中提及客户不符合要求或违反相关义务情形时, 均视为任一单个客户发生不符合要求或违反相关义务的情形。

(f)  If any circumstance relating to the non-compliance or violation of any requirements hereof is mentioned in this Agreement with the wording of “the Client”, it shall be understood as that such non-compliance or violation being caused by any single Client hereof.

 

19.2 本协议项下存在多个客户时, 每一客户均对其他客户在本协 议项下发生的任何债务互负连带清偿义务。且任何客户的违 约应视为其他任一客户及所有客户的违约。

19.2 In the case that more than one Client exists herein, each Client hereunder shall bear joint and several liabilities for the indebtedness of any other Client hereunder. And the default of any Client hereunder shall be deemed as the default of any other and/or all Clients hereof.

 

19.3 在任何时候, 任一单个客户依据本协议约定申请提用本协议下项下授信额度的前提应包括以下条件:

19.3 At any time, the conditions precedent to the utilisation of the Facility hereof for any one of the Clients hereof in accordance with the Agreement, shall include:

 

(a)   本协议下项下有充足的可用额度; 且

(a)  Sufficient Available Facility Amount remains; and

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

(b)   就该客户所申请提用的具体业务额度而言, 在扣除所有客户 ( 包括该申请客户本身 ) 就该类业务品种额度已提用未清偿的所有额度后仍有足够余额; 为免疑义, 前述已提用未清偿的额度包括融资行未解除付款责任或融资行未受足额偿付的款项 ( 不论是否为或有负债 ) ; 且

(b)  In respect of the product type requested by the Client, after deduction of the aggregate of all outstanding utilisations of all Clients hereof (including the Client requests this time) under this product type, sufficient balance remains; for the avoidance of any doubt, the foresaid outstanding utilisation includes those for which the obligation of payment (whether belonging to the contingent liabilities or not) of the Financing Bank has not been released or reimbursed; and

 

(c)   若所提用币种为可选币种时, 该可选币种的提用金额于提用日可为融资行获得; 且

(c)  In case of utilisation in any Optional Currency, such amount of optional Currency is available by the Financing Bank at the drawdown date concerned; and

 

(d)   无违反本协议项下任何限额或限制的情形发生或即将发生; 且

(d)  No breach of any limit of facility hereunder occurs or is to be occurred; and

 

(e)   前述额度计算涉及汇率换算的, 按本部分第 7 条约定处理。

(e)  If any calculation or exchange conversion in connection with the items above is involved, it shall be referred to the stipulation of Clause 7 in Part III hereunder.

 

19.4 在任何时候, 所有客户在本协议项下所提用的未清偿各类额度及各类额度之和, 均应分别符合本协议有关授信总额度及子额度的规定。 融资行有权随时计算前述额度, 并在认为必要时通知任一客户额度不足之状况并要求任一客户提前清偿相关债务

19.4 At any time, both the outstanding facility utilized by all Clients under every product type and the aggregated facility amount under this Agreement shall be in compliance with the requirements of the Total Facility Amount and the sub-limit provided hereunder respectively. The Financing Bank shall have the right to calculate the concerned facility from time to time, and at its sole discretion inform any Client hereof of the event of insufficient balance under any kind of facility limit and request any Client hereunder to prepay the relevant indebtedness.

 

20. 杂 项

20. MISCELLANEOUS

 

20.1 本协议适用中国法律 ( 为本协议目的, 不包含香港、澳门及台湾地区的法律 ) 。本协议项下或与本协议相关的任何争议均应接受融资行住所地法院的排他性管辖。

20.1 The Agreement shall be governed by and construed in accordance with the laws of the P.R.China (for the purpose hereof, excluding the laws of Hong Kong, Macau and Taiwan area). Any dispute arising out of or in connection with the Agreement shall be resorted to the exclusive jurisdiction of the court where the Financing Bank is located.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

20.2 本协议由五部分组成, 包括第一部分 ( 签署页 ) 、第二部分 ( 特别条款 ) 、第三部分 ( 一般条款 ) 、第四部分 ( 业务条款 ) 以及第五部分 ( 附件 ) ; 该五部分构成不可分割的完整整体, 应当共同理解和阅读。本协议生效后, 将与本协议的附件 ( 包括但不限于已实际签署的提款通知书或提款确认函或业务申请文件 ) 共同作为融资行与客户就本协议项下授信相关事项的完整协议, 并取代之前双方达成的关于上述事项的任何口头或书面的类似约定。

20.2 The Agreement consists of five parts, namely Part I - Execution Page, Part II - Special Provision, Part III - General Provision, Part IV - Specification and Part V - Schedule; these five parts constitute an indivisible integrity and shall be understood and read as a whole. When the Agreement becomes effective and in full force, the Agreement together with any related schedule (including but not limited to any executed drawdown notice, drawdown confirmation or application documents) embodies the entire agreement entered into by and between the Financing Bank and the Client(s) as to the facility granting issues provided herein, which shall supersede any oral or written agreement or similar stipulations in this regard previously agreed by the Financing Bank and the Client.

 

20.3 若由于任何法律的生效、执行或修改, 或任何法律的解释或适用上发生变化, 从而导致融资行为客户提供或维持本协议项下授信额度、或提供本协议项下全部或部分融资、或履行其在本协议项下任何义务或在本协议项下收取利息成为非法或在法律上不可行, 则融资行有权通知客户取消本协议项下额度并且要求任何已使用额度立即到期并偿还, 在上述情形下, 融资行可以 ( 但无义务 ) 与客户善意协商采取各方均可接受的替代处理办法。

20.3 Where the introduction, imposition or variation of any law or any change in the interpretation or application of any law makes it unlawful or impractical without breaching such law for the Financing Bank to provide or maintain all or part of the Facility or to fund all or part of the Facility or to carry out any or all of its other obligations under the Agreement or to charge or receive interest at the rate or rates applicable, then the Financing Bank shall have the right to notify the Client(s) hereof that any or all of the remaining facility availability shall be cancelled, and/or any or all of the facility utilised shall become immediately due and repayable by the Client(s). In any such event, the Financing Bank may (but shall not be obliged to) negotiate with the Client(s) hereof in good faith for any substitute arrangements acceptable to all parties.

 

20.4 本协议部分条款无效或不可执行不影响其他条款的效力及可执行。

20.4 The invalidity and unenforceability of any provision of the Agreement shall not affect the validity or enforceability of any other provisions under this Agreement.

 

20.5 融资行未行使或推迟行使任何权利或违约救济不得被视为弃权; 融资行行使一项或部分权利或违约救济不得被视为放弃了其他权利或违约救济。本协议中规定的融资行的权利及违约救济是累积性的, 不排斥融资行根据法律规定而享有的其他权利或违约救济。

20.5 The Financing Bank’s failure to exercise, or any delay in exercising any of its rights and remedies shall not represent or imply as a waiver thereof, nor shall any single or partial exercising of any right or remedy prevent any further or other exercising of the rights or remedies thereof. The rights and remedies provided herein shall be accumulative and shall not exclude any other rights or remedies that the Financing Bank may have in accordance with the laws.

    

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第三部分 一般条款 /Part III General Provision 协议编号 /Agreement Ref. No.: CL201508001

 

20.6 除非本协议另有约定, 客户在此不可撤销的同意: 对于与本协议相关的任何信息, 融资行除了可以根据任何法律、政府机构及监管部门的要求进行披露外, 还可向其总部、分支机构、关联机构、顾问以及这些机构所聘请的人员进行披露。

20.6 Unless otherwise provided herein, the Client(s) hereof hereby irrevocably agrees that the Financing Bank may, in addition to the disclosure of any information relating to the Agreement per the requirements of any laws, governments and regulatory authority, disclose such information to its head offices, branches, subsidiaries, affiliates and advisors and their respective employees.

 

20.7 本协议项下的标题仅为参阅方便之用, 不作为本协议内容解释的依据。本协议中所提及的 营业日 , 均是指融资行在其所在地正常对外营业的时间。

20.7 The headings under this Agreement are provided only for purpose of reference, which shall not be deemed as the basis of any interpretation to the contents of this Agreement. Any reference to the “Business Day” in this Agreement shall refer to a date on which the Financing Bank is open for business in the place where it is located.

 

20.8 本协议以中文和英文书就, 若两种语言版本的内容发生任何不一致, 则应以中文为准。

20.8 This Agreement is being expressed in both Chinese and English. However, in the event of any inconsistency between these two versions, the Chinese version shall always prevail.

 

20.9 本协议置备正本若干, 具有同等法律效力; 融资行与客户各执一份正本。若涉及抵押、质押登记或其他用途时, 协议正本相应增加。

20.9 This Agreement will be executed in several original counterparts with the same legal effect; the Financing Bank and each Client hereof shall keep one original copy. If required, additional original counterparts may be increased for registration of mortgage, pledge or other purposes.

 

-      一般条款末尾       -

-      End of General Provision      -

  

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

    

业务条款 

Specification

     

业务品种: 应收账池贷款 类别: 短期融资
Product Type: Pooled A/R Loan Category: Short-term Finance

  

本业务条款适用于应收账池贷款业务, 本协议项下发放的每笔应收账池贷款应符合以下条款与条件。

This Specification is used for the granting of the Pooled A/R Loan. Each Pooled A/R Loan shall be in compliance with the terms and conditions set forth below.

   

业务额度

Pooled A/R Loan Limit

 

基准币种

Base Currency

 

可选币种

Optional Currency

 

金额/Amount:

美元/USD2,000,000.00

大写/in words:

美元贰佰万元整

TWO MILLION US DOLLOR

 

币种 1

Currency 1

 

不适用

N/A

 

币种 2

Currency 2

 

不适用

N/A

 

币种 3

Currency 3

 

不适用

N/A

 

循环

Revolving

 

可循环

Revolving

 

可动用期

Availability Period

 

在本业务额度到期日前均可使用

Available before the Maturity Date of the Loan Limit of the Specification

 

用途

Purpose

 

用于满足企业日常的流动资金开支

To finance daily working capitalneeds

 

业务额度到期日

Maturity Date of the Loan Limit

 

自本业务额度首次提款之日起 12 个月届满之日, 但首次提款不得晚于 2015 年 09

月 30 日

12 months from the date of first drawdown under this specification, but the first drawdown shall no later than September 30 th , 2015

 

最小提款额

Minimum Drawdown Amount

 

不适用

N/A

 

不适用

N/A

 

用款期(月数)

Loan Tenor Period (Month)

 

不超过 12 个月

Up to 12 months allowed

 

不适用

N/A

 

贷款利率

Interest Rate

 

LIBOR(☐1 个月 ☑3 个月 ☐6 个月 ☐12 个月)加 6.70%(年利率)利差

LIBOR(☐1 month ☑3 months ☐6 months ☐12 months) plus Margin 6.70%(p.a.)

 

( 利率以融资行的提款确认或书面确认所载为准 )

(the final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank.

 

利息期(月数)

Interest Period (Month)

 

1

不适用

N/A

 

提前还款最低限额

Minimum Prepayment Amount

 

不适用

N/A

 

不适用

N/A

 

罚息利率

Penalty Interest Rate

 

逾期罚息/Overdue Penalty Rate:

所适用贷款利率加 5%(年利率)

Applicable Interest Rate plus 5% p.a. 

   

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挪用罚息/Misappropriation Penalty Rate:

所适用贷款利率加 5%(年利率)

Applicable Interest Rate plus 5% p.a.

 

应收账池财务指标

Borrowing Formula

 

融资率: 在任何时点, 客户在本业务条款项下的未清偿贷款余额, 不得超过客户应

收账池中的合格应收账款余额的 80%与播思通讯技术 (北京) 有限公司 (亦作为本协议之“担保人”) 应收账池中的合格应收账款余额的 60%之和。

Advance Rate: at any time, the outstanding amount under this Specification shall not exceed 80% of total Eligible Accounts Receivable in the A/R pool of the Client plus 60% of total Eligible Accounts Receivable in the A/R pool of Borqs Beijing Ltd. (the Guarantor under this Agreement).

 

 

合格应收账款不包括且不限于: 账龄超过 90 天的应收账款, 抵消账户及预计可抵消的递延收入账户产生的应收账款, 关联交易产生的应收账款, 政府账户(除非根据债权转让)产生的应收账款, 单一债务人集中度超过 25%的应收账款(基于客户总的应收账款)。未开具发票的应收账款也是不合格的。

Eligible Accounts shall exclude, but are not limited to, the following: Accounts greater than 90 days from invoice date; Contra accounts and accounts with potential off-set with deferred revenue; Affiliate accounts; Government accounts (unless under an assignment of claims); Amounts exceeding 25% concentration limit (of the Client’s total AR base) for a single debtor. Unbilled A/R is not eligible.

 

费用

Fee

 

 

贷款支付方式

Disbursement Method

受托支付

Entrusted Payment

 

 

融资行有权根据实际情形调整和变更贷款支付方式。

The Financing Bank reserves the right to adjust or alter the loan proceeds disbursement method depending on the actual situation.

 

还款日

Repayment Date

 

还款计划/Repayment schedule:
 

本金于到期日偿还。

Principal due at maturity.

 

 

且, 利息应每月支付一次。

And, Interest shall be paid monthly.

 

财务约定

Financial Covenants

 

 

其他补充约定(如有)

Other stipulations(if any) 

 

 

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用途

Purpose  

本协议项下应收账池贷款业务项下的业务额度是本协议特别 条款中所规定的授信总额度的分项子额度, 仅限用于补充一般流动资金或满足公司日常经营所需, 不得用于固定资产、股权等投资, 不得用于国家禁止生产、经营的领域和用途。流动资金贷款不得挪用, 融资行有权随时检查、监督客户流动资金贷款的使用情况。  

The Pooled A/R Loan Limit is a sub-limit of the Total Facility  Amount stipulated in Special Provision of this Agreement, which can only be used for the working capital purpose or the Client’s normal business operations, but cannot be used for investment(s) over fixed assets, equity or any others, or be used in areas or for purposes for which the production or operation is prohibited by the government. No misappropriation of the loan proceeds hereof is allowed, and the Financing Bank shall have the full right to examine and monitor the Client’s usage of the loan proceeds hereof at any time.

 

合格应收账款和应收帐池

Eligible Account Receivable and A/R Pool

 

作为提用本业务条款项下额度的前提, 客户应按月 ( 或在融资行要求的任何其他时间 ) 首先向融资行提供足够的以其为债权人的应收账款信息。融资行将使用经其接受的应收账款 ( 以下简称为 合格应收账款 , 具体有关要求另附 ) 为基础建立客户在本业务条款项下的可借款额度 (“ 借款基础 ”)

As a condition precedent to the drawdown under this Specification, the Client shall, monthly, or anytime requested by the Financing Bank, provide sufficient information in relation to the accounts receivable to which the Client is the creditor. The Financing Bank will use those accounts receivable that are deemed acceptable by the Financing Bank (the “Eligible Account Receivable”; please refer to Schedule for more detailed criteria) as the basis to establish borrowing availability under this Specification (the “Borrowing Base”).

 

客户应当按照融资行要求, 在每月月末后的三十 (30) 天内 ( 或按融资行不时要求的频率 ) 向融资行提交其应收账款以及应付款项的增减变动的最新情况, 并完成融资行要求的每月借款基础信息表以更新和计算每月的借款基础信息。

The Client shall, pursuant to the requirements of the Financing Bank, submit to the Financing Bank with updated information relating to the change or variation of its accounts receivable and accounts payable within 30 days of each month end (or other time frequency requested by the Financing Bank from time to time), along with the monthly Borrowing Base calculation by completing the related Borrowing Base Certificate required by the Financing Bank.

 

融资行有权根据经其随时计算的合格应收账款情况及有关的客户借款基础情况, 并根据有关应收账款合格程度以及客户维持本业务条款所要求的财务指标及其他约定之能力, 全权决定客户在本业务条款项下任何时点的可以动用的应收账池项下最高业务额度, 决定是否同意 (i) 在当前业务额度项下客户的进一步提款申请, 或 (ii) 要求客户在超额放款情形下强制提前归还本业务条款项下全部或部分债务。为免疑义, 若根据融资行全权判断, 客户的应收账款借款基础指标不足以覆盖本业务条款项下已发放的贷款余额时, 即构成“超额放款”情形的发生。前述“超额放款”之数额等于全部应收账池贷款的未清偿贷款与经融资行确定的最近的应收账款借款基础金额之间的差额。

The Financing Bank shall be entitled to, in accordance with the status of the Eligible Accounts Receivable and the associated Borrowing Base calculated from time to time, and based on the Accounts Receivable’s eligibility and the Client’s ability to remain compliance with financial covenants and other covenants under this Specification, determine at its sole discretion the total Pooled A/R Borrowing Base amount that may be used by the Client at each time, and determine whether or not (i)to accept the following drawdown application of the Client, or (ii) to require the Client to make a mandatory repayment on any or all of its debts in an Over-Advance situation. For avoidance of the doubt, an Over-Advance situation occurs when the Client’s Accounts Receivable Borrowing Base is deemed, at the Financing Bank’s  sole  discretion,  insufficient  to  cover  the  already disbursed   loan   amount   under   this   Specification.  Such Over-advance amount is equal to the difference between the total Account Receivable loan outstanding hereof and the most recent Account Receivable Borrowing Base available amount determined by the Financing Bank.

    

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

  

只要本业务条款项下债务尚未清偿完毕, 客户同意其将履行所有相关承诺以确保始终遵守本业务条款要求的全部应收账池财务指标及其他相关约定。

Until all debt obligations under this Specification have been fully repaid, the Client agrees that it would fulfill all undertaking required to remain in compliance with all financial covenants and other related requirements under this Specification

 

提款

Drawdown

 

除本协议第三部分 ( 一般条款 ) 另有特别约定外, 客户应当至少提前 3 个营业日向融资行提交《提款通知书》 ( 且如为受托支付的, 还应包括支付委托条款; 格式均可参见附件 ) 供融资行审查。该通知书应当书写完整并经客户适当签署。除非融资行书面同意客户撤回该通知书, 否则该通知书不可撤销。如指定的提款日不是营业日, 则提款应推迟于其后的第一个营业日进行。本业务条款项下提款的批准受限于应收帐池财务指标的满足并由融资行全权酌定。

Unless otherwise stipulated in Part III - General Provision, the Client shall, at least 3 Business Days before the drawdown date, submit to the Financing Bank the Drawdown Notice (which shall contain a clause of payment authorization in case that the disbursement of loan is the Entrusted Payment Method; please see Schedules for reference format) for the approval by the Financing Bank. This Notice shall be in written form, completely and duly signed and sealed. The Notice shall be deemed irrevocable unless written consent for the Client’s withdrawal is given by the Financing Bank. If a designated drawdown date is not a Business Day, the drawdown shall be postponed to the first following Business Day. The approval of the drawdown request shall be subject to the satisfaction of all financial indices and requirements hereof, and be determined by the Financing Bank at its sole discretion.

 

利率、利息计算和利息支付

Interest, Interest Calculation and Interest Payment

 

贷款利率应根据融资行认可的基础利率及约定利差 ( 或者融资行同意的其他利率确定方式 ) 于提款时确定, 并以经融资行确认的《提款通知书》所载为准。

The applicable Interest Rate of each drawdown shall be calculated based on the base rate plus the margin confirmed by the Financing Bank (or any other interest determining method agreed by the Financing Bank), and be determined before the drawdown with a drawdown notice confirmed by the Financing Bank.

 

对于每笔提款, 利息应在各利息期的最后一天 ( 应为每个月的第二十天或经融资行同意的其他日期, 即 付息日 ”) 到期应付。每笔提款的利息期自该笔提款的提款日起算 (“ 起始日 ”) , 至最近一个付息日止; 如用款期的最后一天与利息期的最后一天不一致的, 则最后一期利息应截止计算至用款期末的前一营业日, 并在用款期的最后一天到期支付 (“ 最后付息日 ”)

For each drawdown hereof, the interest shall be payable in arrears on the last day of the respective Interest Period (the twentieth day of each month or any other date agreed by the Financing Bank, collectively the "Interest Payment Day"). The first Interest Period of each drawdown shall be calculated from the date of drawdown (“Starting Day”) to the most recent Interest Payment Day; If the last day of the Loan Tenor Period is not the last day of the last Interest Period, the interest for the final Interest Period shall be calculated through one Business Day prior to the last day of the Loan Tenor Period and paid on the last day of the Loan Tenor Period (the "Last Interest Payment Day").

    

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

利息将按照上述约定的贷款利率和实际用款的天数逐日计算; 1 年为 360 天。

The interest shall accrue from day to day and shall be calculated at the above Interest Rate on the actual number of days elapsed on a 360-day year basis.

 

如利息期结束于非营业日, 则利息期的最后一日应顺延至当月 ( 公历月 ) 的下一营业日 ( 如有 ) , 或如当月没有下一营业日的, 则提前至前一营业日。

If the Interest Period ends on a day which is not a Business Day, that Interest Period shall instead end on the next Business Day of that calendar month (if there is one) or the preceding Business Day (if there is none).

 

融资行有权在每一利率厘定日 ( 定义如下 ) 根据市场情形重新厘定所适用的贷款利率, 并根据本业务条款约定的贷款利率计算方式计算和得出新的适用利率, 并自最近利息期开始适用; 融资行应及时通知客户该等变动。为免疑义, 前述 利率厘定日 系指每个公历月的第二十天或其他任何融资行同意的日期, 具体厘定频率根据提款所选择适用的具体贷款利率 ( Libor ) 所对应的时间档次确定。

The Financing Bank may, on each Interest Review Day (as defined below), review the applicable interest rate in accordance with the market situation, and calculate and determine the new applicable interest rate by means of the method stated in this Specification, and apply such new interest rate to the beginning of the next Interest Period; the Financing Bank shall notify the Client of such change in interest rate promptly. For avoidance of any doubt, the “Interest Review Day” means the 20 th day of each calendar month or any other date agreed by the Financing Bank, and the frequency of the Interest Reviewing shall be determined in accordance with the corresponding adjustment period of the interest rate (such as Libor or others) which is chosen to and applied for the drawdown.

 

还款

Repayment

 

除非融资行另行同意或本协议另有约定, 客户在本业务条款项下的每笔提款均应在其提款通知书 ( 需经融资行接受 ) 中指明的用款期届满日或业务额度到期日清偿。但无论如何, 本业务条款项下所有提款均应在本协议约定的最终到期日 ( 如有 ) 全部清偿完毕。

Unless otherwise agreed by the Financing Bank or stipulated herein, each drawdown under this Specification made by the Client shall be completely and fully repaid on the last day of the Loan Tenor Period or the maturity date of the Loan Limit specified in its drawdown notice (which shall be accepted by the Financing Bank). However, all outstanding amounts of drawdowns under this Specification shall be paid off on or before the Final Maturity Date (if stipulated) provided in this Agreement.

 

提前还款

Prepayment

 

客户可以在满足上述提前还款最低限额的基础上向融资行申请自愿提前还款但提前偿还最后余欠之金额的情形不受最低限额限制 ) , 但客户应当在计划提前还款日之前至少提前 3 个营业日向融资行提交书面通知。

The Client may make prepayments based on the minimum prepayment amount requirements as stated above, by providing the Financing Bank with a written notice at least 3 Business Days before the intended prepayment date (however, a prepayment for all remaining loan outstanding amount  will  not  be  subject  to  the  restriction  of Minimum Prepayment Amount).

    

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

若经融资行自行判断本业务条款约定的任一财务指标或约定被违反或不满足时, 则除非该等违反或不满足已经客户补救至融资行满意的程度, 否则融资行有权要求客户立即就本业务条款项下部分或全部债务进行强制提前还款, 以使客户重新满足本协议项下前述约定; 为前述目的, 融资行有权采取包括但不限于直接扣划客户任一账户款项等的各种措施。

If, in the sole judgment of the Financing Bank, any financial covenant or stipulation provided in this Specification for the Client is breached or not abided by, then, unless such breaching or dissatisfaction has been cured or remedied by the Client to the satisfaction of the Financing Bank, the Financing Bank shall have the right to require the Client to immediately repay any or all of the debts under this Specification, so as to enable the Client to be back in compliance with the foregoing covenants under this Agreement; for the foregoing purpose, the Financing Bank shall be entitled to take any or all measures including but not limited to directly deduct any amount from any of the accounts of the Client.

 

所有提前还款应当按照本金到期顺序的倒序进行清偿。并且, 如客户的任何一笔提前还款未在该笔提款对应的利率厘定日进行的, 则客户应额外向融资行支付一笔资金中断费, 资金中断费的金额为该笔提前还款从提前还款日直至该笔提款的用款期最后一日止融资行预计可得到的利息与融资行收到该笔提前还款后将该笔提前还款在同业市场放出直至该笔提款用款期最后一日止的期间实际所收得到的利息的差额。

All prepayments shall be applied towards the repayment of the principal in a reverse order of maturity. Besides, if any prepayment is not made by the Client on the corresponding Interest Review Day, then, the Client shall reimburse the Financing Bank with a break funding cost, which is calculated as below: the difference between (a) the interest that the Financing Bank may expect to receive from the prepayment day to the last date of the Loan Tenor Period of such drawdown, if such prepayment is not made, and (b) the interest that the Financing Bank could have earned if such prepayment amount were placed into the inter-bank market from the prepayment date to the last date of the Loan Tenor Period of such drawdown.

    

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

业务条款

Specification

     

业务品种: 定期贷款 类别: 中期融资
Product Type: Term Loan Category: Mid-term Finance

  

本业务条款适用于流动资金类定期贷款业务, 本协议项下发放的定期贷款应符合以下条款与条件。

This Specification is used for the granting of the Term Loan for working capital finance purpose. Each Term Loan shall be in compliance with the terms and conditions set forth below.

  

业务额度

Term Loan Limit

 

基准币种

Base Currency

 

可选币种

Optional Currency

 

金额/Amount:

美元/USD1,000,000.00

大写/in words:

美元壹佰万元整

ONE MILLION US DOLLOR

 

币种 1

Currency 1

 

不适用

N/A

 

币种 2

Currency 2

 

不适用

N/A

 

币种 3

Currency 3

 

不适用

N/A

 

循环

Revolving

 

不可循环

Non-revolving

 

承诺性

Commitment

 

非承诺性额度

Uncommitted Facility

 

可动用期

Availability Period

 

可动用期截止至 2015 年 09 月 30 日

Withdraw period ending on September 30 th , 2015

 

用途

Purpose

 

用于满足企业日常的流动资金开支

To finance daily working capitalneeds

 

业务额度到期日

Maturity Date of the Loan Limit

 

自本业务额度首次提款之日起 24 个月届满之日, 但首次提款不得晚于 2015 年 09

月 30 日

24 months from the date of first drawdown under this specification, but the first drawdown shall no later than September 30 th , 2015

 

最小提款额

Minimum Drawdown Amount

 

不适用

N/A

 

不适用

N/A

 

用款期(月数)

Loan Tenor Period (Month)

 

不超过 24 个月

Up to 24 months allowed

 

不适用

N/A

 

贷款利率

Interest Rate

 

LIBOR(☐1 个月 ☑3 个月 ☐6 个月 ☐12 个月)加 7.45%(年利率)利差

LIBOR(☐1 month ☑3 months □6 months □12 months) plus Margin 7.45%(p.a.)

( 利率以融资行的提款确认或书面确认所载为准 )

(the final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank.

 

利息期(月数)

Interest Period (Month)

 

1

不适用

N/A

 

提前还款最低限额

Minimum Prepayment Amount

 

不适用

N/A

 

不适用

N/A

 

 

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

  

罚息利率

Penalty Interest Rate

 

逾期罚息/Overdue Penalty Rate:

所适用贷款利率加 5%(年利率)

Applicable Interest Rate plus 5% p.a.

挪用罚息/Misappropriation Penalty Rate:

所适用贷款利率加 5%(年利率)

Applicable Interest Rate plus 5% p.a.

 

费用

Fee

 

若经客户归还本业务条款项下全部未清偿本金、利息并按未清偿本金及本条款规定的提前还款费后, 本业务条款项下业务额度可被提前终止。

Facility under this Specification may be early-terminated if all of the outstanding principal and interest accrued under this Specification, together with a prepayment fee calculated in accordance with this clause, have been paid by the Client fully and completely.

 

提前还款费按以下条件确定:

The prepayment fee shall be calculated as below:

 

(a)   若该提前还款系在或将在本业务条款项下首次提款日(定义见下文(c)段) 后的首个 12 个月内进行的, 提前还款费按该提前还款或将提前还款的本金金额的 3%计算;

if such prepayment is made or to be made within the first 12-month after the First Drawdown Date (as define in paragraph (c) below), the prepayment fee will be calculated as: 3% of the principal amount prepaid or to be prepaid;

 

(b)   若该提前还款系在或将在本业务条款项下首次提款日(定义见下文(c)段) 后的第二个 12 个月内进行的, 提前还款费按该提前还款或将提前还款的本金金额的 2%计算;

if such prepayment is made or to be made within the second 12-month after the First Drawdown Date (as define in paragraph (c) below), the prepayment fee will be calculated as: 2% of the principal amount prepaid or to be prepaid;

 

(c)    为免疑义, 前述(a)、(b)项中提及的“首次提款日”, 系指本协议项下任何客户在本业务条款项下第一次成功提用授信额度之日。

For avoidance of doubt, the First Drawdown Date mentioned in the preceding paragraph (a) or (b), refers to the date on which any of the Clients under this Agreement makes the drawdown of the facility under

this Specification successfully.

 

贷款支付方式

Disbursement Method

 

受托支付

Entrusted Payment

融资行有权根据实际情形调整和变更贷款支付方式。

The Financing Bank reserves the right to adjust or alter the loan proceeds disbursement method depending on the actual situation.

 

还款日

Repayment Date

 

还款计划/Repayment schedule:

 

在2015年11月30日之前仅按约定支付利息, 不归还本金; 前述约定时限届满后开始按等额本金方式还款。

(具体的本金和利息归还进度和金额另附)

 

Before the date of November 30 th , 2015, only interest is required to be paid (no principal is required to be paid in such period); 

After the date of November 30 th , 2015, the loan should be repaid as Installment Repayment Scheme with Repayment Amount of Fixed monthly Principal plus related Interest. ((Equal P) + I) 

(Detailed repayment schedule of principal and interest provided otherwise)

 

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

  

财务约定  

Financial Covenants

 

 

其他补充约定 ( 如有 )  

Other stipulations(if any) 

 

 

用途

Purpose

本协议项下定期贷款业务项下的业务额度是本协议特别条款中所规定的授信总额度的分项子额度, 仅限用于补充一般流动资金或满足公司日常经营所需, 不得用于固定资产、股权等投资, 不得用于国家禁止生产、经营的领域和用途。流动资金贷款不得挪用, 融资行有权随时检查、监督客户流动资金贷款的使用情况。

The Term Loan Limit is a sub-limit of the Total Facility Amount stipulated in Special Provision of this Agreement, which can only be used for the working capital purpose or the Client’s normal business operations, but cannot be used for investment(s) over fixed assets, equity or any others, or be used in areas or for purposes for which the production or operation is prohibited by the government. No misappropriation of the loan proceeds hereof is allowed, and the Financing Bank shall have the full right to examine and monitor the Client’s usage of the loan proceeds hereof at any time.

 

提款

Drawdown

 

除本协议第三部分 ( 一般条款 ) 另有特别约定外, 客户应当至少提前 3 个营业日向融资行提交《提款通知书》 ( 且如为受托支付的, 还应包括支付委托条款; 格式均可参见附件 ) 供融资行审查。该通知书应当书写完整并经客户适当签署。除非融资行书面同意客户撤回该通知书, 否则该通知书不可撤销。如指定的提款日不是营业日, 则提款应推迟于其后的第一个营业日进行。

Unless otherwise stipulated in Part III - General Provision, the Client shall, at least 3 Business Days before the drawdown date, submit to the Financing Bank the Drawdown Notice (which shall contain a clause of payment authorization in case that the disbursement of loan is the Entrusted Payment Method; please see Schedules for reference format) for the approval by the Financing Bank. This Notice shall be in written form, completely and duly signed and sealed. The Notice shall be deemed irrevocable unless written consent for the Client’s withdrawal is given by the Financing Bank. If a designated drawdown date is not a Business Day, the drawdown shall be postponed to the first following Business Day.

 

利率、利息计算和利息支付

Interest, Interest Calculation and Interest Payment

 

贷款利率应根据融资行认可的基础利率及约定利差 ( 或者融资行同意的其他利率确定方式 ) 于提款时确定, 并以经融资行确认的《提款通知书》所载为准。

The applicable Interest Rate of each drawdown shall be calculated based on the base rate plus the margin confirmed by the Financing Bank (or any other interest determining method agreed by the Financing Bank), and be determined before the drawdown with a drawdown notice confirmed by the Financing Bank.

    

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

对于每笔提款, 利息应在各利息期的最后一天 ( 应为每个月的第二十天或经融资行同意的其他日期, 即 付息日 ”) 到期应付。每笔提款的首个利息期自该笔提款的提款日起算 (“ 起始日 ”) , 至最近一个付息日止; 如用款期的最后一天与利息期的最后一天不一致的, 则最后一期利息应截止计算至用款期末的前一营业日, 并在用款期的最后一天到期支付 (“ 最后付息日 ”)

For each drawdown hereof, the interest shall be payable in arrears on the last day of the respective Interest Period (the twentieth day of each month or any other date agreed by the Financing Bank, collectively the "Interest Payment Day"). The first Interest Period of each drawdown shall be calculated from the date of drawdown (“Starting Day”) to the most recent Interest Payment Day; If the last day of the Loan Tenor Period is not the last day of the last Interest Period, the interest for the final Interest Period shall be calculated through one Business Day prior to the last day of the Loan Tenor Period and paid on the last day of the Loan Tenor Period (the "Last Interest Payment Day").

 

利息将按照上述约定的贷款利率和实际用款的天数逐日计算; 1 年为 360 天。

The interest shall accrue from day to day and shall be calculated at the above Interest Rate on the actual number of days elapsed on a 360-day year basis.

 

如利息期结束于非营业日, 则利息期的最后一日应顺延至当月 ( 公历月 ) 的下一营业日 ( 如有 ) , 或如当月没有下一营业日的, 则提前至前一营业日。

If the Interest Period ends on a day which is not a Business Day, that Interest Period shall instead end on the next Business Day of that calendar month (if there is one) or the preceding Business Day (if there is none).

 

融资行有权在每一利率厘定日 ( 定义如下 ) 根据市场情形重新厘定所适用的贷款利率, 并根据本业务条款约定的贷款利率计算方式计算和得出新的适用利率, 并自最近利息期开始适用; 融资行应及时通知客户该等变动。为免疑义, 前述 利率厘定日 系指每个公历月的第二十天或其他任何融资行同意的日期, 具体厘定频率根据提款所选择适用的具体贷款利率 ( Libor ) 所对应的时间档次确定。

The Financing Bank may, on each Interest Review Day (as defined below), review the applicable interest rate in accordance with the market situation, and calculate and determine the new applicable interest rate by means of the method stated in this Specification, and apply such new interest rate to the beginning of the next Interest Period; the Financing Bank shall notify the Client of such change in interest rate promptly. For avoidance of any doubt, the “Interest Review Day” means the 20 th day of each calendar month or any other date agreed by the Financing Bank, and the frequency of the Interest Reviewing shall be determined in accordance with the corresponding adjustment period of the interest rate (such as Libor or others) which is chosen to and applied for the drawdown.

 

还款

Repayment

 

除非融资行另行同意或本协议另有约定, 客户在本业务条款项下的每笔提款均应在其提款通知书 ( 需经融资行接受 ) 中指明的用款期届满日或业务额度到期日清偿。但无论如何, 本业务条款项下所有提款均应在本协议约定的最终到期日 ( 如有 ) 或之前全部清偿完毕。

Unless otherwise agreed by the Financing Bank or stipulated herein, each drawdown under this Specification made by the Client shall be completely and fully repaid on the last day of the Loan Tenor Period or the maturity date of the Loan Limit specified in its  drawdown notice (which shall be accepted by the  Financing  Bank).  However,  all  outstanding amounts of drawdowns under this Specification shall be paid off on or before the Final Maturity Date (if stipulated) provided in this Agreement.

    

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

提前还款

Prepayment

 

客户可以在满足上述提前还款最低限额的基础上向融资行提前还款 ( 但提前偿还最后余欠之金额的情形不受最低限额限制 ) , 但客户应当在计划提前还款日之前至少提前 3 个营业日向融资行提交书面通知。

The Client may make prepayments based on the minimum prepayment amounts requirements as stated above, by providing the Financing Bank with a written notice at least 3 Business Days before the intended prepayment date (however, a prepayment for all remaining loan outstanding amount will not be subject to the restriction of Minimum Prepayment Amount).

 

若经融资行自行判断本业务条款约定的任一财务指标或约定被违反或不满足时, 则除非该等违反或不满足已经客户补救至融资行满意的程度, 否则融资行有权要求客户立即就本业务条款项下部分或全部债务进行强制提前还款, 以使客户重新满足本协议项下前述约定; 为前述目的, 融资行有权采取包括但不限于直接扣划客户任一账户款项等的各种措施。

If, in the sole judgment of the Financing Bank, any financial covenant or stipulation provided in this Specification for the Client is breached or not abided by, then, unless such breaching or dissatisfaction has been cured or remedied by the Client to the satisfaction of the Financing Bank, the Financing Bank shall have the right to require the Client to immediately repay any or all of the debts under this Specification, so as to enable the Client to be back in compliance with the foregoing covenants under this Agreement; for the foregoing purpose, the Financing Bank shall be entitled to take any or all measures including but not limited to directly deduct any amount from any of the accounts of the Client.

 

所有提前还款应当按照本金到期顺序的倒序进行清偿。并且, 如客户的任何一笔提前还款未在该笔提款对应的利率厘定日进行的, 则客户应额外向融资行支付一笔资金中断费, 资金中断费的金额为该笔提前还款从提前还款日直至该笔提款的用款期最后一日止融资行预计可得到的利息与融资行收到该笔提前还款后将该笔提前还款在同业市场放出直至该笔提款用款期最后一日止的期间实际所收得到的利息的差额。

All prepayments shall be applied towards the repayment of the principal in a reverse order of maturity. Besides, if any prepayment is not made by the Client on the corresponding Interest Review Day, then, the Client shall reimburse the Financing Bank with a break funding cost, which is calculated as below: the difference between (a) the interest that the Financing Bank may expect to receive from the prepayment day to the last date of the Loan Tenor Period of such drawdown, if such prepayment is not made, and (b) the interest that the Financing Bank could have earned if such prepayment amount were placed into the inter-bank market from the prepayment date to the last date of the Loan Tenor Period of such drawdown.

    

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

附件一:  

Schedule 1

   

提款通知书(格式)

Drawdown Notice (Format)

 

编号 /Ref No. :                            

   

: [ 客户 ]

From: [Client]

 

致: 浦发硅谷银行有限公司

To: SPD SILICON VALLEY BANK CO., LTD.

  

者,

To whom it may concern,

   

我们在此提及贵行 ( 作为融资行 ) 与我方 ( 作为客户 )          年 月 日共同签署的《授信协议》 ( 编号:          , 下称“《授信协议》” ) 。我方在此不可撤销的通知贵行: 根据《授信协议》及该协议规定的相关条件, 我方现申请办理 以下提款 / 融资业务:

With reference to the Facility Agreement (ref. number:          , hereinafter the “Facility Agreement”) dated [Date] and executed between the Financing Bank and us as Client. We hereby give you irrevocable notice that, pursuant to the Facility Agreement and the terms and conditions contained therein, we apply to make a drawdown as follows:

   

I . 提款明细 /PARTICULAR
金额 /Amount:  
提款日 /Drawdown Date:  
到期日 / 期限 /Maturity Date/Tenor:  
用途 /Purpose:  

本次申请系在《授信协议》之以下业务项下发起 /This application is proposed under the Product Type of Facility Agreement as left: 

 

  

II. 支付方式 / DISBURSEMENT METHOD

本次提款的支付方式为 / The disbursement method for this drawdown should be: [ (A) ]

 

(A)   受托支付  

Entrusted Payment Method  

本次提款的贷款支付方式为受托支付。我们不可撤销地授权和委  托贵行, 请贵行将本次提款放至我司提款账户后代我们将该等款  项支付给我方商业交易对手(收款账户信息及支持文件另附):

This drawdown should be made under Entrusted Payment Method; we hereby irrevocably authorize/entrust your Bank that: after transferring the drawdown amount to our Loan Account, please use the same to make payment to our commercial counterparty on behalf of us (related accounts info. and supporting documents to be attached otherwise):

 

我们确认: 截止我们做出本支付委托之时, 《授信协议》中所有陈  述、保证、承诺及约定条款在主要方面依然真实有效, 且无任何 违约事件(或潜在的违约事件)发生或持续。本支付委托中所有文字定义与其在《授信协议》中的含义是一致的。 

We confirm that, at and until the issuance of this Payment Authorization Letter, all the representations, warranties, undertakings and covenants provided in the Facility Agreement are true and valid in all material respects and no Events of Default (or potential Events of Default) are existing or continuing. Terms defined in the Facility Agreement shall have the same meaning in this Payment Authorization Letter.

 

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

我们在此确认, 贵行收到本支付委托后有权进行付款审核。如贵 行认为本支付委托中的资料/信息不正确、不完整、不够清晰, 或  执行本项受托支付将违反有关法律、法规或双方的约定, 或本支  付委托中所列支付对象、支付金额等信息与相应的商务合同等证 明材料不相符的, 或贵行放款后我司贷款接收账户内可用存款余 额仍不足, 贵行有权不处理本对外付款申请。如因任何前述原因 导致付款延误、拒收、退回或贵行推迟处理或决定不处理付款申 请而引致任何人遭受损失或损害, 贵行不须承担任何责任。

We hereby confirm that, where your Bank has received this payment authorization, your bank reserves the right not to process the payment if you are of the opinion that there are insufficient available funds even if the drawdown amount has been granted, or if the information given is incorrect, incomplete or is not sufficiently clear, or conflicts with that of supporting documents such as business contracts, or the processing thereof will lead to a breach of any applicable laws, regulations or stipulations in some agreement. Your Bank shall not be liable for any loss or damage suffered by any person arising out of payment delay, rejection and/or return, or any delay by your Bank in processing the payment or your Bank's decision in not processing the same, where any information given is, in the opinion of your Bank, incorrect, incomplete or is not sufficiently clear or the processing thereof will be in breach of any applicable laws, regulations or stipulations.

 

除非我们以书面形式另行通知贵行解除本委托并已征得贵行同 意, 否则本函项下委托始终有效。

Unless another written notice of authorization cancellation is delivered to you otherwise and agreed by you, the authorization and entrustment hereunder shall always be valid.

 

(B) 自主支付  

Independent Payment Method  

 

请将本次提款金额划入我司的提款账户, 由我司自行对外支付。 我们承诺将每三个月按贵行要求的形式向贵行提交一份支付记录 的清单用以证明我们使用贷款的用途。

Please transfer the amount of this drawdown to our Loan Account for our discretionary payment. We undertake hereby we would provide to you a list of payment records within three months of such drawdown for purpose of evidencing our compliance with loan purpose hereof.

 

我司在贵行的提款账户(同时亦为上述第(A)项之下对外付款账户)为:

Our Loan Account at your bank (also as Outward Payment Account under Item (A) above) is:  

 

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

   

我们确认: 直至本次提款日, 《授信协议》第 3 条、第 4 条、第 5 条中所规定的所有陈述、保证、承诺及约定条款在主要方面依然真实有效, 并且没有任何违约事件 ( 或潜在的违约事件 ) 发生或持续。本通知书中使用的词语与其在《授信协议》中的含义是一致的。

We confirm that, at and until the drawdown date hereof, all the representations, warranties, undertakings and covenants in Clause 3, Clause 4 and Clause 5 in the Facility Agreement are true and valid in all material respects and no Events of Default (or potential Events of Default) are existing or continuing. Terms defined in the Facility Agreement shall have the same meaning in this Drawdown Notice.

   

此致 

Yours faithfully,

     

     
客户有权签字人签字   客户公章
Authorized Signatures Client   Seal of Client
代表   日期
On behalf of   Date

 

以下银行专用  

For Bank Only

 

兹同意按以下执行利率条件批准本次提款申请:

The drawdown application above is approved with the condition of the applicable interest rate as below:

   

本次提款的执行利率为: (请打勾勾选) 

The applicable Interest Rate under this drawdown shall be: (Please choose with the tick)

 

☐    LIBOR    加    [     ]% (年利率) (利差)   提款当前的利率为:
LIBOR    plus [     ]% (p.a.) (Margin)   The current interest rate at the time of drawdown shall be:
     
☐    WSJ PRIME RATE 加    [     ]% (年利率) (利差)   提款当前的利率为:
WSJ PRIME RATE plus [     ]% (p.a.) (Margin)  

The current interest rate at the time of drawdown shall be: 

 

☐   其他: 

Other:                                 

   

 

Please be advised that the applicable interest rate above may fluctuate or be adjusted in accordance with the provisions provided in the Facility Agreement.

 

银行印章 /Bank seal:                           经办 /Operator signature:                        日期 /Date:                          

 

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

  

收款账户信息

ACCOUNT INFORMATION

( 受托支付适用 /for Entrusted Payment Method)

     

提款通知书编号                            

Ref No of drawdown notice:                           

   

收款人(全称) 

Payee (full name)

 

收款账号信息 

Payee’s Account Info.

 

付款金额 

Amount to pay

 

备注 

Remarks 

             
             
             
             
             

      

   
客户公章  
Seal of Client  
日期  
Date  

    

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

附件二:

Schedule 2

     

关于“允许的投资”

Re “Permitted Investments

     

Permitted Investments ” are: 允许的投资包括:

   

(a) Investments (including, without limitation, Subsidiaries) existing on the Effective Date and shown on the Perfection Certificate; 有效之日即存在的和抵押证书上显示的投资 (包括但不限于子公司) ;

 

Investments consisting of Cash Equivalents; 现金等值物的投资;

   

Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower; 为借款人日常业务中存款、回款或类似交易担保的可转让证券投资

 

Investments consisting of deposit accounts in which Bank has a perfected security interest; 银行拥有登记过的抵押权的存款帐户的投资;

 

Investments accepted in connection with Transfers permitted by Section 4.12; 4.12 章节处允许的交易相关的投资;

 

Investments consisting of the creation of a Subsidiary for the purpose of consummating a merger transaction permitted by Section 4.12 of this Agreement, which is otherwise a Permitted Investment; 子公司进行的为了完成 4.12 章节处允许的并购交易, 即一种“允许的投资”而进行的投资;

 

Investments (i) by Borrower in Subsidiaries (other than Borrower) not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year; (ii) by Subsidiaries in other Subsidiaries (other than Borrower) not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year or in Borrower; and (iii) Investments by Borrower or its Subsidiaries in any Borrower; 如下投资: ( i ) 借款人在子公司 (除借款人外) 任意财政年度累计不超过十万美元的投资 ( ii ) 子公司对其它子公司 (除借款人外) 或对借款人任意财政年度累计不超过十万美元的投资 ( iii ) 借款人或其子公司对借款人的投资;

 

Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors; ( i ) 日常运营的差旅支取和员工派驻贷款和其它员工贷款和提款的投资 ( ii ) 按照借款人董事会批准的员工股票购买计划和协议, 给员工、管理层和董事的用于购买借款人或其子公司股权的投资;

 

Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; 在客户或供应商破产或重组、解决日常经营中与客户或供应商的拖欠帐款或其它纠纷时获得的投资 (包括债权) ;

 

Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph shall not apply to Investments of Borrower in any Subsidiary. 如果不适用于借款人在任何子公司的投资, 企业日常经营中对非关联企业的客户和供应商的应收票据或预付版税和其它授权的投资。

 

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

附件三: 

Schedule 3

     

合规证书

COMPLIANCE CERTIFICATE

     

The Client(s) under this Agreement confirms and undertakes to the Financing Bank that: 本协议中的客户对融资行确认和承诺:

   

a) COMPLIANCE CERTIFICATE(S) would be completed and provided in accordance with the requirements of the Financing Bank during the period of this Agreement;

在本协议期限内, 合规证明将根据融资行要求完成并提供;

   

b) any COMPLIANCE CERTIFICATE submitted by the Client(s) shall comply in substance with the format required by the Financing Bank (including the format set forth below or any further version notified by the Financing Bank).

任何客户提交的合规证明将符合融资行要求的格式 (包括下述格式和日后融资行修订的格式)

  

 

 

COMPLIANCE CERTIFICATE

     

TO: SPD SILICON VALLEY BANK CO., LTD. Date:
致: 浦发硅谷银行有限公司 日期

  

FROM: BORQS Hong Kong Limited

发件人 : 播思微系统香港有限公司

   

The undersigned authorized officer of BORQS Hong Kong Limited (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”):

在下文中签字的播思微系统香港有限公司 ( 借款人 ) 的被授权人证明, 根据借款人与银行之间的贷款协议 ( 协议 ) 的条款和条件:

   

(1) Borrower is in complete compliance for the period ending              with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.

(1) 在截至 [              ] 的期限内, 借款人完全遵守了所有要求的承诺 (下文另行载明的除外) ; (2) 不存在任何违约事件;

(3) 协议下的所有陈述和保证在本证明日期均是真实和正确的 (下文另行载明的除外) , 但前提条件是: 上述重大方面标准不适用于那些已符合要求或已被实质性修改的陈述或保证; 明示提及某个具体日期的陈述和保证, 在该日期  

做出时在所有重大方面是真实正确的; (4) 借款人及其每一个子公司均及时进行了纳税申报和报告; 借款人及时支付了所有海内外税款、征税、保证金和供款; (5) 不存在借款人先前未书面通知银行的、就未付员工工资或福利针对借款人或其子公司设定的留置或提出的索赔。

 

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

       

Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

请查收附件中的有关上述证明的材料。下文签名者证明: 该等材料系按一贯适用的 GAAP 从一个期限到下一期限 所准备的 (根据所附信函或脚注另行提供解释的除外) 。下文中的签名者确认, 借款人申请提款在任何时间或日期均未违反协议的任何条款, 合规性确认, 并非仅确认在本证明交付日期合规。本证明中未定义的术语的含义与协议中所给定义相同。

   

Please indicate compliance status by circling Yes/No under “Complies” column.

请在下表内的 符合 栏内圈明合规状态。

     

Reporting Covenant 报告约定   Required 要求   Complies 合规与否
       

客户

Client

 

担保人

Guarantor

Monthly Company prepared consolidated financial statements

合并的月度财务报表

 

 

Monthly within 30 days of each month end

于每月结束之后 30 天内

 

 

Yes/No

是/否

 

  /

Accounts Receivable Aging and Accounts Payable Report

应收账款账龄及应付账款报告

 

 

Monthly within 30 days of each month end

于每月结束之后 30 天内

 

 

Yes/No

是/否

 

 

Yes/No

是/否

 

Monthly Compliance Certificate

月度合规证书

 

 

Monthly within 30 days of each month end

于每月结束之后 30 天内

 

 

Yes/No

是/否

 

  /

Monthly Borrowing Base Certificate

月度借款基础证书

 

 

Monthly within 30 days of each month end

于每月结束之后 30 天内

 

 

Yes/No

是/否

 

  /

Annual CPA-Audited consolidated financial statements

经注册会计师审计的合并的年度财务报表

 

 

Annually within 270 days from year end

于每一年度结束之后 270 天内

 

 

Yes/No

是/否

 

  /

Annual Board-approved consolidated financial projections

经公司董事会通过的合并的年度财务运营计

 

 

Within 30 days from Board approval and/or year end

在董事会通过和/或年底前 30 天内

 

 

Yes/No

是/否

 

  /

AR Field Exam

应收账款审计

 

 

AR Field Exam shall be conducted annually. The initial AR Field Exam should be done 180 days after upon entering into this agreement.

每年对公司的应收账款进行审计。首次应收

账款审计应于本协议签署之日起 180 天内完成

 

  /  

Yes/No

是/否

 

注: 本表中提及的担保人为播思通讯技术 (北京) 有限公司 (公司注册号: 110000450022704 ) 。

Notes: The Guarantor mentioned in this table is Borqs Beijing Ltd. (Company No. 110000450022704).  

   

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

      

Financial Covenant 财务约定   Required 要求   Actual 实际   Complies 合规与否
             

客户应确认其在合并报表层面上满足和维持:

The Client shall confirm to obtain and maintain under this Agreement on a consolidated basis:

 

每月最小流动比率:

Minimum Monthly Adjusted Quick Ratio (AQR) of:

 

  1.25:1.00      

Yes/No

是/否

 

流动比率定义为: ( 非绑定现金 + 应收帐款净额 ) 除以 ( 流动负债 - 递延收入 )

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

 

每季度最低 EBITDA:

Minimum quarterly EBITDA of:

 

  USD500,000.00      

Yes/No

是/否

 

注: 该财务约束指标从 2015 年第三季度开始测算且 2016 年度的财务约束指标将在收到最新财务预算后重新设定。

Note: This financial covenant shall be tested starting from Q3 2015 and the financial covenant for 2016 will be adjusted upon receipt of updated financial forecast.

 

偿债备付率:

Debt Service Coverage Ratio of:

 

  2X        

Yes/No

是/否

 

偿债备付率定义为: 每季度 EBITDA / 每季度所有银行借款应还本息金额。

Debt Service Coverage Ratio is defined as quarterly EBITDA divided by quarterly principal and interest payment of all bank debt.  

 

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

以下是关于上述证明的除外事项: (若无除外事项, 请注明“无除外事项可写”)

 

 

 

 

 

 

 

 

 

  54  

 

 

第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

COMPANY   BANK USE ONLY
播思微系统香港有限公司    
BORQS Hong Kong Limited    
       
By:                Received by:     
Name:       AUTHORIZED SIGNER
Title:     Date:  
    Verified:  
      AUTHORIZED SIGNER
    Date:  
    Compliance Status:  Yes  No
     
    仅银行填写:
签署人:     接收人:  
姓名:       授权签字人
职务:     日期:  
    审核人:  
      授权签字人
    日期:  
    是否符合: 是 否

  

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

附件四: 借款基础证书  
Schedule 4 BORROWING BASE CERTIFICATE  

       

借款人 /Borrower: 播思微系统香港有限公司
  BORQS Hong Kong Limited
   
贷款人/Lender: 浦发硅谷银行有限公司
  SPD Silicon Valley Bank Co., Ltd.
   
承诺金额: 美元叁佰万元整 (其中美元贰佰万元整为应收账池贷款)
Commitment Amount: USD3,000,000.00 (USD2,000,000.00 for Pooled A/R Loan)

    

应收账款/ACCOUNTS RECEIVABLE  

1.      应收账款 (发票) 账面价值为                 

Accounts Receivable (invoiced) Book Value as of                 

 

美元                 

US$                 

 

2.      附加金额 (请在下页中解释)

Additions (Please explain on next page)

 

美元                 

US$                 

 

3.      减去: 关联/员工/非交易性账目

Less: Intercompany / Employee / Non-Trade Accounts

 

美元                 

US$                 

 

4.      净贸易应收账款

NET TRADE ACCOUNTS RECEIVABLE

 

美元                 

US$                 

 

应收账款抵扣 (不重复计算)

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

 

 

5.      发票账期超过 90 天的

90 Days Past Invoice Date

 

美元                 

US$                 

 

6.      超过 90 天的信用余额

Credit Balances over 90 Days

 

美元                 

US$                 

 

7.      超过 90 天账款 50%的余额 (跨帐龄的或影响目前的)

Balance of 50% over 90 Day Accounts (Cross-Age or Current Affected)

 

美元                 

US$                 

 

8.      不以美元或港币记账并收取的账款

Accounts not billed and collected in US Dollars or Hong Kong Dollars

 

美元                 

US$                 

 

9.      未由借款人出具发票的账款

Accounts not invoiced by Borrower

 

美元                 

US$                 

 

10.    抵消帐户/客户储蓄账目

Contra / Customer Deposit Accounts

 

美元                 

US$                 

 

11.    政府/机关账目

Government / Authority Accounts

 

美元                 

US$                 

 

12.    推广账目或演示账目; 保证销售账目或寄售账目

Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts

 

美元                 

US$                 

 

13.    含备忘录的或预结算的账目

Accounts with Memo or Pre-Billings

 

美元                 

US$                 

 

14.    合同账目; 进度/节点结算的账目

Contract Accounts; Accounts with Progress / Milestone Billings

 

美元                 

US$                 

 

15.    保留款结算的账目

Accounts for Retainage Billings

 

美元                 

US$                 

 

16.   信托/报税账目

Trust / Bonded Accounts

美元                 

US$                 

 

  56  

 

 

第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

 

17     结算及持有账目

Bill and Hold Accounts

 

美元                 

US$                 

 

18     未结算账目

Unbilled Accounts

 

美元                 

US$                 

 

19     非交易性账目 (若上述中未抵扣)

Non-Trade Accounts (If not already deducted above)

 

美元                 

US$                 

 

20     具有展期的发票的账目 (净 90+)

Accounts with Extended Term Invoices (Net 90+)

 

美元                 

US$                 

 

21     退款账目/借方备忘录

Chargebacks Accounts / Debit Memos

 

美元                 

US$                 

 

22     产品退货/换货

Product Returns / Exchanges

 

美元                 

US$                 

 

23     具有争议的账目; 破产债务人账目

Disputed Accounts; Insolvent Account Debtor Accounts

 

美元                 

US$                 

 

24     递延收入/其他 (请在下一页中解释)

Deferred Revenue/ Other (Please explain on next page)

 

美元                 

US$                 

 

25     超过集中度限量 (25%)

Concentration Limits (25%)

 

美元                 

US$                 

 

26     应收账款抵扣总金额

TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

 

美元                 

US$                 

 

27     合格账目 (第 4 项的金额将去第 26 项的金额)

Eligible Accounts (#4 minus #26)

 

美元                 

US$                 

 

28     合格账目的金额 (第 27 项的 80%)

ELIGIBLE AMOUNT OF ACCOUNTS (80% of #27)

美元                 

US$                 

余额/BALANCES  

29     最高贷款限额

Maximum Loan Amount

 

美元                 

US$                 

 

30     可放贷金额 (第 28 项与第 29 项中的较低者)

Total Funds Available [Lesser of #29 or #28]

 

美元                 

US$                 

 

31     目前在循环贷款 1 下的欠款余额

Present balance owing on Revolving Line 1

 

美元                 

US$                 

 

32     储备头寸 (第 30 项减去第 31 项)

RESERVE POSITION (#30 minus #31) 

美元                 

US$                   

 

[ 续下页 /Continued on following page.]

   

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第五部分 附件/Schedule 授信协议编号/Agreement Ref. No.: CL201508001

   

对上页中内容的解释: 

Explanatory comments from previous page:

  

 

 

 

 

 

 

 

 

签署人承认并保证上述内容是真实、完整以及准确的, 并且本借款基础证书中的所有信息符合签署人与浦发硅谷银行有限公司所签订的贷款协议下的陈述与保证的规定。

The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in the Loan Agreement between the undersigned and SPD Silicon Valley Bank Co., Ltd..

     

    仅供银行使用/BANK USE ONLY  
    接收人/Received by:        
公司/Company:     授权签字人/AUTHORIZED SIGNER  
       
      日期/Date:    
签字/By:                      
授权签字人/Authorized Signer   核验/Verified:    
      授权签字人/AUTHORIZED SIGNER  
       
日期/Date:     Date:    
       
    是否合规/Compliance Status:是/Yes 否/No  

  

  58  

 

Exhibit 10.57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

保证协议(最高额)

Guarantee Agreement (Maximum Amount)

 

公司保证人适用

For Corporate Guarantor

 

(文件编号/Ref No.: CL201508001-GA-2)

 

 

 

 

第一部分 签署页 /Part I Execution Page

协议编号 /Agreement Ref. No.: CL201508001-GA-2

   

签署页

Execution Page

  

银行

Bank

保证人

Guarantor

   

浦发硅谷银行有限公司

SPD SILICON VALLEY BANK CO., LTD.

 

BORQS International Holding Corp

   

住所地

with address at

住所地

with address at

   

上海市杨浦区大连路 588 号宝地广场 B 21

200082

 
   

21/F, B Block, Baoland Plaza,

No. 588, Dalian Road, Shanghai 200082

Scotia Centre, 4 th Floor, P.O. Box 2804, George Town, Grand Cayman KY1-1112, Cayman Islands
   

以上当事人在本协议中简称为 银行

hereinafter referred to as “Bank”

以上当事人在本协议中简称为 保证人

hereinafter referred to as “Guarantor”

   

 

上述各方当事人在此同意并接受本协议中所述之全部条款;保证人特此确认, 就本协议项下有关条件和条款,银行已向保证人作出充分的说明和解释,

保证人已理解、同意、承认该等条款。

The parties above hereby agree to and accept all terms and conditions set forth in this Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Guarantor completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

 

  1  

 

 

第二部分 正文 /Part II Content

协议编号 /Agreement Ref. No.: CL201508001-GA-2

   

正文

Content

 

 

为确保债务人 ( 定义见下文 ) 全面、及时履行其在主债权债务合同

( 定义见下文 ) 项下各项义务,保障银行债权的实现,本协议项下保证人同意自愿按本协议承担担保责任。

 

 

为实现上述目的,保证人和银行经协商一致并达成如下条款, 以资各方共同恪守。

 

 

一、特别条款

 

1 . 保证方式

 

(1)   保证人在本协议项下承担的责任为连带责任保证。

 

 

(2)   保证人在此无条件且不可撤销地向银行保证,如果债务人未能在到期时支付主合同项下的任何款项,无论银行对主合同项下的债权是否拥有其他担保权利 ( 包括但不限于保证、抵押、质押等担保方式 ) ,银行均有权先要求本协议项下保证人在本协议约定的保证范围内承担保证责任,而无须先要求其他担保人履行担保责任。

 

2 . 保证期间

 

保证期间为:债务人在主债权债务合同下的债务履行期届满之日起二年。

  

 

为免疑义,本协议所称“到期”、“届满”或类似措辞均包括债权人宣布主债权提前到期的情形。债权人宣布全部或部分主债权提前到期的,以其宣布的提前到期日为该等主债权债务履行期届满日,债权确定期间同时到期。

For the security of the well performance of the obligations under the Principal Contract (as defined hereunder) by the Debtor (as defined hereunder) and ensuring the recovery of the Bank’s right of credit, the Guarantor hereof agrees to assume the guarantee liability as agreed herein.

 

Therefore, a guarantee agreement (“the Agreement” or “Guarantee”) is reached by and between the Guarantor and the Bank hereof as follows.

  

I    SPECIAL PROVISIONS

 

1.    Guarantee Obligations

  

(1)   The obligations of the Guarantor hereunder are joint and several.

 

(2)   The Guarantor hereby irrevocably and unconditionally guarantees to the Bank the due and punctual observance and performance of the payment obligations under the Principal Contract by the Borrower, provided that the Banks has other security rights (by way of, including but not limited to guarantee, mortgage, pledge, etc.), the Bank shall be entitled to first enforce its rights hereunder against the Guarantor within the Secured Extent, and shall not be required to take any steps to first enforce its creditor’s rights against any other security provider.

 

2. Period of Guarantee

 

The period of guarantee shall be: two years after the expiration of the Period for Debt Performance of the Debtor under the Principal Contract.

 

For avoidance of doubt, the “expiration”, “maturity” or such similar wording shall be interpreted as including the circumstance that the creditor declares the early-maturity of any Principal amount, in whole or in part. In the event of the foregoing, the Period for Debt Performance shall be advanced to the date that such declaration of early-maturity is made, and the Period for Claims’ Determination shall mature correspondingly.

  2  

 

 

第二部分 正文 /Part II Content

协议编号 /Agreement Ref. No.: CL201508001-GA-2

   

 

3 . 主债权债务合同

 

本协议所担保的主债权债务合同为:债务人与本协议银行在债权确定期间内签署或履行的一系列债权债务文件,包括但不限于双方于 2015 年 月 日签署的《授信协议》 ( 编号 : CL201508001)

 

 

4 . 保证所担保的主债权 / 被担保主债权

 

本协议项下被担保的主债权为:银行在债权确定期间内,向债务人连续提供的一笔或多笔融资余额。

 

 

5 . 债权确定期间

 

(1)   本协议所指债权确定期间为:自 2015 日至 2018 03 31 日止。

 

 

 

(2)   为免疑义,前述有关债权,包括以下情形:

 

  

(a)  任何债权债务文件,只要债务人与银行系在债权确定期间内签署,系视为符合本协议担保要求,该文件项下所有债务均纳入本协议项下最高额保证的担保;及 /

 

  

(b)  债务人与银行虽未签署有关债权债务文件,但有证据证明其在债权确定期间内实际发生有此等债权的情形。

 

   

(3) 为免疑义,对于前款 (a) 项所述之债权债务文件项下的具体债务,即使其实际发生的时间晚于债权确定期间届满日 ( 包括但不限于:有关贷款或贷款额度系在债权确定期间届满

后方始提用;有关保函、信用证等表外额度在债权确定期 间内提用,银行对外开具了付款承诺性文件,但在债权确定期间届满后发生银行对外垫付的;或有关保函、信用证等表外额度在债权确定期间届满后方始提用对外开具承诺性文件等) ,该等债务同样受本协议项下最高额保证的担保。

 

   3.   Principal Contract

 

The Principal Contract hereunder means: a series of documents of claims and liabilities executed or performed between the Debtor and the Bank hereunder within the stipulated Period for Claims’ Determination, including but not limited to Facility Agreement (Agreement No. CL201508001) dated (Month) (Day), 2015.

 

4.     Principal Amount secured by the Guarantee

 

The Principal Amount secured by the Guarantee means: the balance of one or several finances, provided by the Bank to the Debtor within the Period for Claims’ Determination specified hereunder.

 

5. Period for Claims’ Determination

 

(1)   The Period for Claims’ Determination hereunder refers to: from (Month) ___________ (Day), 2015 to Mar. (Month) 31 st (Day), 2018.

 

(2)   For the avoidance of doubt, the wording of “Claim” in the preceding paragraph, includes the circumstances set forth below:

 

(a)   Any document in relation to the creditor’s rights or the debts, if only signed and/or sealed by the Debtor and the Bank within the Period for Claims’ Determination, would be deemed complying with the requirements of this Agreement, and all debts arising therefrom would be secured by the maximum amount guarantee hereunder; and/or

 

(b)   Although no written documents in relation to the creditor’s rights or the debts is signed and/or sealed between the Debtor and the Bank, some evidence exists proving the occurrence of such debts within the Period for Claims’ Determination.

 

(3) For the avoidance of doubt, in respect of the debts under the document in relation to the creditor’s rights or the debts stated in item (a) of the preceding paragraph, even if the actual debt occurs practically after the expiry date of the Period for Claims’ Determination, it would also be secured by the maximum amount guarantee hereunder. The aforesaid debts occurred after the expiration date of the Period for Claims’ Determination includes, but not limited to, the circumstance as follows: any loan or credit line of loan is actually requested or drawn down after the expiration date of the Period for Claims’ Determination; any facility for purpose such as the issuance of the guarantee or the letter of credit is requested and utilized within the Period for Claims’ Determination and the bank issues the formal documents with commitment obligation, while the actual payment or advance under such documents occur after the expiration of the Period for Claims’ Determination; or, any facility for purpose such as the issuance of the guarantee or the letter of credit is requested for utilized after the expiration of the Period for Claims’ Determination.

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(4)   为免疑义,对于前述第 (2) (a)(b) 项所述情形下的债务,即使系属在债权确定期间届满后产生的部分 ( 例如债权确定期间届满后新产生的利息、罚息或其他费用等 ) ,该等债务均同样受本协议项下最高额保证的担保。

 

 

 

(5)   关于在先债务的约定 ( 如适用,请在方框内打钩选择;为免疑义,请务必确保中英文本中本选项的勾选状态保持一致 )

 

 

 

□ 银行与保证人特别约定,银行与债务人在本协议确定之债权确定期间之前存在的授信或融资协议项下的债务 ( 如有 ) , 也一并纳入本协议项下最高额保证的担保。

 

 

 

6 . 最高债权限额

 

 

本协议项下保证人责任的最高债权限额为 USD3,600,000.00 元整 ( 大写:美元叁佰陆拾万元整 ) 或等值其他币种。

 

(4)   For the avoidance of doubt, with respect to any debt under the circumstances stated in both item (a) and (b) of the preceding paragraph (2), even for the part of the debts that occur after the expiration of the Period for Claims’ Determination (e.g. the interest, penalty interest and other fees of an existing debt accrued after the expiration of the Period for Claims’ Determination), such part of the debts would also be secured by the maximum amount guarantee hereunder.

 

(5)   Special stipulations on the preceding debts (please check the appropriate box if it’s agreed by both parties; for the avoidance of doubt, please ensure that the selected item is consistent between English and Chinese version ).

 

   It is specially agreed between the Guarantor and the Bank that, all the existing and outstanding debts (if any) under any facility or loan agreement(s) which is entered into by both the Debtor and the Bank prior to the Period for Claims’ Determination, would also be secured by the maximum amount guarantee hereunder.

 

6.    Maximum Limit of Claiming

 

The Maximum Limit of Claiming to the extent that the Guarantor shall assume as a security liability under this Agreement shall be: USD3,600,000.00 (SAY: USD THREE MILLION, SIX HUNDRED THOUSAND ONLY) or its equivalents in other currency.

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7 . 债务人

 

本协议项下所称债务人为:即播思微系统香港有限公司。

 

 

二、一般条款

 

1. 担保范围 本协议担保范围包括因主债权债务合同而产生的融资本金、利息、罚息、需补足的保证金、复利、违约金、赔偿金、评估费、公证费、手续费、实现债权的费用 ( 包括但不限于诉讼费用、财产保全费、差旅费、拍卖费、律师费用、执行费用等 ) 、因保证人在本协议下违约而给银行造成的损失和债务人在主债权债务合同项下的其它所有应付费用。

 

 

 

 

 

 

2. 担保权益之选择 若因债务人发生主债权债务合同项下的违约和 / 或保证人发生本协议项下违约,而造成银行依本协议约定行使担保权益时,若被担保的主债权既有物的担保又有人的担保的,银行可以先就相关担保文件 ( 包括本协议 ) 项下物的担保实现债权,也可以根据相关担保文件的规定先要求实现人的保证责任。保证人同意,在任何情况下, 银行未行使或未及时行使其与债务人在其他任何文件项下的任何权利,包括但不限于债权、担保物权、违约救济权, 均不得被视为银行怠于或放弃行使权利,亦不会影响其充分行使本协议项下的权利。

 

 

 

 

 

 

3. 保证人的陈述与保证 保证人向银行作出如下陈述与保证 , 并确认银行系依赖于该等陈述与保证而签署和履行本协议:

 

7. The Debtor

  

The Debtor hereunder, in terms of this Agreement, refers to BORQS Hong Kong Limited.

 

II GENERAL PROVISIONS

  

1.   Secured Extent. The Secured Extent of this Guarantee hereunder covers the following items resulting from Principal Contract: the Principal Amount hereof, interest, penalty interest, required cash deposit, compound interest, penalty fine, damage compensation, assessment fees, notarization fees, commission, expenses for realization of the Bank’s rights (including but not limited to litigation fees, property preservation fees, travel fees, auction fees, legal services fees and execution fees), the loss and damage resulting from the defaults of the Guarantor and any other expenses payable by the Debtor under Principal Contract.

 

2.   Choice of Security Interests. When the Bank intends to exercise the security interests due to any default of the Debtor under Principal Contract and/or that of the Guarantor hereunder, if the Principal Amount secured hereunder is secured by both property security and non-property guarantee, the Bank shall, at its full discretion, choose the security interest to be first claimed; namely, it may either recover the debts with the property security thereunder (including this Agreement) first, or require the guarantor to assume guaranteed liability thereunder first. The Guarantor agrees that in any case, the Bank’s failure to promptly exercise or Bank’s delay in exercising any of its right under the other agreements to which the Debtor is a party, such rights including but not limited to right of claiming, right of security interest, right of relief under breach of contract, shall not be deemed as the Bank’s intention to forego such rights to exercise or as a waiver thereof, and shall not preclude the exercise of any right hereunder.

 

3.    Representations and warranties. The Guarantor represents and warrants to the Bank as follows; the Guarantor confirms its understanding that the performance of any obligation hereunder by the Bank is totally based on such Representations and Warranties.

 

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 (1)   保证人系依据其当地法律成立并有效存续之法人。

 

  

(2)   保证人根据中国法律有权签署本协议,以及行使其在本协议项下的权利及履行其在本协议项下的义务,并已完成签署本协议及履行其在本协议项下的义务所需的一切授权及 / 或批准。

 

  

(3)   本协议的签署和履行不违反保证人所应遵守的法律、法规、规章、判决、裁决,也不与保证人的章程或其签署的任何合同、协议或承担的任何其他义务相抵触。

  

 

(4)   本协议各条款均是保证人的真实意思表示,对保证人具有法律约束力。

 

  

(5)   保证人保证其向银行出具的所有财务报表是按照其适用的会计准则编制的,真实、公正地表明了保证人的财务状况, 并且本协议所涉及的全部资料、文件均是真实、有效、准确、完整而无任何隐瞒的。

  

 

(6)   保证人保证完成应由其作出的为本协议的有效并能合法履行所需的备案、记录或登记,并支付所有税项。

 

  

(7)   保证人保证本协议履行期间不存在任何由法院或行政部门或任何相关方提起或将提起可能会对保证人的业务或财务状况造成重大不利影响的行动或任何法律程序的情况,包括但不限于破产、清算等。

 

 

 

 

 

(1)   The Guarantor guarantees it is a legal person duly incorporated and validly existing under the laws of its jurisdiction of incorporation.

 

(2)   The Guarantor, according to PRC laws, has full power to enter into this Agreement and exercise/perform rights and obligations hereunder, and has all necessary authorization and ratification in respect of the execution of this Agreement and the performance of the obligations hereunder.

 

(3)   The execution of this Agreement will neither constitute any breach of the laws, regulations, rules, judicial decisions, and awards that the Guarantor shall abide by, nor conflict with its articles of association, any contracts/agreements it signed and any other obligations assumed by it.

 

(4)   All the provisions hereunder are the expression of true intention and interest made by the Guarantor, and shall be legally binding thereupon.

 

(5)   All the financial statements provided by the Guarantor to the Bank are prepared in accordance with the general accounting standards, which indicate the financial status of the Guarantor truly and fairly; all the materials and documents in relation to this Agreement are truthful, effective, accurate, integral without any hidden facts purposely undisclosed to Bank..

 

(6)   The Guarantor guarantees it shall duly complete all the formalities of filing, recording or registration that it shall assume to ensure the validity of this Agreement and its performance; it shall also bear all the taxes thereof.

 

(7)   The Guarantor guarantees no any action or legal procedure is (or is to be) brought forward by any court, administration authorities or other concerned party, which may induce material adverse effects upon its business or financial status, including but not limited to the bankruptcy and liquidation.

 

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4.      约定事项

 

保证人向银行承诺,并同意在本协议有效期间内,除非银行事先书面同意,保证人应:

  

(1)   应向银行提供:

 

(a) 一经获得,但不迟于保证人每一会计年度结束后 180 天之日,银行可接受的一国际公认的独立的会计师事务所或者在中国注册的注册会计师出具的经审计和核实的该年度的财务报表的副本 ( 包括损益表和资产负债表 )

 

  

 

(b) 一经获得,但不迟于保证人每半个会计年度结束后 90 天之日,在经审计的财务报表的基础上编制的中期财务报表副本 ( 包括损益表和资产负债表 ) 以及由保证人财务负责人签署的证书,以证明该等财务报表在所有实质性方面是真实的,并清楚地反映了保证人在该等半年内的经营结果和财务状况;

  

 

 

(c) 一经请求,银行不时合理要求的有关保证人的财务信息或其他信息;

 

  

 

(2)   应妥善保存与其经营有关的记录和会计账簿,允许银行和 / 或由银行指定的任何专业顾问在任何合理时间检查保证人的该等记录和会计账簿;

 

 

 

(3)   一经发生任何诉讼、仲裁或行政诉讼程序,应立即通知银行;

 

(4)   应维持其公司法人地位合法有效,应适当并有效地开展其业务,应遵守所有适用于其的法律、法规、授权、协议和义务,并应缴纳所有应缴税款;

 

4.      Covenants.

 

The Guarantor undertakes and agrees with the Bank throughout the continuance of this Guarantee that the Guarantor will, unless the Bank otherwise agrees in writing:

 

(1)    supply to the Bank:

  

(a)   as soon as they are available, but in any event within one hundred and eighty (180) days after the end of each financial year of the Guarantor copies of its financial statements in respect of such financial year (including a profit and loss account and balance sheet) audited by an internationally recognized firm of independent accountants or a certified public accountant registered in the PRC acceptable to the Bank;

 

(b)   as soon as they are available, but in any event within ninety (90) days after the end of each half of each financial year of the Guarantor, copies of its interim financial statements (including a profit and loss account and balance sheet) prepared on a basis consistent with the audited financial statements of the Guarantor together with a certificate signed by the principal financial officer of the Guarantor to the effect that such financial statements are true in all material respects and present fairly the financial position of the Guarantor as at the end of, and the results of its operations for, such half-year period;

 

(c)    promptly on request, such additional financial or other information relating to the Guarantor as the Bank may from time to time reasonably request;

 

(2)   keep proper records and books of account in respect of its business and permit the Bank and/or any professional consultants appointed by the Bank at all reasonable times to inspect and examine the records and account books of the Guarantor;

 

(3)   promptly inform the Bank of any litigation, arbitration or administrative proceeding;

 

(4)   maintain its corporate existence and conduct its business in a proper and efficient manner and in compliance with all laws, regulations, authorizations, agreements and obligations applicable to it and pay all taxes imposed on it when due;

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(5)   应确保未经银行事先书面同意,保证人的股权或所有权或控制权 ( 直接或间接 ) 不发生变化;

 

 

(6)   应确保未经银行事先书面同意,不对保证人的章程做出任何修改或补充;

 

 

(7)   除非法律另有规定,应确保其在本协议项下的义务在任何时候与其所有其他无担保债务处于至少相同的清偿顺序;

  

 

(8)   应确保未经银行事先书面同意,不得与任何其他实体合并或兼并或采取任何措施进行分立、歇业、整顿、清算、破产或解散;

  

 

(9)   应确保未经银行事先书面同意,不得在其全部或任何资产或收益上设定或允许存在以任何人为受益人 ( 银行除外 ) 的任何担保;

 

 

(10)   未经银行事先书面同意,无论通过单个的交易还是一系列的交易 ( 无论与否为关联交易 ) ,不得出售、转移或以其他方式转让、处理或处置其业务、资产或收益的全部或任何部分 ( 但正常业务过程中按公平原则转让、处理或处置的除外 )

 

 

(11)   不得签署或承担可能对其财务或其他状况有重大不利影响的任何协议或义务。

  

5.  费用和开支

 

(1) 保证人在此承诺,一经要求,即将银行为行使或保护银行在本协议项下的各项权利及权力而产生的、或因本协议所引起的应归咎于保证人的任何争议或因保证人对本协议的任何违反而使银行合理地产生的所有成本、开支及费用 ( 包括诉讼费、律师费等法律费用 ) 立即支付或偿付给银行。

 

(5)   procure that there is no change of the shareholdings in or ownership or control (direct or indirect) of the Guarantor without the prior written consent of the Bank;

 

(6)   procure that no amendment or supplement is made to the articles of association of the Guarantor without the prior written consent of the Bank;

 

(7)   ensure that its obligations under this Guarantee at all times rank at least pari passu with all other unsecured obligations of the Guarantor unless otherwise provided by law;

 

(8)   ensure that not merge or consolidate with any other entity or take any step with a view to demerger, winding-up, administration, liquidation, bankruptcy or dissolution without the prior written consent of the Bank;

 

(9)   ensure that not create or attempt or agree to create or permit to arise or exist any charge over all or any part of its property, assets or revenues in favor of any person except for the Bank written consent of the Bank;

 

(10)   subjected to the written consent of the Bank, not sell, transfer or otherwise assign, deal with or dispose of all or any part of its business or (except for good consideration in the ordinary course of its business) its assets or revenues, whether by a single transaction or by a number of transactions whether related or not;

 

(11)   not enter into any agreement or obligation which might materially and adversely affect its financial or other condition.

 

5. Expense and Fees.

  

(1) The Guarantor undertakes hereby, once requested, it shall immediately pay to the Bank the related costs, expenses and fees (including litigation fee, reasonable attorney’s fee and other legal service fees) resulting from the exertion or protection of the rights/powers hereunder, or from any dispute in relation to this Agreement which is ascribed to the Guarantor, or from any default by the

Guarantor hereunder.

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(2) 保证人须支付与本协议或与本协议项下的转让有关的依法应由保证人承担的所有印花税或类似其它税项, 并在未能支付或延误支付该等税费而导致银行发生任何责任、费用、索赔和开支时向银行作出赔偿。

 

  

6. 授权扣款与抵消 保证人不可撤销的授权银行,在保证人对于银行有任何到期未清偿债务的时候,银行均有权在任何时间无需通知保证人,即可将保证人在银行任何账户中的款项(不论币种、期限如何)直接用于偿付上述债务;为本协议目的,保证人确认银行有权自行决定相关货币兑换的适用汇率,因此导致的任何存款损失或汇率风险均由保证人承担。

 

 

 

 

  

7. 独立性 本协议的效力独立于主债权债务合同的效力,不因主债权债务合同的无效或被撤销或未成立而无效或可被撤销或未成立;本协议部分条款被宣告无效或被撤销,不影响其余条款的效力。

 

 

 

8. 违约事件及违约责任 下列任一事件均构成保证人在本协议项下的违约事件 (“ 违约事件 ”)

  

(1)   债务人在主债权债务合同项下的任一违约事件;

 

(2)   保证人在本协议中所作的任何陈述、保证或承诺在任何重要方面被证明是不正确的或是具有误导性的;

  

 

(3)   保证人违反本协议下的其他任何义务;

 

(4)   保证人发生严重影响其本协议项下履约能力的其他情形的。

 

(2)  The Guarantor shall assume all of the stamp duty or any other taxes in relation to this Agreement or the transfer hereunder; in case of any failure or delay of the said payment which leads to the occurrence of any liability, fee, claiming and expense of the Bank, the Guarantor shall compensate for it.

 

6.   Deduction Authorization and Set-off. The Guarantor hereby irrevocably authorizes, in case of any failure by the Guarantor to pay the debts due and payable to the Bank, the Bank shall have the right to deduct corresponding amount directly (regardless of the currency and deposit term) in any account of the Guarantor opened at the Bank to repay the debt, without any prior notice; for the purpose of this Agreement, the Guarantor confirms the Bank shall, at its sole discretion, decide the applicable exchange rate of currency conversion, and any deposit loss or exchange risk resulting from such conversion shall be borne by the Guarantor.

 

7.  Independence. The effectiveness of this Agreement is independent from that of the Principal Contract, and it will not be invalid or revocable due to the invalidity or revocation of Principal Contract. The invalidity or revocation of any term or condition hereunder shall not affect the validity of the other terms and conditions hereunder.

 

8.   Events of default. Each of the following circumstances shall constitute an event of default hereunder with respect to the Guarantor:

 

(1)   Any default by the Debtor under Principal Contract;

  

(2)   Any presentation and warranty made by the Guarantor is or proves to be incorrect or misleading in any material aspect, or the Guarantor fails to perform or comply with any stipulations hereunder in any material aspect;

 

(3)   Any other default by the Guarantor hereunder;

 

(4)   Any other circumstances occurred by the Guarantor that have material negative effect on the Guarantor’s ability to fulfill its obligation under this Agreement..

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9. 违约处理 发生前述任一违约事件时,银行有权宣布主债权及 / 或债权确定期间提前到期,及 / 或采取以下所述之一种或多种措施:

 

  

 

(1)   宣布保证人已构成本协议项下违约,并要求限期整改;

 

  

(2)   要求保证人依本协议承担保证责任;

 

 

(3)   要求债务人或保证人提供新的担保;

 

 

(4)   向有管辖权的人民法院提起诉讼;

 

(5)   采取在中国法律最大范围内所允许的其他措施。

  

 

 

10. 通知

 

(1) 本协议一方发往另一方的任何其他通知,均应发往本协议开头列明的地址,直到另一方书面通知更改该地址为止。只要按上述地址发送,则视为在下列日期送达:如是信函, 则按营业地址挂号寄发后的第七个营业日;如果是专程送达,则为收件人签收之日;如果为传真或电子邮件,则为传真或电子邮件发送之日。但向银行发出或交付的所有通知、要求或其它通讯均须在银行实际收到时被视为已经送达。且以传真方式向银行发出的所有通知、要求须于事后将原件以当面送交或邮寄于银行的方式加以确认。

 

 

 

  

 

(2) 保证人同意,提起任何诉讼、仲裁的传票或通知可交付或留置到本协议开头约定的地址即视为已经送达保证人。保证人放弃一切抗辩权。

 

9.   Disposal of Default. In case of any of the aforesaid events of default, the Bank shall have the right to declare the early-maturity of the Principal Amount under the Principal Contract and/or the Period for Claims’ Determination, and/or adopt one or several measures below:-

 

(1)   Declare the default of the Guarantor under this Agreement, and require the Guarantor to make prompt correction within designated correction period;

 

(2)   Require the Guarantor to assume the guarantee obligations as provided in this Agreement;

 

(3)   Require the Debtor or the Guarantor to provide new security;

 

(4)   File an action to competent People’s Court;

 

 

(5)   Take any other measure which is to the fullest extent allowed by PRC laws.

 

10.   Notice.

 

(1)   Any notice from one party to the other party shall be delivered to the address stated at the beginning of this Agreement, unless such address is changed with written notice by the other party. Any notice delivered to the above address shall be deemed to have been received:- for mail, on the 7 th business day following the registered delivery date to the main business address; for express, on the signing date of the receiver; for fax or E-mail, on the delivering date of the fax or E-mail. All the notices, requirements or any other communications shall be deemed to be received as they are actually received by the Bank. The originals of the said notices and requirements delivered via fax shall be sent to the Bank via express or mail after the said fax.

 

(2)   The Guarantor consents and agrees, any summon or notice in relation to litigations/arbitrations shall be delivered or left to the address listed at the beginning of this Agreement. Once delivered or left to the said address, it shall be deemed as received by the

  10  

 

 

第二部分 正文 /Part II Content

协议编号 /Agreement Ref. No.: CL201508001-GA-2

   

 

 

11. 其他

 

(1)   本协议自保证人和银行双方签署之日起生效,至本协议所担保的全部债务被完全清偿后终止。

 

  

(2)   本协议的签订和履行均适用中国法律。

 

 

(3)   有关本协议的一切争议应通过友好协商解决;协商不成的, 应向银行住所地有管辖权的人民法院提起诉讼。争议期间, 各方仍应继续履行未涉争议的条款。

 

  

 

(4)   本协议需要变更或补充的,双方另行达成书面协议,作为本协议的附件。本协议附件是本协议不可分割的组成部分, 与本协议正文具有同等的法律效力。

 

  

(5)   本协议同时配有英文文本供参考。如中英文本存在差异, 应以中文本的约定为准。

   

(6)   除非在本协议中另有特别说明,本协议中相关用语和表述与主债权债务合同具有相同的含义。

  

(7)   本协议一式两份,具有同等效力。保证人、银行各执一份。

  

 

- 本担保协议末尾 -

Guarantor. The Guarantor undertakes to forego all claims of defense.

 

11. Miscellaneous.

  

(1)   This Agreement will come into force upon the seal and signature of both parties, and will terminate when all the secured debts hereunder have been fully and completely repaid.

 

(2)   This Agreement shall be governed by and construed in accordance with the laws of P.R. China.

 

(3)   All disputes under or relating to this Agreement shall be settled through friendly negotiations; in case of any failure of negotiation, the dispute shall be referred to the jurisdiction of competent people’s court of the place where the Bank is located. During the period of dispute, each party shall continue executing the clauses prescribed under the agreement which are not involved in the dispute.

 

(4)   This Agreement may be amended during the duration of this Agreement by the Parties, provided that such amendment shall be in writing and be drawn up in Schedules. Any Schedule is the integral part of this Agreement, all of which are of the same effect.

 

(5)   This Agreement shall be formed with both Chinese and English. In case of any discrepancy between the said versions, the Chinese version shall prevail.

 

(6)   Unless otherwise defined in this Agreement, the relevant words and phrases shall have the same meaning as in the Principal Contract.

 

(7)   This Agreement is made in two originals with equivalent legal effect; the Guarantor and the Bank keep one of them respectively.

 

- End of this Guarantee -

 

  11  

Exhibit 10.58

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

变更协议

Amendment Agreement

 

 

 

 

 

 

 

 

 

(修订函编号/Ref. No.: CL201508001-001)

隶属于/Belonging to: 授信协议/Facility Agreement

(编号/Ref. No.: CL201508001)

 

 

 

 

第一部分 签署页 / Part I Execution Page

变更协议编号 / Agreement Ref. No.: CL201508001-001

 

签署页

Execution Page

  

融资行

Financing Bank

客户

Client

   

浦发硅谷银行有限公司

SPD SILICON VALLEY BANK CO., LTD.

播思微系统香港有限公司

BORQS Hong Kong Limited

   

住所地

with address at

住所地

with address at

   

上海市杨浦区大连路 588 号宝地广场 B 座 21 楼

200082

 

21/F, Block B, Baoland Plaza,

No. 588, Dalian Road, Shanghai 200082

Office B, 21/F., Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong

   

以上当事人在本协议中简称为“融资行”

hereinafter referred to as “Financing Bank”
以上当事人在本协议中简称为“客户” hereinafter referred to as "Client"

 

  上述各方当事人在此同意并接受本变更协议中所述之全部条款;客户特此确认, 就本协议项下有关条件和条款,融资行已向客户作出充分的说明和解释, 客户已理解、同意、承认该等条款。

The parties above hereby agree to and accept all terms and conditions set forth in this Amendment Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Financing Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Client completely.  

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

 

1

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

变更协议条款

TERMS AND CONDITIONS

 

鉴于:

Whereas,

 

浦发硅谷银行有限公司(作为融资行)与客户(作为借款人)于 2015 年 08 月 31 日签署了《授信协议》(编号: CL201508001,下称“ 《授信协议》 ”)以及其他相关文件(连同前述文件的任何变更、修订、补充,以下简称“ 融 资文件 ”)。根据融资文件,银行同意向客户提供金额为美元叁佰万元整之银行授信(下称“ 授信 ”)。现经各方协商一 致,达成如下增补及变更条款(“ 本变更协议 ”),以资协议各方共同恪守:

SPD SILICON VALLEY BANK CO., LTD. (as financing bank) and the Client (as borrower) have entered into a Facility Agreement (“ Facility Agreement ”) dated August 31st, 2015 (Ref. No. CL201508001) and other related documents (together with any modification, amendment, supplement of/to the foregoing, hereinafter as the “ Finance Documents ”). Pursuant to the Finance Documents, the Financing Bank agrees to make available to the Client the facility up to USD3,000,000.00 (hereinafter as the “Facility”). Based on the foregoing, the parties hereby further agree to reach the amendment and/or supplementary clause as below (hereinafter as the “ Amendment Agreement ”).

 

1.       各方一致不可撤销地确认本变更协议条款如下:

The parties hereby irrevocably confirm the following amendment clauses below:

 

(1) 《授信协议》第二部分“特别条款”中对于“额度”中的如下内容:

The contents of “Facility Amount” in Part II Special Provision of the Facility Agreement quoted below:

 

引用 /QUOTE

 

授信总额度:

美元 3,000,000.00

大写金额: 美元叁佰万元整

 

Total Facility Amount:

USD3,000,000.00

In words: THREE MILLION US Dollar

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

授信总额度:

美元 5,000,000.00

大写金额: 美元伍佰万元整

 

2

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

Total Facility Amount:

USD5,000,000.00

In words: FIVE MILLION US DOLLAR

 

引用结束 /UNQUOTE

 

(2) 《授信协议》第二部分“特别条款”中对于“关于所有业务品种均应遵循的财务约定”中的如下内容:

The contents of “General Financial Covenants for all product-types” in Part II Special Provision of the Facility Agreement quoted below:

 

引用 /QUOTE

 

未取得融资行同意的情况下,客户、本授信合同项下的任何担保人及远特(北京)通信技 术有限公司不得将其任何资产转让给第三方,同时,不得产生其他银行或第三方的额外债 务(Red Lion Capital 的美元 3,000,000.00 授信除外)。

Without the consent from the Financing Bank, the Client, any Guarantors under this facility and Yuantel (Beijing) Telecommunications Technology Co., Ltd. will not be allowed to grant any of its assets to third party or obtain additional indebtedness from other banks or third party (except for up to USD3,000,000.00 from Red Lion Capital).

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

未取得融资行同意的情况下,客户、本授信合同项下的任何担保人及远特(北京)通信技 术有限公司不得将其任何资产转让给第三方,同时,不得产生其他银行或第三方的额外债 务(Partners For Growth IV, L.P.及其关联公司的美元 8,000,000.00 授信除外)。

Without the consent from the Financing Bank, the Client, any Guarantors under this facility and Yuantel (Beijing) Telecommunications Technology Co., Ltd. will not be allowed to grant any of its assets to third party or obtain additional indebtedness from other banks or third party (except for the credit facility up to USD8,000,000.00 from Partners For Growth IV, L.P. and its affiliated).

 

 

本协议项下客户在此确认,若客户的关联公司【即:播思通讯技术(北京)有限公司,统 一社会信用代码:91110108666251455B,注册地址为:北京市海淀区八里庄路 62 号院 1

号楼 8 层 943 室】在其与融资行间签署的任何融资或业务文件项下发生违约的,即视为构 成本协议项下的违约事件,融资行有权依据法律及本协议相关约定行使追索权利。

The Client under this Agreement hereby confirm that in case that any event of default occurred under any finance or business document which is signed between the Financing Bank and the related company of the Client (viz. Borqs Beijing Ltd., Unified Social Credit Code No. 91110108666251455B, Registered Address: Room 943, 8/F, Building No. 1, No. 62, Balizhuang Road, Haidian District, Beijing), it should be deemed as constituting an event of default under this Agreement; accordingly the Financing Bank shall have the right to exercise any or all of its rights of recourse in accordance with the provisions of the laws and this Agreement.

 

3

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

引用结束 /UNQUOTE

 

(3) 《授信协议》第二部分“特别条款”中对于“其他约定”中的如下内容: The contents of “Others” in Part II Special Provision of the Facility Agreement quoted below:

 

引用 /QUOTE

 

在本授信合同有效期内,客户在融资文件项下任何债务均应当优先于客户在 Red Lion Capital 的任何债务。

Within the period of this agreement, any indebtedness of the client from Red Lion Capital shall be subordinate to any indebtedness of the client from the Financing Bank.

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

在本授信合同有效期内,客户在融资文件项下任何债务均应当优先于客户在 Partners For Growth IV, L.P.及其关联公司的任何债务。

Within the period of this agreement, any indebtedness of the client from Partners For Growth IV, L.P and its affiliated shall be subordinate to any indebtedness of the client from the Financing Bank.

 

引用结束 /UNQUOTE

 

(4) 《授信协议》第二部分“特别条款”中对于“关于所有业务品种均应遵循的财务约定”中的如下内容: The contents of “General Financial Covenants for all product-types” in Part II Special Provision of the Facility Agreement quoted below:

 

引用 /QUOTE

 

客户应确认其在合并报表层面上满足和维持:

The Client shall confirm to obtain and maintain under this Agreement on a consolidated basis:

 

1)     每月最小流动比率:1.25:1.00

Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00

 

流动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

 

4

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

2)      每季度最低 EBITDA:USD500,000.00

Minimum quarterly EBITDA of: USD500,000.00

 

注:该财务约束指标从 2015 年第三季度开始测算且 2016 年度的财务约束指标将在收 到最新的财务预算后重新设定。

Note: This financial covenant shall be tested starting from Q3 2015 and the financial covenant for 2016 will be adjusted upon receipt of updated financial forecast.

 

3)      偿债备付率:2X

Debt Service Coverage Ratio of: 2X

 

偿债备付率定义为:每季度 EBITDA / 每季度所有银行借款应还本息金额。

Debt Service Coverage Ratio is defined as quarterly EBITDA divided by quarterly principal and interest payment of all bank debt.

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

客户应确认在合并报表层面上需维持:

The Client shall confirm to maintain on a consolidated basis:

 

1)      每月最小调整后速动比率:1.25:1.00

Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00

 

调整后速动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。 AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

 

2)      每季度最低 EBITDA:USD500,000.00

Minimum Quarterly EBITDA of: USD500,000.00

 

注:该财务约束指标将在收到并审核 2017 年董事会批准的(最新)预算后更新。 Note: This financial covenant for 2017 will be adjusted upon receipt and review of 2017 board-approved (updated) plan.

 

引用结束 /UNQUOTE

 

5

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

(5) 《授信协议》第二部分“特别条款”中对于“其他约定”中的如下内容: The contents of “Others” in Part II Special Provision of the Facility Agreement quoted below:

 

引用 /QUOTE

 

关于资料提交,自本协议签署后,客户应:

Upon entering into this Agreement, the client shall:

1)      于每月结束之后 30 天内提供公司准备的合并的月度财务报表;

submit Monthly Company prepared consolidated financial statements within 30 days of each month end;

2)      于每月结束之后 30 天内提供应收账款账龄及应付账款账龄报告;

submit Accounts Receivable Aging and Payable Aging Report within 30 days of each month end;

3)      于每月结束之后 30 天内提供合规证书;

submit Monthly Compliance Certificate within 30 days of each month end;

4)      于每月结束之后 30 天内提供借款基础证书;

submit Monthly Borrowing Base Certificate within 30 days of each month end;

5)

在董事会通过和/或年底前 30 天内提供经公司董事会通过的合并的财务运营计划;

submit Annual Board-approved consolidated financial projections within 30 days from Board approval and/or year end;

6) 于每一年度结束之后 270 天内提供经注册会计师审计的合并的年度财务报表;

submit Annual CPA-Audited consolidated financial statements within 270 days from year end;

7)      其他经融资行合理要求的报告。

submit such other reports which may be reasonably requested by the Financing Bank.

 

关于资料提交,自本协议签署后,播思通讯技术(北京)有限公司(公司注册号:

110000450022704,作为本协议之“担保人”)应:

Upon entering into this Agreement, Borqs Beijing Ltd. (Company No. 110000450022704, the Guarantor under this Agreement) shall:

1)      于每月结束之后 30 天内提供应收账款账龄及应付账款账龄报告;

Submit Accounts Receivable Aging and Payable Aging Report within 30 days of each month end;

2) 每年对公司的应收账款进行审计。首次应收账款审计应于本协议签署之日起 180 天内

完成;

AR Field Exam shall be conducted annually. The initial AR Field Exam should be done 180 days after upon entering into this agreement;

3)      其他经融资行合理要求的报告。

submit such other reports which may be reasonably requested by the Financing Bank.

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

关于资料提交,自本协议签署后,客户应:

Upon entering into this Agreement, the Client shall:

1)      于每月结束之后 30 天内提供公司准备的合并的月度财务报表;

submit Monthly Company prepared consolidated financial statements within 30 days

of each month end;

2)      于每月结束之后 30 天内提供应收账款账龄及应付账款账龄报告;

submit Accounts Receivable Aging and Payable Aging Report within 30 days of each month end;

 

6

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

3)      于每月结束之后 30 天内提供合规证书;

submit Monthly Compliance Certificate within 30 days of each month end;

4)      于每月结束之后 30 天内提供借款基础证书;

submit Monthly Borrowing Base Certificate within 30 days of each month end;

5)      每年对公司的应收账款进行审计,首次应收账款年审应于本变更协议签署之日起 60

天内完成;

AR Field Exam shall be conducted annually and the initial AR Field Exam should be completed within 60 days from the execution date of this Amendment Agreement;

6)      于每一年度结束之后 270 天内提供经注册会计师审计的年度财务报表;

submit Annual CPA-Audited financial statements within 270 days from year end;

7)      在每一年度董事会通过后 10 天内提供经公司董事会通过的合并的财务运营计划,但

最迟不得晚于每一年度结束之后 60 天;

submit Annual Board-approved consolidated financial projections within 10 days from Board approval, but no later than 60 days from year end;

8)      其他经融资行合理要求的报告。

submit such other reports which may be reasonably requested by the Financing Bank.

 

引用结束 /UNQUOTE

 

(6) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“业务额度”中的如下内容: the contents of “Pooled A/R Loan Limit” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用 /QUOTE

 

金额/Amount: 美元/USD2,000,000.00

大写/in words:

美元贰佰万元整

TWO MILLION US DOLLOR

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

金额/Amount: 美元/USD4,000,000.00

大写/in words:

美元肆佰万元整

FOUR MILLION US DOLLOR

 

引用结束 /UNQUOTE

 

7

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

(7) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“业务额度到期日”中的如下内 容:

the contents of “Maturity Date of the Loan Limit” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用 /QUOTE

 

自本业务额度首次提款之日起 12 个月届满之日,但首次提款不得晚于 2015 年 09 月 30

12 months from the date of first drawdown under this specification, but the first drawdown shall no later than September 30th, 2015

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

2017 年 08 月 31 日

August 31st, 2017

 

引用结束 /UNQUOTE

 

(8) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“应收账池财务指标”中的如下 内容:

the contents of “Borrowing Formula” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用 /QUOTE

 

融资率: 在任何时点,客户在本业务条款项下的未清偿贷款余额,不得超过客户应收账池 中的合格应收账款余额的 80%与播思通讯技术(北京)有限公司(亦作为本协议之“担保 人”)应收账池中的合格应收账款余额的 60%之和。

Advance Rate: at any time, the outstanding amount under this Specification shall not exceed 80% of total Eligible Accounts Receivable in the A/R pool of the Client plus 60% of total Eligible Accounts Receivable in the A/R pool of Borqs Beijing Ltd. (the Guarantor under this Agreement).

 

合格应收账款不包括且不限于:账龄超过 90 天的应收账款,抵消账户及预计可抵消的递 延收入账户产生的应收账款,关联交易产生的应收账款,政府账户(除非根据债权转让)产 生的应收账款,单一债务人集中度超过 25%的应收账款(基于客户总的应收账款)。未开具

 

发票的应收账款也是不合格的。

Eligible Accounts shall exclude, but are not limited to, the following: Accounts greater than 90 days from invoice date; Contra accounts and accounts with potential off-set with deferred revenue; Affiliate accounts; Government accounts (unless under an assignment of claims); Amounts exceeding 25% concentration limit (of the Client’s total AR base) for a single debtor. Unbilled A/R is not eligible.

8

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

引用结束 /UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

融资率: 在任何时点,客户在本业务条款项下的未清偿贷款余额,不得超过应收账池中的 合格应收账款余额的 80%。

Advance Rate: at any time, the outstanding amount under this Specification shall not exceed 80% of total Eligible Accounts Receivable in the A/R pool.

 

合格应收账款不包括且不限于:账龄超过 90 天的应收账款,抵消账户及预计可抵消的递

延收入账户产生的应收账款,超过 90 天账款 50%的余额,超过 90 天的贷方余额;关联交 易产生的应收账款,政府账户(除非根据债权转让)产生的应收账款,单一债务人集中度 超过 25%的应收账款(基于客户总的应收账款),未开具发票的应收账款也是不合格的。 Eligible Accounts shall exclude, but are not limited to, the following: Accounts greater than 90 days from invoice date; Contra accounts and accounts with potential off-set with deferred revenue; Cross Age accounts; Credit Balances over 90 Days; Affiliate accounts; Government accounts (unless under an assignment of claims); Amounts exceeding 25% concentration limit (of the Client’s total AR base) for a single debtor; Unbilled A/R is not eligible.

 

引用结束 /UNQUOTE

 

(9) 《授信协议》第五部分“附件”中“附件三”将在本变更协议生效后调整为以下内容:

The contents of “Appendix 3” in Part V Schedule of the Facility Agreement shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

附件三:

Schedule 3

 

9

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

合规证书

COMPLIANCE CERTIFICATE

 

The Client(s) under this Agreement confirms and undertakes to the Financing Bank that: 本协议中的客户 对融资行确认和承诺:

 

a) COMPLIANCE CERTIFICATE(S) would be completed and provided in accordance with the requirements of the Financing Bank during the period of this Agreement; 在本协议期限内,合规证明将根据融资行要求完成并提供;

 

b) any COMPLIANCE CERTIFICATE submitted by the Client(s) shall comply in substance with the format required by the Financing Bank (including the format set forth below or any further version notified by the Financing Bank).

任何客户提交的合规证明将符合融资行要求的格式(包括下述格式或日后融资行修订的格式)

 

COMPLIANCE CERTIFICATE

 

 

  TO: SPD SILICON VALLEY BANK CO., LTD. Date:
  致:浦发硅谷银行有限公司 日期

   

FROM: BORQS Hong Kong Limited

发件人: 播思微系统香港有限公司

 

The undersigned authorized officer of BORQS Hong Kong Limited (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”): 在下文中签字的播思微系统香港有限公司(“借款人”)的被授权人证明,根据借款人与银行之间的贷款协议(“协 议”)的条款和条件:

 

(1) Borrower is in complete compliance for the period ending with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.

(1)在截至[ ]的期限内,借款人完全遵守了所有要求的承诺(下文另行载明的除外);(2)不存在任何违约事

件;(3)协议下的所有陈述和保证在本证明日期均是真实和正确的(下文另行载明的除外),但前提条件是:上述 重大方面标准不适用于那些已符合要求或已被实质性修改的陈述或保证;明示提及某个具体日期的陈述和保证, 在该日期做出时在所有重大方面是真实正确的;(4)借款人及其每一个子公司均及时进行了纳税申报和报告;借款 人及时支付了所有海内外税款、征税、保证金和供款;(5)不存在借款人先前未书面通知银行的、就未付员工工资 或福利针对借款人或其子公司设定的留置或提出的索赔。

 

Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

请查收附件中的有关上述证明的材料。下文签名者证明:该等材料系按一贯适用的 GAAP 从一个期限到下一期限

所准备的(根据所附信函或脚注另行提供解释的除外)。下文中的签名者确认,借款人申请提款在任何时间或日

 

10

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

期均未违反协议的任何条款,合规性确认,并非仅确认在本证明交付日期合规。本证明中未定义的术语的含义与 协议中所给定义相同。

 

Please indicate compliance status by circling Yes/No under “Complies” column.

请在下表内的“符合”栏内圈明合规状态。

 

Reporting Covenant 报告约定   Required 要求  

Complies

合规与否

 
Monthly Company prepared consolidated financial statements 公司准备的合并的月度财务报表   Monthly within 30 days of each month end
于每月结束之后 30 天内
  Yes/No
是/否
 
Accounts Receivable and Payable Aging Report
应收账款账龄报告及应付账款账龄报告
  Monthly within 30 days of each month end
于每月结束之后 30 天内
  Yes/No
是/否
 
Compliance Certificate
合规证书
  Monthly within 30 days of each month end
于每月结束之后 30 天内
  Yes/No
是/否
 
Borrowing Base Certificate
借款基础证书
  Monthly within 30 days of each month end
于每月结束之后 30 天内
  Yes/No
是/否
 
Annual CPA-Audited financial statements
经注册会计师审计的年度财务报表
  Annually within 270 days from year end
于每一年度结束之后 270 天内
  Yes/No
是/否
 
Board-approved consolidated financial   Within 10 days from Board approval, but no later   Yes/No  
projections   than 60 days from year end   是/否  
经公司董事会通过的合并的年度财务运营计划   在每一年度董事会通过后10天内提供,但最迟不      
  得晚于每一年度结束之后 60 天      
AR Field Exam   Conducted annually and the initial AR Field Exam   Yes/No  
应收账款年审   should be completed within 60 days from from the   是/否  
  execution date of this Amendment Agreement      
  每年对公司的应收账款进行审计,首次应收账款年      
  审应于本变更协议签署之日起60天内完成      

 

  Financial Covenant 财务约定 Required 要求

Actual

实际

Complies

合规与否

 

客户应确认在合并报表层面上需维持:

The Client shall confirm to maintain on a consolidated basis:

 
 

每月最小调整后速动比率:

Minimum Monthly Adjusted Quick Ratio (AQR):

1.25:1.00  

Yes/No

是/否

 

调整后速动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

 
  每季度最低 EBITDA: Minimum Quarterly EBITDA of: USD500,000.00  

Yes/No

是/否

 

注:该财务约束指标将在收到并审核 2017 年董事会批准的(最新)预算后更新。

Note: This financial covenant for 2017 will be adjusted upon receipt and review of 2017 board-approved (updated) plan.

 

 

The following Intellectual Property was registered (or a registration application submitted) after the Effective Date (if no registrations, state “None”)

请列明已登记(或已提交登记申请)的知识产权信息:(若无此等事项,请注明“无”)

 

11

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

Other Matters

其他事项

 

Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? (☐  Yes  ☐ No)

是否借款人的资本构成表(capitalization table)以及借款人或其任何子公司的运营文件发生了修改或变动?

(□是 □否)

 

If yes, provide copies of any such amendments or changes with this Compliance Certificate.

若选择“是”,请随本证书一并提供此等修改文件之副本。

 

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

以下是关于上述证明的除外事项:(若无除外事项,请注明“无除外事项可写”)

 

----------------------------------------------------------------------------------------------------------------------------- ----------------------------

----------------------------------------------------------------------------------------------------------------------------- ----------------------------

----------------------------------------------------------------------------------------------------- ----------------------------------------------------

 

COMPANY   BANK USE ONLY
 
播思微系统香港有限公司  
BORQS Hong Kong Limited    
 
     
By:                                                     Received by:                                                   
         AUTHORIZED SIGNER
Name:                                                         Date:                                                   
     
Title:                                                         Verified:                                                   
    AUTHORIZED SIGNER            
    Date:                                                   
     
    Compliance Status:       Yes      No        
签署人:                              仅银行填写: 接收人
姓名:                                                                               
职务                             授权签字人
     
    日期                                                 
     
      审核人:                                                   
                               授权签字人
     
    日期:                                                  
     
    是否符合:是 否

 

引用结束 /UNQUOTE

 

(10) 《授信协议》第五部分“附件”中“附件四”将在本变更协议生效后调整为以下内容:

The contents of “Schedule 4” in Part V Schedule of the Facility Agreement shall be amended into the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用 /QUOTE

 

12

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

附件四:                                                                                                                   借款基础证书

 
Schedule 4 BORROWING BASE CERTIFICATE

 

借款人/Borrower: 播思微系统香港有限公司
  BORQS Hong Kong Limited
贷款人/Lender: 浦发硅谷银行有限公司
  SPD SILICON VALLEY BANK CO., LTD.
承诺金额: 美元伍佰万元整(其中美元肆佰万元整为应收账池贷款)
Commitment Amount: USD5,000,000.00 (USD4,000,000.00 for Pooled A/R Loan)

 

应收账款/ACCOUNTS RECEIVABLE

币种/金额

 Currency/Amount

1.      应收账款(发票)账面价值( )

Accounts Receivable (invoiced) Book Value (as of )

                                  

2.       附加金额(请在下页中解释)

Additions (Please explain on next page)

                                  

3.       减去:关联/员工/非交易性账目

Less: Intercompany / Employee / Non-Trade Accounts

                                  

4.       净贸易应收账款

NET TRADE ACCOUNTS RECEIVABLE

                                  

 应收账款抵扣(不重复计算)

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

 

5.       帐龄超过 90 天的

90 Days Past Invoice Date

                                   

6.       超过 90 天的信用余额

Credit Balances over 90 Days

                                  

7.       超过 90 天账款 50%的余额(跨帐龄的或影响目前的)

Balance of 50% over 90 Day Accounts (Cross-Age or Current Affected)

 

                                  

8.       未由借款人出具发票的账款

Accounts not invoiced by Borrower

                                  

9.       抵消帐户/客户储蓄账目

Contra / Customer Deposit Accounts

                                   

10.     政府/机关账目

Government / Authority Accounts

                                  

11.     推广账目或演示账目;保证销售账目或寄售账目

Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts

 

                                  

12.     含备忘录的或预结算的账目

Accounts with Memo or Pre-Billings

                                  

13.    合同账目;进度/节点结算的账目

Contract Accounts; Accounts with Progress / Milestone Billings

                                   

14.     保留款结算的账目

Accounts for Retainage Billings

                                    
 

 

13

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

15.    信托/报税账目

Trust / Bonded Accounts

                                  

16.    结算及持有账目

Bill and Hold Accounts

                                    

17.    未结算账目

Unbilled Accounts

                                  

18.    非交易性账目(若上述中未抵扣)

Non-Trade Accounts (If not already deducted above)

                                    

19.    具有展期的发票的账目(净 90+)

Accounts with Extended Term Invoices (Net 90+)

                                  

20.     退款账目/借方备忘录

Chargebacks Accounts / Debit Memos

                                  

21.    产品退货/换货

Product Returns / Exchanges

                                  

22.     具有争议的账目;破产债务人账目

Disputed Accounts; Insolvent Account Debtor Accounts

                                  

23.    递延收入/其他(请在下一页中解释)

Deferred Revenue/ Other (Please explain on next page)

                                  

24.    超过集中度限量(25%)

Concentration Limits (25%)

                                  

25.    应收账款抵扣总金额

TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

                                  

26.    合格账目(第 4 项的金额将去第 25 项的金额)

Eligible Accounts (#4 minus #25)

                                  

27.    合格账目的金额(第 26 项的 80%)

ELIGIBLE AMOUNT OF ACCOUNTS (80% of #26)

                                  

 余额/BALANCES

 

28.    最高贷款限额

Maximum Loan Amount

                                  

29.    可放贷金额(第 27 项与第 28 项中的较低者)

Total Funds Available [Lesser of #27 or #28]

                                    

30.    目前在循环贷款 1 下的欠款余额

Present balance owing on Revolving Line 1

                                  

31.    储备头寸(第 29 项减去第 30 项)

RESERVE POSITION (#29 minus #30)

                                  

 

[续下页/Continued on following page.]

 

对上页中内容的解释:

Explanatory comments from previous page:

 

 

14

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

  

签署人承认并保证上述内容是真实、完整以及准确的,并且本借款基础证书中的所有信息符 合签署人与浦发硅谷银行有限公司所签订的贷款协议下的陈述与保证的规定。

The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in the Loan Agreement between the undersigned and SPD SILICON VALLEY BANK CO., LTD..

 

 

  仅供银行使用/BANK USE ONLY
公司/Company: 接收人/Received by: _____________________
  授权签字人/AUTHORIZED SIGNER
签字/By: ___________________________  
授权签字人/Authorized Signer 日期/Date: __________________________
   
  核验/Verified: ________________________
日期/Date: 授权签字人/authorized signer
   
  Date: ___________________________
   
  是否合规/Compliance Status:是/Yes 否/No

  

引用结束 /UNQUOTE

 

2. 客户在此确认,至本变更协议签署之日没有发生任何违约事件或潜在违约事件及所有声明保证在任何事实方 面仍然保持真实、准确。客户在融资文件项下所述的每一项声明和保证,在本变更协议和担保文件(如有) 签署后均将继续保持真实和准确并被全面遵守。

The Client hereby confirms that, at and until the execution date of the Amendment Agreement, no Events of Default or potential Events of Default are existing or continuing, and all representations and warranties made by any Client remain true and accurate in all material respects. Each representation and warranty made by the Client under the Finance Documents will continue to remain true, accurate and be in complete compliance after the execution of the Amendment Agreement and security documents (if any).

 

3. 本变更协议由封面、第一部分(签署页)和第二部分(正文)组成,并构成不可分割的完整整体。除非另有明确 说明,本变更协议中定义和术语与授信协议中具有相同含义。

This Amendment Agreement consists of the cover page, part I (execution page) and part II (context), which shall constitute an integrity. Unless otherwise stated hereunder, terms and definitions defined herein shall bear the same meaning ascribed to it in the Finance Documents.

 

4. 本变更协议是融资文件不可分割的组成部分。本变更协议与融资文件约定不一致的,以本变更协议为准,融 资文件其余条款保持不变,本变更协议未涉及事项仍应依照融资文件的约定执行。

This Amendment Agreement shall constitute an integral part of the Finance Documents. In the event of any discrepancy between this Amendment Agreement and the Finance Documents, this Amendment Agreement shall prevail without prejudice to any other provisions of the Finance Documents. Matters not covered in this Amendment Agreement shall still be dealt with by the parties in compliance with the provisions of the Finance Documents.

 

15

第二部分    正文/ Part II Context

变更协议编号/ Agreement Ref. No.: CL201508001-001

 

 

5. 所有与本变更协议有关的费用,无论是法律费用或其它费用,包括(但不限于)就本协议各份正本应付的中国

 

法下的印花税以及与本变更协议的准备、谈判、签署和执行相关的律师费,均应由客户支付。

Any and all costs in relation to this Amendment Agreement including but not limited to legal fee and other cost, such as stamp duty charged under the PRC law for each original copy of this Agreement and any attorney fee payable in relation to the planning, negotiation, execution and implementation of this Amendment Agreement, shall be borne by the Client.  

 

6. 本协议自融资行与客户有权签字人签字并加盖公章后生效。

This Amendment Agreement shall come into force after it has been duly signed by the authorized person(s) of the Financing Bank and the Client(s) and sealed with common chops by both/all parties.  

 

7. 本协议以中文和英文书就,若两种语言版本的内容发生任何不一致,则应以中文为准。

This Amendment Agreement is written in both Chinese and English. In the event of any inconsistency between these two versions, the Chinese version shall prevail.  

 

8. 本变更协议一式 贰 份,所有签署方各执 壹 份,均具有同等法律效力。

This Amendment Agreement may be executed in TWO separate counterparts, each of which when so executed shall have equal legal effect. Each party may have one counterpart.

 

-以下无正文-

-END OF AMENDMENT AGREEMENT-

 

担保人(如有)确认:

Confirmed by the Security Provider(s)(if any):

 

  我们已充分阅读和了解原融资文件以及本变更协议内容,且所有相关必要说明已有融资行提供;我们在此确认同 意和接受上述变更,并愿就本次变更后的客户债务继续承担担保责任。

We have read and understood fully the contents of the previous Finance Documents and Amendment Agreement, and all related and necessary explanation have been given by the Financing Bank; we hereby confirm that we agree and accept the amendment stipulated above, and would continue to assume the security liabilities for the debts of the Clients after such amendments.          

 

 /s/ Pat Chan  
担保人(保证人)授权代表签字  
Security Provider(Guarantor)’s Authorized Signature  
代表 BORQS International Holding Corp  
on behalf of BORQS International Holding Corp  
公章  
Seal  
日期  2016.07.20  
Date  

 

16

 

Exhibit 10.59

 

 

 

变更协议

Amendment Agreement

 

   

 

 

(修订函编号/Ref. No.: CL201508001-002)

 

 

 

 

隶属于/Belonging to: 授信协议/Facility Agreement

(编号/Ref. No.: CL201508001)

   

 

 

 

 

第一部分 签署页/Part I Execution Page 变更协议编号/Agreement Ref. No.: CL201508001-002

 

签署页

Execution Page

  

融资行   客户
Financing Bank   Client
     
浦发硅谷银行有限公司   播思微系统香港有限公司
SPD SILICON VALLEY BANK CO., LTD.   BORQS Hong Kong Limited
     
住所地   住所地
with address at   with address at
     
上海市杨浦区大连路588号宝地广场B座21楼    
200082    
     
21/F, Block B, Baoland Plaza,
No. 588, Dalian Road, Shanghai 200082
  Office B, 21/F., Legend Tower, 7 Shing Yip Street, Kwun Tong, Kowloon, Hong Kong
     
以上当事人在本协议中简称为“融资行”   以上当事人在本协议中简称为“客户”
hereinafter referred to as “Financing Bank”   hereinafter referred to as "Client"

 

上述各方当事人在此同意并接受本变更协议中所述之全部条款;客户特此确认,

就本协议项下有关条件和条款,融资行已向客户作出充分的说明和解释,

客户已理解、同意、承认该等条款。

The parties above hereby agree to and accept all terms and conditions set forth in this Amendment Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Financing Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Client completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

 

  

  1  

 

变更协议条款

Terms and Conditions

 

鉴于:

Whereas,

 

浦发硅谷银行有限公司(作为融资行)与客户(作为借款人)于2015年08月31日签署了《流动资金贷款类授信协议》(协议编号:CL201508001),于2016年07月20日签署了《变更协议》(协议编号:CL201508001-001,该等《流动资金贷款类授信协议》和《变更协议》以下合称“ 《授信协议》 ”)以及其他相关文件(连同前述文件的任何变更、修订、补充,以下简称“ 融资文件 ”)。根据融资文件,银行同意向客户提供金额为美元伍佰万元整之银行授信(下称“ 授信 ”)。现经各方协商一致,达成如下增补及变更条款(“ 本变更协议 ”),以资协议各方共同恪守:

SPD SILICON VALLEY BANK CO., LTD. (as Financing Bank) and the Client (as borrower) have entered into the Facility Agreement for Working Capital Loans dated Aug. 31 st , 2015 (Ref. No.: CL201508001), an Amendment Agreement dated Jul. 20 th , 2016 (Ref. No.: CL201508001-001) (such Facility Agreement for Working Capital Loans and Amendment Agreements shall be hereinafter collectively referred to as the “ Facility Agreement ”) and other related documents (together with any modification, amendment, supplement of/to the foregoing, hereinafter as the “ Finance Documents ”). Pursuant to the Finance Documents, the Financing Bank agrees to make available to the Clients the facility up to USD5,000,000.00 (hereinafter as the “ Facility ”). Based on the foregoing, the parties hereby further agree to reach the amendment and/or supplementary clause as below (hereinafter as the “ Amendment Agreement ”).

 

1. 各方一致不可撤销地确认本变更协议条款如下:

The parties hereby irrevocably confirm the following amendment clauses below:

 

(1) 客户同意,融资文件中“定期贷款(中期流动资金贷款)”该业务类型将在本变更协议生效后被取消。

The Client confirms that product type for Term Loan (Mid-term Working Capital Loan) shall be cancelled entirely after the effectiveness of this Amendment Agreement.

 

(2) 《授信协议》第二部分“特别条款”中对于“额度”中的如下内容:

The contents of “Facility Amount” in Part II Special Provision of the Facility Agreement quoted below:

 

引用/QUOTE

 

额度

Facility Amount

授信总额度:

美元5,000,000.00

大写金额: 美元伍佰万元整

Total Facility Amount :

USD5,000,000.00

In words: FIVE MILLION US DOLLAR

基准币种: 美元

可选币种: 不适用

Base Currency : USD

Optional Currency : N/A

 

引用结束/UNQUOTE

  2  

 

    

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

  

引用/QUOTE

 

额度

Facility Amount

授信总额度:

美元6,000,000.00

大写金额: 美元陆佰万元整

Total Facility Amount :

USD6,000,000.00

In words: SIX MILLION US DOLLAR

基准币种: 美元

可选币种: 不适用

Base Currency : USD

Optional Currency : N/A

  

引用结束/UNQUOTE

 

(3) 《授信协议》第二部分“特别条款”中对于“额度期限/最终到期日”中的如下内容:

The contents of “Facility Validity Period/ Final Maturity Date” in Part II Special Provision of the Facility Agreement quoted below:

 

引用/QUOTE

 

额度期限/最终到期日

Facility Validity Period/ Final Maturity Date

最终到期日:

2017年09月30日

Final Maturity Date :

September 30 th , 2017

     

引用结束/UNQUOTE

    

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

额度期限/最终到期日

Facility Validity Period/ Final Maturity Date

最终到期日:

2018年08月31日

Final Maturity Date :

August 31 st , 2018

   

引用结束/UNQUOTE

   

(4) 《授信协议》第二部分“特别条款”中对于“业务类型”中的如下内容:

The contents of “Product Type” in Part II Special Provision of the Facility Agreement quoted below:

 

引用/QUOTE

 

业务类型

Product Type

定期贷款(中期流动资金贷款)

应收账池贷款(短期融资)

Term Loan (Mid-term Working Capital Loan)

Pooled A/R Loan (Short-term Finance)

  3  

 

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

  

业务类型

Product Type

应收账池贷款(短期融资) Pooled A/R Loan (Short-term Finance)

 

引用结束/UNQUOTE

   

(5) 《授信协议》第二部分“特别条款”中对于“关于所有业务品种均应遵循的财务约定”中的如下内容:

The contents of “General Financial Covenants for all product-types” in Part II Special Provision of the Facility Agreement quoted below:

 

引用/QUOTE

 

客户应确认在合并报表层面上需维持:

The Client shall confirm to maintain on a consolidated basis:

 

1) 每月最小调整后速动比率:1.25:1.00

Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00

调整后速动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

 

2) 每季度最低EBITDA:USD500,000.00

Minimum Quarterly EBITDA of: USD500,000.00

 

注:该财务约束指标将在收到并审核2017年董事会批准的(最新)预算后更新。

Note: This financial covenant for 2017 will be adjusted upon receipt and review of 2017 board-approved (updated) plan.

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

  4  

 

 

本协议项下客户应确认在合并报表层面上需维持:

The Client under this Agreement shall confirm to maintain on a consolidated basis:

 

1) 每月最小调整后速动比率:1.25:1.00

Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00

 

调整后速动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

 

2) 每季度最低EBITDA:USD750,000.00

Minimum Quarterly EBITDA of: USD750,000.00

 

注:该财务约束指标将在收到并审核2018年董事会批准的(最新)预算后更新。

Note: This financial covenant for 2018 will be adjusted upon receipt and review of 2018 board-approved (updated) plan.

  

客户应确认BORQS International Holding Corp(注册号:OI-192127,亦作为本协议之“保证人”)需满足:

The Client shall confirm that, BORQS International Holding Corp (Registration No. OI-192127, the Guarantor under this agreement) to achieve:

 

1) 在2017年08月31日之前与Pacific Special Acquisition Corp完成合并。

To complete the merger with Pacific Special Acquisition Corp by the end of August 31 st , 2017.

 

引用结束/UNQUOTE

 

(6) 《授信协议》第二部分“特别条款”中对于“其他约定”中的如下内容:

The contents of “Others” in Part II Special Provision of the Facility Agreement quoted below:

 

引用/QUOTE

 

关于资料提交,自本协议签署后,客户应:

Upon entering into this Agreement, the Client shall:

5) 每年对公司的应收账款进行审计,首次应收账款年审应于本变更协议签署之日起60天内完成;

AR Field Exam shall be conducted annually and the initial AR Field Exam should be completed within 60 days from the execution date of this Amendment Agreement;

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

  5  

 

引用/QUOTE

 

关于资料提交,自本协议签署后,客户应:

Upon entering into this Agreement, the Client shall:

5) 每年对公司的应收账款进行审计,下一次应收账款年审应于2017年09月30日之前完成;

AR Field Exam shall be conducted annually and the next AR Field Exam should be completed before September 30 th , 2017;

 

引用结束/UNQUOTE

 

(7) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“业务额度”中的如下内容:

The contents of “Pooled A/R Loan Limit” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

  

业务额度

Pooled A/R Loan Limit

基准币种

Base Currency

 

可选币种

Optional Currency

  金额/Amount:   币种1 不适用
  美元/USD4,000,000.00   Currency 1 N/A
  大写/in words:   币种2 不适用
  美元肆佰万元整   Currency 2 N/A
  FOUR MILLION US DOLLOR   币种3 不适用
      Currency 3 N/A

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

  

业务额度

Pooled A/R Loan Limit

基准币种

Base Currency

 

可选币种

Optional Currency

  金额/Amount:   币种1 不适用
  美元/USD6,000,000.00   Currency 1 N/A
  大写/in words:   币种2 不适用
  美元陆佰万元整   Currency 2 N/A
  SIX MILLION US DOLLOR   币种3 不适用
      Currency 3 N/A

  

引用结束/UNQUOTE

  6  

 

(8) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“可动用期”中的如下内容:

The contents of “Availability Period ” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

  

可动用期 在本业务额度到期日前均可使用
Availability Period Available before the Maturity Date of the Loan Limit of the Specification

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

  

可动用期

Availability Period

第1段:美元4,000,000.00的授信可于本变更协议相关文件全部签署后即可提款;

Tranche 1: USD4,0 00,000.00 available upon the execution of loan documents of this Amendment Agreement;

 

第2段:美元2,000,000.00的授信可于a) BORQS International Holding Corp与Pacific Special Acquisition Corp完成合并 以及 b) 融资行与Partners for Growth IV, L.P.签署令其满意的提高债权从属金额方可提款。

Tranche 2: USD2,0 00,000.00 available upon a) BORQS International Holding Corp completing the merger with Pacific Special Acquisition Corp and b) the Financing Bank signing updated satisfactory Subordination Agreement with Partners for Growth IV, L.P. to increase the cap of senior debt.

  

引用结束/UNQUOTE  

  7  

 

(9) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“业务额度到期日”中的如下内容:

The contents of “Maturity Date of the Loan Limit” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

  

业务额度到期日 2017年08月31日
Maturity Date of the Loan Limit August 31 st , 2017

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

  

业务额度到期日 2018年08月31日
Maturity Date of the Loan Limit August 31 st , 2018

 

引用结束/UNQUOTE  

  8  

 

(10) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“贷款利率”中的如下内容:

The contents of “Interest Rate” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

 

贷款利率

Interest Rate

LIBOR(☐1个月 ☑3个月 ☐6个月 ☐12个月)加6.70%(年利率)利差

LIBOR(☐1 month ☑3 months ☐6 months ☐12 months) plus Margin 6.70%(p.a.)

 

(利率以融资行的提款确认或书面确认所载为准)

(the final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank)

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

  

引用/QUOTE

  

贷款利率

Interest Rate

LIBOR(□1个月 ☑3个月 □6个月 □12个月)加3.70%(年利率)利差

LIBOR(□1 month ☑3 months □6 months □12 months) plus Margin 3.70%(p.a.)

 

(利率以融资行的提款确认或书面确认所载为准)

(the final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank)

 

引用结束/UNQUOTE

 

(11) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“应收账池财务指标”中的如下内容:

The contents of “Borrowing Formula” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

  

应收账池财务指标

Borrowing Formula

融资率: 在任何时点,客户在本业务条款项下的未清偿贷款余额,不得超过应收账池中的合格应收账款余额的80%。

Advance Rate: at any time, the outstanding amount under this Specification shall not exceed 80% of total Eligible Accounts Receivable in the A/R pool.

 

合格应收账款不包括且不限于:账龄超过90天的应收账款,抵消账户及预计可抵消的递延收入账户产生的应收账款,超过90天账款50%的余额,超过90天的贷方余额;关联交易产生的应收账款,政府账户(除非根据债权转让)产生的应收账款,单一债务人集中度超过25%的应收账款(基于客户总的应收账款),未开具发票的应收账款也是不合格的。

Eligible Accounts shall exclude, but are not limited to, the following: Accounts greater than 90 days from invoice date; Contra accounts and accounts with potential off-set with deferred revenue; Cross Age accounts; Credit Balances over 90 Days; Affiliate accounts; Government accounts (unless under an assignment of claims); Amounts exceeding 25% concentration limit (of the Client s total AR base) for a single debtor; Unbilled A/R is not eligible.

 

引用结束/UNQUOTE

  

  9  

 

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

  

应收账池财务指标

Borrowing Formula

融资率: 在任何时点,客户在本业务条款项下的未清偿贷款余额,不得超过应收账池中的合格应收账款余额的80%。

Advance Rate: at any time, the outstanding amount under this Specification shall not exceed 80% of total Eligible Accounts Receivable in the A/R pool.

 

合格应收账款不包括且不限于:账龄超过90天的应收账款,抵消账户及预计可抵消的递延收入账户产生的应收账款,超过90天账款50%的余额,超过90天的贷方余额;关联交易产生的应收账款,政府账户(除非根据债权转让)产生的应收账款,单一债务人集中度超过25%的应收账款(基于客户总的应收账款)(其中债务人Reliance Retail Limited, Vizio. Inc, E La Carte Inc., Fossil (East) Limited以及Sprint的集中度为50%),未开具发票的应收账款也是不合格的。

Eligible Accounts shall exclude, but are not limited to, the following: Accounts greater than 90 days from invoice date; Contra accounts and accounts with potential off-set with deferred revenue; Cross Age accounts; Credit Balances over 90 Days; Affiliate accounts; Government accounts (unless under an assignment of claims); Amounts exceeding 25% concentration limit (of the Client s total AR base) for a single debtor (The concentration limit for Reliance Retail Limited, Vizio. Inc, E La Carte Inc., Fossil (East) Limited and Sprint is 50%); Unbilled A/R is not eligible.

 

引用结束/UNQUOTE

 

(12) 《授信协议》第五部分“附件”中“附件三”将在本变更协议生效后调整为以下内容:

The contents of “Schedule 3” in Part V Schedule of the Facility Agreement shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

附件三:

Schedule 3

  

  10  

 

 

合规证书

COMPLIANCE CERTIFICATE

 

The Client(s) under this Agreement confirms and undertakes to the Financing Bank that: 本协议中的客户对融资行确认和承诺:

 

a) COMPLIANCE CERTIFICATE(S) would be completed and provided in accordance with the requirements of the Financing Bank during the period of this Agreement;

在本协议期限内,合规证明将根据融资行要求完成并提供;

 

b) any COMPLIANCE CERTIFICATE submitted by the Client(s) shall comply in substance with the format required by the Financing Bank (including the format set forth below or any further version notified by the Financing Bank).

任何客户提交的合规证明将符合融资行要求的格式(包括下述格式和日后融资行修订的格式)

 

 

 

COMPLIANCE CERTIFICATE

  

TO: SPD SILICON VALLEY BANK CO., LTD. Date:  
致:浦发硅谷银行有限公司 日期

 

FROM: BORQS Hong Kong Limited

发件人: 播思微系统香港有限公司

   

The undersigned authorized officer of BORQS Hong Kong Limited (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”):

在下文中签字的播思微系统香港有限公司(“借款人”)的被授权人证明,根据借款人与银行之间的贷款协议(“协议”)的条款和条件:

 

(1) Borrower is in complete compliance for the period ending _________ with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.

(1)在截至[     ]的期限内,借款人完全遵守了所有要求的承诺(下文另行载明的除外);(2)不存在任何违约事件;(3)协议下的所有陈述和保证在本证明日期均是真实和正确的(下文另行载明的除外),但前提条件是:上述重大方面标准不适用于那些已符合要求或已被实质性修改的陈述或保证;明示提及某个具体日期的陈述和保证,在该日期做出时在所有重大方面是真实正确的;(4)借款人及其每一个子公司均及时进行了纳税申报和报告;借款人及时支付了所有海内外税款、征税、保证金和供款;(5)不存在借款人先前未书面通知银行的、就未付员工工资或福利针对借款人或其子公司设定的留置或提出的索赔。

  

  11  

 

 

Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

请查收附件中的有关上述证明的材料。下文签名者证明:该等材料系按一贯适用的GAAP从一个期限到下一期限所准备的(根据所附信函或脚注另行提供解释的除外)。下文中的签名者确认,借款人申请提款在任何时间或日期均未违反协议的任何条款,合规性确认,并非仅确认在本证明交付日期合规。本证明中未定义的术语的含义与协议中所给定义相同。

 

Please indicate compliance status by circling Yes/No under “Complies” column.

请在下表内的“符合”栏内圈明合规状态。

   

Reporting Covenant报告约定 Required要求 Complies
合规与否

Monthly Company prepared consolidated financial statements

公司准备的合并的月度财务报表

Monthly within 30 days of each month end

于每月结束之后30天内

Yes/No

是/否

Accounts Receivable and Payable Aging Report

应收账款账龄报告及应付账款账龄报告

Monthly within 30 days of each month end

于每月结束之后30天内

Yes/No

是/否

Compliance Certificate

合规证书

Monthly within 30 days of each month end

于每月结束之后30天内

Yes/No

是/否

Borrowing Base Certificate

借款基础证书

Monthly within 30 days of each month end

于每月结束之后30天内

Yes/No

是/否

Annual CPA-Audited financial statements

经注册会计师审计的年度财务报表

Annually within 270 days from year end

于每一年度结束之后270天内

Yes/No

是/否

Board-approved consolidated financial projections

经公司董事会通过的合并的年度财务运营计划

Within 10 days from Board approval, but no later than 60 days from year end

在每一年度董事会通过后10天内提供,但最迟不得晚于每一年度结束之后60天

Yes/No

是/否

AR Field Exam

应收账款年审

Conducted annually and the next AR Field Exam should be completed before September 30 th , 2017

每年对公司的应收账款进行审计,下一次应收账款年审应于2017年09月30日之前完成

Yes/No

是/否

  

Financial Covenant 财务约定 Required 要求 Actual
实际
Complies
合规与否

本协议项下客户应确认在合并报表层面上需维持:

The Client under this Agreement shall confirm to maintain on a consolidated basis:

每月最小调整后速动比率:

Minimum Monthly Adjusted Quick Ratio (AQR):

1.25:1.00  

Yes/No

/

调整后速动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

每季度最低 EBITDA

Minimum Quarterly EBITDA of:

USD750,000.00  

Yes/No

/

客户应确认 BORQS International Holding Corp (注册号: OI-192127 ,亦作为本协议之 保证人 )需满足:

The Client shall confirm that, BORQS International Holding Corp (Registration No. OI-192127, the Guarantor under this agreement) to achieve:

完成合并:

Completion of merger:

2017 08 31 日之前与 Pacific Special Acquisition Corp 完成合并。

To complete the merger with Pacific Special Acquisition Corp by the end of August 31 st , 2017.

 

Yes/No

/

  

注:该财务约束指标将在收到并审核2018年董事会批准的(最新)预算后更新。

Note: This financial covenant for 2018 will be adjusted upon receipt and review of 2018 board-approved (updated) plan.

 

The following Intellectual Property was registered (or a registration application submitted) after the Effective Date (if no registrations, state “None”)

请列明已登记(或已提交登记申请)的知识产权信息:(若无此等事项,请注明“无”)

 

 

 

 

  12  

 

  

Other Matters

其他事项

 

Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? (☐Yes ☐No)

是否借款人的资本构成表(capitalization table)以及借款人或其任何子公司的运营文件发生了修改或变动?

(☐是 ☐否)

 

If yes, provide copies of any such amendments or changes with this Compliance Certificate.

若选择“是”,请随本证书一并提供此等修改文件之副本。

 

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

以下是关于上述证明的除外事项:(若无除外事项,请注明 “无除外事项可写”)

  

 

 

 

 

 

 

 

 

COMPANY   BANK USE ONLY
播思微系统香港有限公司      
BORQS Hong Kong Limited   Received by:  
        authorized signer
By:     Date:  
Name:        
Title:     Verified:  
        authorized signer
签署人:     Date:  
姓名:        
职务:     Compliance Status: Yes   No
         
      仅银行填写:  
         
      接收人:  
        授权签字人
         
      日期:  
         
      审核人:  
        授权签字人
         
      日期:  
         
      是否符合: 是  否

 

引用结束/UNQUOTE

 

(13) 《授信协议》第五部分“附件”中“附件四”将在本变更协议生效后调整为以下内容:

The contents of “Schedule 4” in Part V Schedule of the Facility Agreement shall be amended into the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

  

附件四: 借款基础证书
Schedule 4 BORROWING BASE CERTIFICATE

 

借款人 /Borrower: 播思微系统香港有限公司
  BORQS Hong Kong Limited
贷款人 /Lender: 浦发硅谷银行有限公司
  SPD SILICON VALLEY BANK CO., LTD.
承诺金额: 美元陆佰万元整
Commitment Amount: USD6,000,000.00

  

  13  

 

  

应收账款 /ACCOUNTS RECEIVABLE

币种/金额Currency/Amount

 

1.         应收账款(发票)账面价值 (____________________)

Accounts Receivable (invoiced) Book Value (as of ____________________)

 

__________________

2.        附加金额(请在下页中解释)

Additions (Please explain on next page)

 

__________________

3.       减去:关联 / 员工 / 非交易性账目

Less: Intercompany / Employee / Non-Trade Accounts

 

__________________

4.        净贸易应收账款

NET TRADE ACCOUNTS RECEIVABLE

 

__________________

   

应收账款抵扣(不重复计算)

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

 

__________________

5.        帐龄超过 90 天的

90 Days Past Invoice Date

 

__________________

6.        超过 90 天的信用余额

Credit Balances over 90 Days

 

__________________

7.        超过 90 天账款 50% 的余额(跨帐龄的或影响目前的)

Balance of 50% over 90 Day Accounts (Cross-Age or Current Affected)

 

__________________

8.        未由借款人出具发票的账款

Accounts not invoiced by Borrower

 

__________________

9.        抵消帐户 / 客户储蓄账目

Contra / Customer Deposit Accounts

 

__________________

10.      政府 / 机关账目

Government / Authority Accounts

 

__________________

11.      推广账目或演示账目;保证销售账目或寄售账目

Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts

 

__________________

12.      含备忘录的或预结算的账目

Accounts with Memo or Pre-Billings

 

__________________

13.      合同账目;进度 / 节点结算的账目

Contract Accounts; Accounts with Progress / Milestone Billings

 

__________________

14.      保留款结算的账目

Accounts for Retainage Billings

 

__________________

15.      信托 / 报税账目

Trust / Bonded Accounts

 

__________________

16.      结算及持有账目

Bill and Hold Accounts

 

__________________

17.      未结算账目

Unbilled Accounts

 

__________________

18.      非交易性账目(若上述中未抵扣)

Non-Trade Accounts (If not already deducted above)

 

__________________

19.      具有展期的发票的账目(净 90+

Accounts with Extended Term Invoices (Net 90+)

 

__________________

20.      退款账目 / 借方备忘录

Chargebacks Accounts / Debit Memos

 

__________________

21.      产品退货 / 换货

Product Returns / Exchanges

 

__________________

22.      具有争议的账目;破产债务人账目

Disputed Accounts; Insolvent Account Debtor Accounts

 

__________________

23.      递延收入 / 其他(请在下一页中解释)

Deferred Revenue/ Other (Please explain on next page)

 

__________________

24.      超过集中度限量( 25%

Concentration Limits (25%)

其中债务人 Reliance Retail Limited, Vizio. Inc, E La Carte Inc., Fossil (East) Limited 以及 Sprint 的集中度为 50%

The concentration limit for Reliance Retail Limited, Vizio. Inc, E La Carte Inc., Fossil (East) Limited and Sprint is 50%

 

__________________

 

 

 

__________________

 

  14  

 

 

25.      应收账款抵扣总金额

TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

 

__________________

   

26.      合格账目(第 4 项的金额将去第 25 项的金额)

Eligible Accounts (#4 minus #25)

 

__________________

27.      合格账目的金额(第 26 项的 80%

ELIGIBLE AMOUNT OF ACCOUNTS (80% of #26)

 

__________________

 

余额 /BALANCES

 

__________________

28.      最高贷款限额

Maximum Loan Amount

 

__________________

29.      可放贷金额(第 27 项与第 28 项中的较低者)

Total Funds Available [Lesser of #27 or #28]

 

__________________

30.      目前在循环贷款 1 下的欠款余额

Present balance owing on Revolving Line 1

 

__________________

31.      储备头寸(第 29 项减去第 30 项)

RESERVE POSITION (#29 minus #30)

 

__________________

 

[ 续下页/Continued on following page.]

 

对上页中内容的解释:

Explanatory comments from previous page:

 

 
 
 

 

签署人承认并保证上述内容是真实、完整以及准确的,并且本借款基础证书中的所有信息符合签署人与浦发硅谷银行有限公司所签订的贷款协议下的陈述与保证的规定。

The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in the Loan Agreement between the undersigned and SPD SILICON VALLEY BANK CO., LTD..

   

  仅供银行使用 /BANK USE ONLY
公司 /Company: 接收人 /Received by: _____________________
  授权签字人 /authorized signer
签字 /By: ___________________________  
授权签字人 /Authorized Signer 日期 /Date: __________________________
   
  核验 /Verified: ________________________
  授权签字人 /authorized signer
   
日期 /Date: ___________________________ Date: ___________________________
   
  是否合规 /Compliance Status: /Yes /No

 

引用结束/UNQUOTE

   

  15  

 

 

2. 客户在此确认,至本变更协议签署之日没有发生任何违约事件或潜在违约事件及所有声明保证在任何事实方面仍然保持真实、准确。客户在融资文件项下所述的每一项声明和保证,在本变更协议和担保文件(如有)签署后均将继续保持真实和准确并被全面遵守。

The Client hereby confirms that, at and until the execution date of the Amendment Agreement, no Events of Default or potential Events of Default are existing or continuing, and all representations and warranties made by any Client remain true and accurate in all material respects. Each representation and warranty made by the Client under the Finance Documents will continue to remain true, accurate and be in complete compliance after the execution of the Amendment Agreement and security documents (if any).

 

3. 本变更协议由封面、第一部分(签署页)和第二部分(正文)组成,并构成不可分割的完整整体。除非另有明确说明,本变更协议中定义和术语与授信协议中具有相同含义。

This Amendment Agreement consists of the cover page, part I (execution page) and part II (context), which shall constitute an integrity. Unless otherwise stated hereunder, terms and definitions defined herein shall bear the same meaning ascribed to it in the Finance Documents.

 

4. 本变更协议是融资文件不可分割的组成部分。本变更协议与融资文件约定不一致的,以本变更协议为准,融资文件其余条款保持不变,本变更协议未涉及事项仍应依照融资文件的约定执行。

This Amendment Agreement shall constitute an integral part of the Finance Documents. In the event of any discrepancy between this Amendment Agreement and the Finance Documents, this Amendment Agreement shall prevail without prejudice to any other provisions of the Finance Documents. Matters not covered in this Amendment Agreement shall still be dealt with by the parties in compliance with the provisions of the Finance Documents.

 

5. 所有与本变更协议有关的费用,无论是法律费用或其它费用,包括(但不限于)就本协议各份正本应付的中国法下的印花税以及与本变更协议的准备、谈判、签署和执行相关的律师费,均应由客户支付。

Any and all costs in relation to this Amendment Agreement including but not limited to legal fee and other cost, such as stamp duty charged under the PRC law for each original copy of this agreement and any attorney fee payable in relation to the planning, negotiation, execution and implementation of this Amendment Agreement, shall be borne by the Client.

 

6. 本协议自融资行与客户有权签字人签字并加盖公章后生效。

This Amendment Agreement shall come into force after it has been duly signed by the authorized person(s) of the Financing Bank and the Client(s) and sealed with common chops by both/all parties.

 

7. 本协议以中文和英文书就,若两种语言版本的内容发生任何不一致,则应以中文为准。

This Amendment Agreement is written in both Chinese and English. In the event of any inconsistency between these two versions, the Chinese version shall prevail.

 

8. 本变更协议一式 贰 份,所有签署方各执 壹 份,均具有同等法律效力。

This Amendment Agreement may be executed in TWO separate counterparts, each of which when so executed shall have equal legal effect. Each party may have one counterpart.

 

 

 

-以下无正文-

-END OF AMENDMENT AGREEMENT-

 

 

 

担保人(如有)确认:

Confirmed by the Security Provider(s)(if any):

 

我们已充分阅读和了解原融资文件以及本变更协议内容,且所有相关必要说明已有融资行提供;我们在此确认同意和接受上述变更,并愿就本次变更后的客户债务继续承担担保责任。

We have read and understood fully the contents of the previous Finance Documents and Amendment Agreement, and all related and necessary explanation have been given by the Financing Bank; we hereby confirm that we agree and accept the amendment stipulated above, and would continue to assume the security liabilities for the debts of the Clients after such amendments.

   

  16  

 

  

/s/ Pat Chan  
担保人(保证人)授权代表签字  
Security Provider(Guarantor)’s Authorized Signature  
代表  
on behalf of BORQS International Holding Corp  
公章  
Seal  
日期  2017.08.31  
Date  

 

 

17

 

Exhibit 10.60

 

  

 

 

 

 

 

 

 

 

 

 

 

授信协议

Facility Agreement

 

 

流动资金贷款类授信

For working capital loans

 

 

 

(文件编号/Ref No.: CL201606008)

 

 

 

 

 

 

 

 

第一部分  签署页 /Part I Execution Page 协议编号 /Agreement Ref. No.: CL201606008

   

签署页

Execution Page

 

融资行

Financing Bank

 

客户

Client

     

浦发硅谷银行有限公司

SPD SILICON VALLEY BANK CO., LTD.

 

播思通讯技术(北京)有限公司

Borqs Beijing Ltd.

     

住所地

with address at

 

住所地

with address at

     

上海市杨浦区大连路 588 号宝地广场 B 座 21 楼

200082

 

北京市海淀区八里庄路 62 号院 1 号楼 8 层

943 室

21/F, Block B, Baoland Plaza,

No. 588, Dalian Road, Shanghai 200082

  Room  943,  8/F,  Building  No.  1,  No.  62, Balizhuang Road, Haidian District, Beijing
     

以上当事人在本协议中简称为“融资行”

hereinafter referred to as “Financing Bank”

 

以上当事人在本协议中简称为“客户”

hereinafter referred to as “Client”

 

  上述各方当事人在此同意并接受本协议中所述之全部条款;客户特此确认, 就本协议项下有关条件和条款,融资行已向客户作出充分的说明和解释, 客户已理解、同意、承认该等条款。

The parties above hereby agree to and accept all terms and conditions set forth in this Facility Agreement. The Client hereby confirms that sufficient interpretations and explanations in relation to the clauses hereunder have been made by the Financing Bank and all of them have been understood, agreed and acknowledged by the Client completely.

 

  有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

 

  1  

 

 

第二部分   特别条款/Part II Special Provision 协议编号/Agreement Ref. No.: CL201606008

 

特别条款

SPECIAL PROVISION

 

根据本协议(下称“本协议”)条件和条款,融资行同意向客户提供如下授信额度(下称“额度”):

Pursuant to the terms and conditions of this Agreement (“the Agreement”), the Financing Bank agrees to make the facility available to the Client(s) as below (“the Facility”):

 

额度

Facility Amount

 

授信总额度:

人民币 15,000,000.00

大写金额: 人民币 壹仟伍佰万元整

 

Total Facility Amount : RMB 15,000,000.00

In words: RMB FIFTEEN MILLION ONLY

         
   

基准币种: 人民币

 

可选币种: 不适用

 

Base Currency : RMB

 

Optional Currency : N/A

         

额度期限/最终到期日 

Facility Validity Period/ Final Maturity Date

 

最终到期日:

 

自本协议签署之日起 12 个月届满之日

 

Final Maturity Date :

 

12 months from the execution date of this agreement

         

可动用期(提款期) 

Availability Period
(Drawdown Period)

  除在本协议第四部分 - 业务条款中另有 约定外,额度的可使用的期限最晚为不超 过最终到期日   Unless otherwise provided for  any Product hereof in Part IV – Specification respectively, the Facility hereof is available for utilization until the Final Maturity Date.
         

额度用途  

Facility Purpose

  本协议项下额度用途为:融资行向客户提 供的本协议第四部分 - 业务条款中可办 理的业务类型中确定的各类用途以及经融 资行同意的其他用途   Purposes as specified for any Product hereof in Part IV - Specification, or any other purposes Financing Bank agrees otherwise
         

业务类型  

Product Type

  应收账池贷款(短期融资)   Pooled A/R Loan (Short-term Finance)
         

授信类型  

Facility Type

  循环授信,   但本协议第四部分 -  业务条 款中另有约定的除外   Revolving facility, unless otherwise provided for any Product in Part IV – Specification
         

具体内容参见本协议第三部分 - 一般条款以及本协议第四部分 - 业务条款的规定

Please see details in Part III - General Provision and Part IV – Specification.

 

  2  

 

 

第二部分   特别条款/Part II Special Provision 协议编号/Agreement Ref. No.: CL201606008

 

双方补充约定条款(如有)

Other Supplementary Stipulations (If Any)

 

1、 关于管理团队变动的约定/ Management Team Change Specification

关于业务、管理人员、所有权的变动方面,客户不得:

 

a) 从事或允许其子公司(如有)从事客户及其子公司目前从事业务或合理相关业务之外的业务;
b) 清算或者解散;
c)

(i)高级管理层发生变动,该高级管理人员不再担任原职务;

(ii)订立任何下述交易或一系列相关交易:在该交易前不 是客户股东的主体,通过实施这样的交易或一系列相关交易,而持有客户股票达到超过

40%的表决权(但不包括 以下述两种情况:其一是客户通过首次公开发行出售股票;

其二是获得风险投资,并且在交易结束前融资行已获悉 并认可该风险投资者,且客户向融资行提供说明交易条款的材料)。

 

With regard to the changes in Business, Management, Ownership, each Client hereby shall not:

 

(a) engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Client and such Subsidiary, as applicable, or reasonably related thereto;
(b) liquidate or dissolve;or
(c) (i) have a change in senior management who ceases to hold such office[s] with Client; or (ii) enter into any transaction or series of related transactions in which the stockholders of Client who were not stockholders immediately prior to the first such transaction own more than 40% of the voting stock of the Client immediately after giving effect to such transaction or related series of such transactions (other than by the sale of the Client’s equity securities in a public offering or to venture capital investors so long as Client identifies to the Financing Bank the venture capital investors prior to the closing of the transaction and provides to the Financing Bank a description of the material terms of the transaction).

 

2、 关于股权或控制权变动的约定/ Change in Ownership and Control

约定同上

Same as above.

 

3、 关于所有业务品种均应遵循的财务约定/General Financial Covenants for all product-types

客户应确认在合并报表层面上需维持:

The Client shall confirm to maintain on a consolidated basis:

 

1) 每月最小调整后速动比率:1.25:1.00

Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00

 

调整后速动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

 

2) 每季度最低 EBITDA:USD500,000.00

Minimum Quarterly EBITDA of: USD500,000.00

 

注:该财务约束指标将在收到并审核 2017 年董事会批准的(最新)预算后更新。

Note: This financial covenant for 2017 will be adjusted upon receipt and review of 2017 board-approved (updated) plan.

 

  3  

 

 

第二部分   特别条款/Part II Special Provision 协议编号/Agreement Ref. No.: CL201606008

 

4 、 其他约定 / Others

为便于融资行监控流动性情况,本协议项下客户应维持其主要银行账户开立于融资行。同时,本协议项下客户应通过 开立于融资行的账户进行日后的增资业务。

In order for the Financing Bank to monitor the liquidity, the Client under this Agreement shall maintain its primary bank account(s) with the Financing Bank. And the Client under this Agreement shall use the accounts which opened in the Financing Bank for future capital injection business.

 

本协议项下客户确认,其同意在本协议授信期限内应满足融资行对其业务及融资及 / 或贷款还款来源的监管要求,并确 保: (i) 业务回笼资金通过在融资行开立的资金回笼账户办理,以及 (ii) 确保将维持拥有足够的资金按期归还所欠融资 行债务。

The Client under this Agreement hereby confirms that, it agrees to meet the monitoring requirement by the Financing Bank concerning its business and repayment sources for the finance or loans during the Facility period, ensuring that i) the proceeds of sales and other accounts receivable of the Client should be collected through the bank account for proceeds collection which is opened at the Financing Bank, and ii) maintain sufficient funds to repay any debts owed to the Financing Bank.

 

客户在本协议项下的任何债务均应当优先于客户在 Partners For Growth IV, L.P. 的任何债务。

Any indebtedness of the client from Partners For Growth IV, L.P. shall be subordinate to any indebtedness of the client from the Financing Bank.

 

本协议项下客户在此确认,若客户的股东【即:播思微系统香港有限公司,公司注册号: 1151010 】在其与融资行间签 署的任何融资或业务文件项下发生违约的,即视为构成本协议项下的违约事件,融资行有权依据法律及本协议相关约定行 使追索权利。

The Client under this Agreement hereby confirm that in case that any event of default is occurred under any finance or business document which is signed between the Financing Bank and the shareholder of the Client (viz. BORQS Hong Kong Limited, Company No. 1151010), it should be deemed as constituting an event of default under this Agreement; accordingly the Financing Bank shall have the right to exercise any or all of its rights of recourse in accordance with the provisions of the laws and this Agreement.

 

当客户发生下述情况时,融资行有权要求客户支付相应的违约费: (i) 客户违反本协议约定事项。

 The Financing Bank is entitled to charge the Violation Fee when (i) the Client violates this Agreement.

 

具体收费标准如下: 

The Violation Fee shall be calculated as below:

 

(i) 对于违反本协议约定事项:

Regarding the violation of this agreement:

 

如发生违反本协议约定事项,且该违约事件导致融资行需要进一步出具变更协议或者豁免函,则在出具变更协议 或豁免函时约定具体的违约费用,但最高不超过贷款额度的 5%

When the Client violates the terms or covenants of this Agreement and such Event of Default may cause the Financing Bank to issue an amendment agreement or a waiver letter, the violation fee shall be provided in such amendment agreement or waiver letter (however the maximum of the violation fee is 5% of Facility Amount).

  

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第二部分   特别条款/Part II Special Provision 协议编号/Agreement Ref. No.: CL201606008

 

关于资料提交,自本协议签署后,客户应:

Upon entering into this Agreement, the Client shall:

 

1) 于每月结束之后 30 天内提供公司准备的合并的月度财务报表;

submit Monthly Company prepared consolidated financial statements within 30 days of each month end;

 

2) 于每月结束之后 30 天内提供应收账款账龄报告及应付账款账龄报告;

submit Accounts Receivable and Payable Aging Report within 30 days of each month end;

 

3) 于每月结束之后 30 天内提供合规证书;

submit Compliance Certificate within 30 days of each month end;

 

4) 于每月结束之后 30 天内提供借款基础证书;

submit Borrowing Base Certificate within 30 days of each month end;

 

5) 每年对公司的应收账款进行审计,首次应收账款年审应于本协议签署之日起 180 天内完成;

AR Field Exam shall be conducted annually and the initial AR Field Exam should be completed within 180 days from from the execution date of this agreement;

 

6) 于每一年度结束之后 270 天内提供经注册会计师审计的年度财务报表;

submit Annual CPA-Audited financial statements within 270 days from year end;

 

7) 在每一年度董事会通过后 10 天内提供经公司董事会通过的合并的财务运营计划,但最迟不得晚于每一年度结束之 后 60 天;

submit Annual Board-approved consolidated financial projections within 10 days from Board approval, but no later than 60 days from year end;

 

8) 其他经融资行合理要求的报告。

submit such other reports which may be reasonably requested by the Financing Bank.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

1. 额度  

1. Facility

 

1.1 额度  

1.1 Facility

 

(a) 根据本协议规定,融资行将向本授信协议 ( “授信协议”或“本 协议” ) 列明的一个或多个客户 ( 以下分别或统称为 客户 ”) 提供 最多不超过授信总额度之授信 ( “授信总额度” ) 。前述授信总 额度由本协议第二部分 - 特别条款规定。  

(a) Pursuant to the terms and conditions of the clauses of this facility agreement (“Facility Agreement” or “Agreement”), the Financing Bank will extend to one or more Clients (individually or collectively the “Client”) a facility not exceeding the stipulated total facility amount of this Agreement (“Total Facility Amount”). The Total Facility Amount will be provided in Part II - Special Provision

(b) 在任何时候, (i) 融资行按照本协议及其相关文件已经向本协 议项下所有客户发放且未获偿还融资的基准币种金额,与 (ii) 融资行按照客户的要求向第三方出具的所有尚未解除支付 义务或未经客户足额偿付的支付义务或承诺 ( 无论其是否属 于或有负债 ) 所涉基准币种金额之和,不得超过本协议第二 部分 - 特别条款中规定的授信总额度。提用额度涉及基准 币种以外的其他可选币种时,为计算目的,由融资行依据本 协议约定换算为基准币种金额。  

(b) At no time shall the sum of (i) the Base Currency Amount of all finance outstanding funded in accordance with this Agreement or other related documents by the Financing Bank to all Clients hereof but not yet repaid, and (ii) the Base Currency Amount of all outstanding amounts in relation to the payment obligations or undertakings of the Financing Bank made to any third party per the request of the Client, for which the Financing Bank’s obligation of payment (whether relating to the contingent liabilities or not) has not been released or reimbursed, exceed the Total Facility Amount specified in Part II - Special Provision. In case of any Optional Currency permitted hereunder and for the purpose of calculation, the Optional Currency shall be converted into Base Currency in accordance with the stipulations hereunder.

 

(c) 若以授信总额度减去: (1) 融资行已经向本协议项下所有客户 发放且未获偿还融资的基准币种金额、及 (2) 按照客户的要求 对外出具的所有尚未解除支付义务或未经客户足额偿付的 支付承诺 ( 无论其是否属于或有负债 ) 所涉基准币种金额,其 余额即本协议项下“可用额度”。本协议履行期内,融资行 将以其认为合适的方式和汇率随时计算可用额度,并在其认 为合适的时候通知客户。  

(c) After netting out from the Total Facility Amount: (i) the Base Currency Amount of all finance outstanding funded in accordance with this Agreement or other related documents by the Financing Bank to all Clients hereof but not yet repaid, and (ii) the Base Currency Amount of all outstanding amounts in relation to the payment obligations or undertakings of the Financing Bank made to any third party as per the request of the Client, for which the Financing Bank’s obligation of payment (whether relating to the contingent liabilities or not) has not been released or reimbursed, the difference shall constitute the facility amount available to be utilized by the Client under this Agreement(“Available Facility Amount”). During the performance of this Agreement, the Available Facility Amount will be calculated by the Financing Bank at its sole discretion with respect to the calculation method and exchange rate(s) as deemed appropriate. The Financing Bank may notify the Clients if and when it deems necessary.  

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

(d) 任何时候,本协议项下之客户只能在可用额度内提用本协议 项下额度;并且,若客户拟提用的额度所属之具体业务品种 还规定有子额度的,客户还应受限于该子额度可用余额的限 制。若一项额度的提用申请可能或将导致授信总额度或具体 业务品种子额度的突破,则融资行有权拒绝客户对此等额度 的提用。  

(d) Any utilization under the Facility hereunder by the Client hereof shall at no time exceed the Available Facility Amount; and further, if a sub-limit of the Facility is established under certain product type under this Agreement, any funding under such sub-limit facility shall still be subject to the available balance of the sub-limit. If a loan funding request for facility utilization may or will cause the aggregate financed amount to exceed either the Total Facility Amount or any of such sub-limit amount allowed under this Agreement, the Financing Bank shall be entitled to reject such request of the Client.

 

(e) 本协议所称“基准币种”系规定在本协议第二部分 - 特别 条款中。  

(e) The Base Currency mentioned in this Agreement shall be determined in Part II - Special Provision.

 

(f)    本协议所称“基准币种金额”意指以基准币种标记的货币金 额,或者,若一项金额系以基准币种以外的其他币种标记的, 则指由融资行以其自行决定的汇率将该其他币种转换为基 准币种后的金额。  

(f)    The Base Currency Amount mentioned in this Agreement refers to any amount denominated in the Base Currency or, if an amount is not denominated in the Base Currency, the corresponding amount of the Base Currency after being converted from such amount at the exchange rate determined by the Financing Bank at its sole discretion.

 

(g) 本协议所称 “可选币种”意指本协议项下客户可以选择提用 的除基准币种以外的其他币种,具体由本协议第二部分 - 特别条款规定。

(g) The Optional Currency mentioned in this Agreement refers to any currencies other than the Base Currency, which may be chosen for facility utilization and will be provided in Part II - Special Provision.

 

(h) 本协议所称“可选币种”意指本协议项下客户可以选择提用 的除基准币种以外的其他币种,具体由本协议第二部分 - 特别条款规定。  

(h) For avoidance of doubt, the Total Facility Amount and the Available Facility Amount referenced in this Agreement shall not be deemed as a commitment, guarantee or obligation of the Financing Bank to fund such facility amount to the Client. Final determination regarding such amounts shall be made by the Financing Bank in accordance with this Agreement, and at the sole discretion of the Financing Bank.

 

1.2   额度的可动用期  

1.2   Availability Period

 

(a) 额度的可动用期分别由该额度所属具体业务品种之业务条款 ( 见第四部分 - 业务条款 ) 中规定的可动用期确定,且该可动用 期之届满日均不应晚于本协议第二部分 - 特别条款规定的最 终到期日。若该具体业务品种业务条款对该品种额度未规定可 动用期的,则该品种额度的可动用期为本协议第二部分 - 特 别条款规定之整个额度期限。  

(a) The Availability Period of the facility hereof will be provided in the business clauses of each product type (see Part IV - Specification), and the last date of such Availability Period shall be no later than the Final Maturity Date provided in Part II - Special Provision. In case there is no Availability Period provided for a product type specified in the associated Specification, the Availability Period of such product type shall be the overall Facility Validity Period provided in Part II - Special Provision.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

(b) 客户应在本协议允许的可动用期内向融资行提出办理具体 种类业务的申请。除非融资行另行同意,具体业务品种项下 额度的可动用期届满后,该业务品种的未提用额度将立即自动 取消;并且,除非融资行另行同意,本协议第二部分 - 特别 条款规定的额度期限 ( 或最终到期日 ) 届满后,本协议项下所有 业务品种的未提用额度均立即自动取消,且本协议项下所有融 资应视为立即到期应付。   (b) Any request of Facility utilization shall be submitted to the Financing Bank within the Availability Period permitted under this Agreement. Unless otherwise permitted by the Financing Bank, upon the expiration of the Availability Period of any certain product type, the unutilized portion of the Facility under such product type would be cancelled automatically and immediately. Also, unless otherwise permitted by the Financing Bank, upon the expiration of the Facility Validity Period (or Final Maturity Date) provided in Part II - Special Provision, the unutilized portion of the Facility under all product types under this Agreement would be cancelled automatically and immediately, and all outstanding finance hereunder shall be deemed as due and payable immediately.

 

1.3 具体业务品种和额度的使用  

1.3 Product Type and Utilization of Facility

 

(a) 本协议项下额度可通过第二部分 - 特别条款中列明的具体 业务品种形式进行提用。任一具体业务品种项下额度应由融 资行全权审核并决定是否向客户提供。受限于本协议规定的 授信总额度及其他子额度,客户可一次或分次使用额度办理 业务。除非经融资行以书面确认某具体业务项下额度使用无 需逐笔申请,否则客户均应逐笔提出业务申请并根据融资行 要求签署和提交相应的业务文件。    

(a) The Facility under this Agreement can be utilized by the Client under the specified product type(s) permitted in Part II - Special Provision. Each product type may be made available and drawn by the Client, subject to the approval by the Financing Bank at its sole discretion. Subject to the Total Facility Amount and any sub-limit hereof, the Client may request Facility utilization in one lump sum or in several drawings. Except for the product type on which the Financing Bank has confirmed in writing that no case-by-case application is required for each facility utilisation under such product type, each facility utilization hereof shall be made available based on a separate request, and related application documents shall be signed and submitted by the Client in accordance with the requirements of the Financing Bank.

 

(b) 就本协议项下任一业务品种额度而言,除非本协议第四部分 有关业务条款另有规定,否则当客户已部分或全部履行了相 关融资的清偿义务或融资行已被充分解除了对外付款责任 或被充分偿付后,客户已清偿 / 释放 / 补偿部分所涉之授信额 度将予以恢复,并可于可动用期内再次提用。      

(b) For any product type under the Facility hereof, unless otherwise stated in Part IV – Specification related to such product type, when the Client has repaid the finance hereunder in whole or in part, or any payment obligation of the Financing Bank has been released or reimbursed completely, the repaid/released/reimbursed portion of such Facility may be re-borrowed by the Client during the Availability Period.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

(c) 客户理解并同意,除本协议第四部分 ( 业务条款 ) 中另有其他 约定外,本协议项下的额度为非承诺性的。客户同意,无论 是否为承诺性额度或本协议是否已实际签署,融资行有权按 其绝对酌定,审核客户提供的额度提用申请及相关文件、独 立判断该申请是否满足本协议的相关约定及融资行政策,并 最终决定是否接受该申请;但即使满足前述要求,若客户申 请使用额度时,存在以下任一情形的,融资行仍然有权拒绝 客户的申请:    

(c) The Client acknowledges and agrees that unless otherwise stated in Part IV-Specification, the Facility shall be deemed as an uncommitted facility. The Client agrees that, regardless of the commitment of the facility given by the Financing Bank or whether this Agreement is executed or not,  the Financing Bank may, after its review of any application and related documents in relation to the Facility utilization submitted by the Client, make its independent judgment as to whether or not the application satisfies the requirements of the Agreement and the internal policy of the Financing Bank, and at its sole discretion, decide whether or not to accept such application. However, even if the aforesaid requirements are fully satisfied, the Financing Bank shall reserve its right to decline such application under any of (but not limited to) the following circumstances:

 

(i) 按融资行的绝对酌定,融资行未能以其可接受的条件获 得足够数量的人民币或外汇资金;或融资行或客户履行 本协议项下之义务将会导致违反任何适用之法律、法规 或合规要求的;     

(i) Based on the sole independent judgment of the Financing Bank, it fails to obtain sufficient RMB or foreign exchange funds with acceptable terms and conditions; or it becomes unlawful, illegal, or out of compliance with any regulatory rules for the Client or the Financing Bank to perform its obligations under the Agreement;  

 

(ii) 本协议依据监管要求需被调整、修订、补充的,在该等 调整、修订、补充完成之前。  

(ii) Before the completion of any adjustment of, amendment or supplement to the Agreement if such adjustment, amendment or supplement is required by any regulatory authority.  

 

1.4 额度的调整与取消  

1.4 Alteration and Cancellation of Facility

就本协议项下的任何非承诺性额度,融资行有权单方决定并在通 知客户后调整或取消任何额度,包括要求客户提前清偿已使用的 额度及/或要求客户增加担保。上述决定自相关通知送达客户之 日起生效,客户同意放弃一切抗辩权。      

For any uncommitted portion of this Facility, the Financing Bank may at its sole discretion, upon notice to the Client, change or withdraw any utilization(s), including requiring a prepayment of any part of utilized Facility and/or more security. The notice to the Client will be effective on its delivery date and the Client hereby agrees to waive all claimant rights .

 

2. 先决条件  

2. CONDITIONS PRECEDENT

就每一客户而言,除非融资行已经收到在形式和实质上令其满意 的下列所有先决条件文件并满足下述条件及融资行不时要求的 其他文件或条件,否则融资行没有义务为客户提供本协议项下任 何授信:      

For each Client hereof, unless all required documents/conditions set forth below and any other document/condition required from time to time by the Financing Bank are fully received/deemed as satisfied by the Financing Bank in form and substance satisfactory to the Financing Bank, the Financing Bank shall have no obligation to make any of the Facility available to the Client:

 

2.1 经证实为真实的客户的下列文件原件的复印件:  

2.1 The certified true photocopy of the following original documents of the Client:

 

( a ) 最新经年检合格及有效的营业执照正本、副本;  

(a) the latest and effective business license of the Client (the original and the copy), for which the latest annual review has been passed;  

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

(b) 最新及有效的外商投资企业批准证书及相关商务部批复 ( 如 有 )  

(b) the latest and effective Certificate of Approval for the Establishment of Enterprises with Foreign Investment and the related approval of the Ministry of Commerce, if any;

 

(c) 最新及有效的公司组织机构代码证正本 ( 如有 )  

(c) the latest and effective Organization Code Certificate (the original, if any);  

 

(d) 现时有效的税务登记证正本、副本 ( 如有 )  

(d) the current and effective Tax Registration C ertificate (the original and a copy, if any);

 

(e) 基本户开户许可证;  

(e) the Permit for Opening Bank Account (Basic Deposit Account);

 

(f) 最新的客户公司章程;  

(f) the latest Articles of Association;

 

(g) 客户的中国人民银行征信系统中征编码,且有关查询结果令融 资行满意;  

(g) the Client’s reference number in the Credit Reference Center of the People’s Bank of China, and the related enquiry result is satisfactory to the Financing Bank;

 

(h) 由经融资行认可的会计师事务所出具的验资报告 ( 如有 ) 、或审 计报告,证明客户的注册资本已经根据其有效的章程规定而足 额缴纳;  

(h) a capital verification report (if any) or an audit report that is issued by a certified accounting firm recognized by the Financing Bank, evidencing that the registered capital of the Client has been paid in full compliance with its valid Articles of Association;

 

(i) 客户法定代表人的签字样本、身份证 / 护照;  

(i) the specimen of signature and the ID card/passport of the legal representative of the Client;

 

(j) 最近财务年度的客户经审计的财务报告 ( 若有 ) ,或如本协议附 件四就具体业务另行要求的财务资料 ( 若融资行要求 )  

(j) the audited financial statement of most recent fiscal year of the Client (if any), or otherwise as stated in Part IV Specification for certain product type (if required by the Financing Bank);

 

(k) 经证实为真实的、形式及内容经融资行认可的、关于批准本 协议及相关文件的签署、送达、执行及具体条件的董事会决 议或其他有权决定机构的决议,该等决议应对有权签字人作 出授权,另外还应提交董事会成员名单或批准机构的成员名 单以及其经验证无误的真实签字样本。  

(k) the board resolution or any other resolution made by a competent authorities, which is certified as true and in form and substance satisfactory to the Financing Bank, approving the signing, delivery, performance of, and the terms and conditions of this Agreement and other related documents; such resolution shall also contain the contents on the authorization of the authorized person(s) who signs, and the member list of the board or such other competent authorities shall also be provided together with the specimens of their signatures which are certified as true;

 

(l) 被授权代表客户签署本协议及客户向融资行所提交其他相 关文件人员的经验证无误的真实签字样本。  

(l) the specimens of the signatures of the related authorized person(s) to sign on this Agreement and any other related documents presented to the Financing Bank, which are certified as true;

 

(m) 经客户公章证实为真实的、形式及内容经融资行认可的关于 客户公司情况说明的公司信息完善表 ( 如融资行要求 )  

(m) the corporate information perfection certificate (if required by the Financing Bank), which is certified with its company chop  as  true  and  in  form  and  substance satisfactory to the Financing Bank, stating the detailed information of the Client;

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

2.2 经证实为真实的担保人的下列文件原件的复印件:  

2.2  The certified true photocopy of the following original documents of the security provider:

 

(a) 最新及有效的担保人营业执照 ( 如为外国实体的,则为其注册 登记证明文件 ) 、最新及有效的公司组织机构代码证正本 ( 如有 ) 及设立批准文件 ( 如有 )  

(a) the latest and effective business license (for foreign entity, the registration certificate), the latest and effective Organization Code Certificate (the original, if any) and the related approval for the establishment (if any);

 

(b) 最新的担保人公司章程;  

(b) the latest Articles of Association;

 

(c) 担保人的现时股东名单;  

(c) the member list of the current shareholders;

 

(d) 担保人身份证明文件 ( 自然人适用 )  

(d) the identity document (for the natural person);

 

(e) 担保人的中国人民银行征信系统中征编码或其担保配号,且查 询结果令融资行满意 ( 如适用 )  

(e) the security provider’s reference number or such other number for security in the Credit Reference Center of the People’s Bank of China, and the related enquiry result is satisfactory to the Financing Bank (if applicable);

 

(f) 经证实为真实的、形式及内容经融资行认可的、关于批准相 关担保文件签署、送达、执行及具体条件的董事会决议或其 他有权决定机构的决议,该等决议应对有权签字人作出授 权,另外还应提交担保人董事会成员名单或批准机构的成员 名单以及其经验证无误的真实签字样本。  

(f) the board resolution or any other resolution made by a competent authority (acceptable to the Financing Bank), which is certified as true and in form and substance satisfactory to the Financing Bank, approving the signing, delivery, performance, and the terms and conditions of the related Security documents; such resolution shall also contain the contents on the authorization of the authorized person(s) who signs, and the member list of the board or such other competent authorities shall also be provided together with the specimens of their signatures which are certified as true;

 

(g) 被授权代表担保人签署有关担保文件及向融资行所提交其 他相关文件的人员的经验证无误的真实签字样本。  

(g) the specimens of the signatures of the security provider’s authorized person(s) who sign on the Security documents and any other related documents presented to the Financing Bank, which are certified as true;

 

2.3 经客户有权签字人有效签署的本协议。  

2.3 The Agreement duly signed by the authorized signatories of the Client.

 

2.4 经有效签署的担保文件并且已令融资行满意地完成为担保 权设立所需的所有必要的批准与登记 ( 若有 )  

2.4 All Security documents that have been executed duly and all necessary approval and registration (if any) have been completed to the satisfaction of the Financing Bank.

 

2.5 客户在本协议项下到期应付的所有税费 ( 含与本协议有关的 印花税 ) 、成本和支出已经全部支付或将于首次提款之前支 付的证明。  

2.5 Evidences that all taxes and fees, costs and expenses hereof have been paid by the Client or will be paid before the first drawdown of the Facility hereof.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

2.6 如融资行要求客户就其资产进行投保的,客户已提供令融资 行满意的保险 ( 或保险批单 ) 以及保险费发票复印件,且有关 保险已将融资行设定为保险第一受益人;  

2.6 If there is any requirement provided by the Financing Bank concerning the insurance over the Client’s assets, the related insurance policy (or the insurance endorsement) and the copy of insurance premium invoice deemed satisfactory to the Financing Bank shall be submitted by the Client, evidencing that the Financing Bank should be the first beneficiary of the foregoing insurance proceeds.

 

2.7 如融资行提供本协议项下的额度需获得监管机构的批准或 完成监管机构要求的其它程序,该等监管机构的批准或程序 已获得或完成。  

2.7 If there is any other approval or procedure required to be completed for the Financing bank to provide the Facility hereof, such approval or procedure has been obtained or completed;

 

2.8 融资行要求的与本次融资相关的所有银行账户已按融资行要 求开立。  

2.8 All necessary bank accounts required by the Financing Bank and in connection with the Facility have been opened at the Financing Bank per the requirements of the Financing Bank.

 

2.9 由融资行认可的律师事务所分别根据各授信文件所适用的 不同法律所出具的内容和形式均令融资行合理满意的法律 意见书已出具 ( 如融资行要求 )  

2.9 The legal opinion(s) to be issued in accordance with the governing law(s) of related finance documents with contents and form satisfactory to the Financing Bank (if required), has(have) been issued.

 

2.10 融资行不时合理要求或认为有必要满足的其他先决条件。  

2.10 Any other conditions precedent that the Financing Bank reasonably requires from time to time or deemed necessary.

 

2.11 除上述要求外,每一客户每次提用本协议项下任何额度时, 还应当符合以下条件:  

2.11 Besides the requirements mentioned above, each Client hereof shall also satisfy the following conditions before each utilization of the Facility hereof:

 

(a) 距提款日之前不少于三 (3) 个营业日向融资行提交《提款通知 书》 ( 或符合融资行要求的其他额度提用申请文件 )  

(a) submit the drawdown notice (or any other application documents for facility utilization request as required by the Financing Bank) no later than 3 Business Days before the intended drawdown date;

 

(b) 提款日须在额度可动用期内,且须为营业日;  

(b) the intended drawdown date shall be a date within the availability period, and shall be a Business Day;

 

(c) 有足够的可用额度及 / 或具体业务品种子额度;  

(c) sufficient Facility and the sub-limit for the related product type for such drawdown is available;

 

(d) 本协议项下所有客户在本协议项下所做的各项陈述、保证、 承诺和约定依照当时存续的事实及情形在所有方面仍是真 实和准确的;  

(d) any representations, warranties, undertakings and covenants made by  any  Client under this Agreement remain genuine and accurate in all aspects according to the fact and situation when the Facility is utilized;

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

(e) 就本协议项下授信所提供的担保及担保文件仍然符合融资 行的要求;  

(e) all the security and the Security documents provided hereunder remain in compliance with the requirements of the Financing Bank;

 

(f) 无违约事件或潜在的违约事件发生;  

(f) no Event of Default or potential Event of Default;

 

(g) 提款或额度提用符合本协议第四部分 ( 业务条款 ) 中的先决条 件要求 ( 如有 ) ,并符合当时有效的、包括中国银行业监督管 理委员会 ( “中国银监会” ) 、中国人民银行 (“ 人民银行 ”) 及外 汇管理局等在内的监管机构不时发布的监管政策或要求。  

(g) the drawdown or the Facility utilization shall satisfy the conditions precedent provided in Part IV – Specification (if any), and shall also be in compliance with the effective regulatory policies or requirements published from time to time by the regulatory authorities such as the China Banking Regulatory Commission(“CBRC”), the People’s Bank of China(“PBOC”), the State Administration of Foreign Exchange(“SAFE”) or others.

 

2.12 为免疑义,客户申请的预计提用授信的日期与实际提用授信 的日期不一致时,以实际提用授信日为准。实际提用授信日 以融资行有关会计凭证 ( 如借款借据 ) 记载为准。  

2.12 For the avoidance of the doubt, if the intended facility utilization date applied by the Client is not the same as the actual date on which the Facility is utilized, the actual date of facility utilization prevails. The actual date of facility utilization shall be that specified by the Financing Bank in its related accounting certificates (such as the borrowing receipt).

 

3. 陈述与保证  

3. REPRESENTATIONS AND WARRANTIES

本协议项下每一客户在此均向融资行作出如下陈述与保证;该等 陈述与保证应视为由该客户在其每次使用额度时重复做出并持 续有效:

Each Client under this Agreement hereby represents and warrants to the Financing Bank as below; and such representations and warranties shall be deemed as being restated by the Client when each Facility utilization request is made under this Agreement and shall be kept effective on an ongoing basis:

 

3.1 本协议项下每一客户均为根据其应适用的有关法律注册成 立并有效存续的法律实体,对其资产享有完全的合法权利并 有权开展经营活动。  

3.1 Each Client hereof shall be a legal entity which is duly incorporated and valid existence in accordance with the applicable related laws, and has full power, authority and legal right to own its assets and to conduct its business.

 

3.2 本协议项下每一客户均有权签署本协议及其相关文件,有权 行使相关权利及履行相关义务,且已就前述文件签署和履行 之授权采取了任何所需之公司行为或其他行为。  

3.2 Each Client hereof shall have full power and authority to enter into this Agreement and any related documents and to exercise its rights and perform its obligations hereunder, and all corporate and other action required to authorize its execution thereof and the performance of its obligations hereunder has been duly taken.

 

3.3 本协议项下每一客户签署本协议以及履行其在本协议项下 的义务,均不会违反任何对客户适用或对其资产或收入适用 的法律、法规、司法裁决、授权、协议、合同或客户的其他 义务 ( 且该等违反可能对客户的经营或财务状况或其在本协 议项下之履约能力产生重大不利影响 )  

3.3 It is not in breach of or in default under any law, regulation, judgment order, authorisation, agreement, contract or obligation applicable to it or its assets or revenues for the execution or the performance of this Agreement by any Client hereof, whereby such breach may lead to a material adverse effect on the Client’s business or financial condition or its ability to perform the obligations under the Agreement.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

3.4 本协议项下每一客户均未卷入任何可能对其履约能力产生 重大不利影响 ( 依融资行的单独判断,下同 ) 的诉讼、仲裁、 行政程序或类似程序 , 亦未发生任何可能导致其卷入该等 诉讼程序或类似仲裁程序的情形或威胁,客户的高级管理人 员或其资产或收入也没有遭遇上述情形或威胁。  

3.4 Each Client is not involved in any litigation, arbitration, administrative proceedings or such similar procedures, which in the opinion of the Financing Bank may lead to a material adverse effect on the Client’s ability to perform its obligations hereof, is involved by any Client hereof, or may result in any situation or threat in relation to the foregoing occurs to any Client hereof or any Client’s senior management team or any of their assets or revenues.

 

3.5 本协议项下每一客户或其任何资产或收入均未卷入任何清 算、破产、重整、兼并合并、分立、重组、解散、关闭、歇 业或类似法律程序 , 亦未发生被指定接管人、管理人、托管 人等任何可能导致涉及该等法律程序的情形。  

3.5 Neither the Client nor  any of its assets/ revenues is involved with liquidation, bankruptcy, reorganization, merger and acquisition, division, restructure, dissolution, closure, winding-down or any other similar legal proceedings or any such event as the designation of a taker-over, administrator or trustee, or any other circumstances which may lead to the foregoing legal procedure occurred.

 

3.6 本协议项下每一客户均保证向融资行提供的本协议项下或 与本协议相关的全部资料、信息等在所有重要方面均是真 实、有效、准确、完整,客户保证无任何未知晓或隐瞒任何 没有向融资行披露但将影响融资行的授信决定的重要事实 或信息。  

3.6 Each Client hereof warranties that all the materials and information supplied by the Client(s) to the Financing Bank under or in connection with the Agreement are genuine, valid, accurate and complete in all material respects, and each Client hereof confirms there is no material fact or information that such Client is not aware of or is concealed but if disclosed, may affect the determination of the Financing Bank on whether or not to provide the Facility hereunder.

 

3.7 本协议项下每一客户截至本协议签署之日均没有发生任何 经营、资产或财务等状况方面的重大不利变化 ( 依融资行合 理判断 ) ,也没有发生或存续任何违约事件或 ( 根据有关通知 或随时间的流逝或前述两者 ) 将构成违约事件的情形。  

3.7 Each Client hereof warranties that up to the execution date of this Agreement, there is no material adverse change (subject to the reasonable judgment of the Financing Bank) in the business, assets or financial conditions of any Client hereof, nor any Event of Default or any situation that, based on certain related notice about such occurrence, and/or in the passage of time, may lead to an Event of Default which has occurred or is in occurrence.

 

3.8 对于客户自身提供的财产担保,本协议项下每一客户均保证 其对该等担保财产享有充分的财产所有权,其有权处分和转 让该等担保财产;并且,除非系法律另有要求或已经融资行 同意,该等担保财产未处于任何第三方占有或保管下;对于 以知识产权提供担保的,本协议项下每一客户均保证,除 (i) 本协议客户在其日常业务经营过程中向它的客户所授予的 非排他性许可及 (ii) 客户已在向融资行提交的公司信息完善 表中已经披露的有关许可外,其应为该等知识产权的唯一权 利人。  

3.8 With respect to any property security provided by the Client, each Client hereof warrants that it has full ownership rights over such security property and shall have the rights and power to transfer the security property; unless otherwise required by the laws or agreed by the Financing Bank, such security property is not in possession of any third party. For the security of intellectual property right, each Client hereof warrants that it is the sole right-holder of such intellectual property right, except for the circumstances of: (i) any non-exclusive licenses granted to its customers in the ordinary course of business, and (ii) the licenses described in the corporate information perfection certificate which is delivered by the Client to the Financing Bank in connection herewith.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

3.9 本协议项下每一客户均在此保证,除经融资行允许的投资 外,其不拥有任何股票、合伙权益或其他权益证券。如融资 行认为必要,前述“融资行允许的投资”可由融资行另行后 附并作为本协议附件。  

3.9 Each Client hereof hereby warrants that it does not own any stock, partnership interest or other equity securities except for the investments permitted by the Financing Bank (“Permitted Investments”). If deemed necessary and appropriate by the Financing Bank, the foregoing “Permitted Investments” will be provided otherwise by the Financing Bank and attached to this Agreement as a schedule .

 

每一客户同时保证和承诺,在本协议履行期内,将根据融资 行要求,及时向融资行提交与业务品种有关合规证书及 / 或 借款基础证书 ( 如要求 ) ;该等文件的当前格式已附于本协议 附件作参考,但出具时最终应以融资行不时更新后最新版本 为准。    

Each Client hereof also warrants and undertakes that during the period of this Agreement, it shall, as per the request of the Financing Bank, promptly provide to the Financing Bank the Compliance Certficate and/or the Borrowing Base Certificate (if required); current format of such documents are attached in the Schedules of this Agreement for reference, but it shall anyway be subject to the latest version updated by the Financing Bank from time to time at the time of issuing.

 

4. 承诺和约定  

4. UNDERTAKINGS AND COVENANTS

 

本协议项下每一客户在此均向融资行作出如下承诺;该等承诺和 约定应视为由该客户在其每次使用额度时重复做出并持续有效:    

Each Client under this Agreement hereby undertakes and covenants to the Financing Bank as below; and such undertakings and covenants shall be reaffirmed by the Client when each Facility utilization request is made under this Agreement and shall be kept effective on an ongoing basis:

 

4.1   本协议项下每一客户均承诺只将本协议项下授信用于本协 议规定的用途。  

4.1 Each Client hereof confirms that it shall only use the Facility hereunder for the Purposes allowed herein.

 

4.2 本协议项下每一客户均应当按期足额偿还或支付本协议项 下的任何到期应付债务 ( 包括与本协议相关的任何应付款项 或费用 ) ,并严格根据本协议履行相关义务。  

4.2 Each Client hereof shall fully and timely repay or pay any debt due and payable under this Agreement (including any payable fees or charges in connection herewith), and strictly perform the obligations under the Agreement.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

4.3   对于适用法律法规所要求的所有审核、授权、登记、许可及 批准手续,本协议项下每一客户应依法办理、取得并遵照执 行,并 ( 在任何规定的时限内 ) 保持其持续有效性,以使客户 能合法签署本协议并履行其义务,并使之具有合法性、有效 性、可执行性及被接受认可;如果融资行要求,客户应当立 即出具上述相关证明。  

4.3 Each Client hereof shall obtain, comply with the terms of and do all that is necessary to maintain in full force and effect (within any specified time limits needed) all verifications, approvals, registrations, licenses and consents required by applicable laws and regulations, to enable the Client lawfully to enter into and perform its obligations under the Agreement and to ensure the legality, validity, enforceability or admissibility thereof and, if required by the Financing Bank, promptly provide evidence of the same.

 

4.4 本协议项下每一客户均应自担费用 ( 但法律或监管机构另有 要求的除外 ) 并根据融资行的要求,及时提供担保并签署相 关文件及办理登记,并执行融资行的合理指令办理担保相关 事宜,或按照本协议或融资行的要求增加担保。  

4.4 Each Client hereof shall, per the request of the Financing Bank and at its own cost (unless otherwise provided by the laws or the requirements of the regulatory authorities), promptly provide the security hereof, execute the related security documents and make registration and handle any issues in relation to the security as reasonably directed and required by the Financing Bank; the Client shall also provide the additional security pursuant to the stipulations of this Agreement or requirements of the Financing Bank.

 

4.5 本协议项下每一客户均应维持其商业存在并合理有效地从 事经营,还应遵守适用的相关法律、法规、授权、合同或其 他义务以及按时纳税,并在所有方面遵守其适用的所有法 律。  

4.5 Each Client hereof shall maintain its commercial existence and conduct its business in a proper and efficient manner. In addition, it shall comply with the applicable laws, regulations, authorisations, agreements and other obligations, pay all taxes timely, and comply with all of the laws applied in all respects.

 

4.6   本协议项下每一客户均应确保其在本协议项下的债务在任 何情况下至少与客户其他无担保债务及非条件性、非附属性 债务进行平等的按比例受偿。  

4.6 Each Client hereof shall ensure its obligations under this Agreement should, at any time, rank at least pari passu with all the unsecured, unconditional and unsubordinated obligations of the Client.

 

4.7   本协议项下每一客户均应根据融资行要求,在每个会计年度结束后 120 ( 或融资行同意的其他更长时间 ) 内提供经审计的 财务报表 ( 中文版及 / 或英文版,视融资行要求 ) ,以及在每月结 束后的 30 天内提供其准备的、未经审计的上月度财务报表 ( 中 文版及 / 或英文版,视融资行要求 )( 融资行另行同意的情形除 外 ) 。客户应根据融资行的不时要求及时向融资行提供所需的 额外财务信息或其他信息。  

4.7 Each Client hereof shall, at request of the Financing Bank, submit its audited financial statements (in English and/or Chinese language, to be determined by the Financing Bank) within 120 days (or any other longer period otherwise agreed by the Financing Bank) after the end of each financial year, and, its company-prepared and unaudited financial statements of last month (in English and/or Chinese language, to be determined by the Financing Bank) within 30 days of each month end (unless otherwise agreed by the Financing Bank). The Client shall supply the additional financial or other information as per the request of the Financing Bank requests from time to time.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

4.8 本协议项下每一客户均应根据融资行的不时要求,提供与其 在本协议项下履约能力有关的其他财务及经营信息,并在发生 名义金额达到客户净资产 10% 及以上的关联交易时,立即将 融资行要求的相关交易细节通知融资行。  

4.8 Each Client hereof shall provide related financial and business information in relation to the Client’s ability to perform its obligations under the Agreement, as the Financing Bank may request from time to time, and shall promptly inform the Financing Bank of the details required by the Financing Bank in relation to any related transactions whose nominal amount is equal to or exceeds 10 percent of the Client’s net assets.

 

4.9 本协议项下每一客户均应进行或安排他人进行所有其他与本 协议相关的必要的或合适的行为和事项,包括 ( 但不限于 ) 协助 融资行遵守中国人民银行的信贷登记要求,并在贷款融资期间 一直向融资行提供客户的有效的中国人民银行征信系统中征 编码。  

4.9 Each Client hereof shall on its own or through a third party, undertake  all other actions and things deemed necessary or appropriate in connection with this Agreement, including (but not limited to) items that will help the Financing Bank comply with the credit registration requirements of PBOC and provide the Financing Bank at all times during the lifetime of the Facility with the valid Client’s reference number in the Credit Reference Center of PBOC.

 

4.10 [ 如有境外担保时适用 ] 本协议项下每一客户均应确保在本 协议项下的境外担保发生融资行书面通知担保履约后的三个 营业日内到客户所在地的外汇管理局办妥有关外债登记手续 及相关信息备案。客户应向融资行真实、完整地提供并更新 其已办理外保内贷业务的债务违约、外债登记及债务清偿情 况。客户应确保在上述履约境外保证或担保时具备和符合所 有监管要求及必要条件,包括但不限于拥有足够的外债额度 及 / 或投注差 ( 如适用 ) ,以向外汇管理局成功办理相关登记手 续及确保为该等境外保证或担保的成功履行;  

4.10 [For Situation with Offshore Security] Each Client hereof shall ensure that it should complete the related foreign debt registration and other related filing works in relation to the offshore security hereof duly with the local State Administration of Foreign (“SAFE”) within 3 Business Days after the Financing Bank notifies the Client in writing that such offshore security has been called upon. Each Client shall provide the Financing Bank on a true and complete basis with all the information of any defaults on debt.,foreign debt registration and debt repayment in relation to all debts secured by offshore securities, and update the foregoing information to the Financing Bank in due course. Each Client shall ensure that all the regulatory requirements have been satisfied and all the required conditions have been fulfilled in the case that the offshore guarantee or security is performed, including but not limited to having sufficient foreign debt quota and/or capital gap between the total investment amount and the registered capital of the Client (if applicable), so as to ensure all related formalities should be successfully completed with SAFE, and the related offshore guarantee or security may also be performed successfully.

 

每一客户在此承诺,在本协议签署时其在外保内贷业务项下 不存在任何因担保履约而产生的对境外担保人的未清偿债 务。在本协议存续期间若发生上述未清偿债务的,则未经该 客户所在地外汇管理局批准,客户将不得申请提款 ( 提用额 度 ) / 或签订新的外保内贷合同。客户若因未履行前述约定 导致融资行造成损失的,应当赔偿融资行由此产生的全部损 失。    

Each Client hereby undertakes that when such Client executes this Agreement, with respect to any or all finance of the Client with offshore security, there is no outstanding debt owed by such Client to any offshore security provider based on the performance of any offshore security; and, in case of any of such debt arising during the period of the this Agreement, each Client hereunder shall not request any further drawdown (or facility utilization) and/or enter into any new contract of facility with offshore security, unless otherwise approved by the local SAFE where such Client is located. In the case that the Client fails to comply with the foregoing stipulations which leads to any loss or damage of the Financing Bank, the Client shall compensate the Financing Bank for all such losses and damages.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

4.11 发生以下任一情况时,本协议项下任一客户均应立即毫不迟 延地书面通知融资行:  

4.11 Upon the occurrence of any of the following, each Client hereof shall, immediately and without any delay, inform the Financing Bank in writing of such event:

 

(a) 任何客户的名称、地址、法定代表人、授权人员及公司章程 发生变化;  

(a) any changes in any Client’s name, location, legal representative, authorized person and the amendment to its Articles of Association;

 

(b) 任何客户或其高级管理人员或其关联企业卷入任何诉讼、仲 裁、行政程序或其他类似程序,并且有可能对该客户在本协 议项下的履约能力造成重大不利影响 ( 依融资行合理判断 )  

(b) any litigation, arbitration or administrative proceedings or other actions that involves or causes a threat against any Client or its senior management team or any of its related enterprise which may, in the reasonable opinion of the Financing Bank, have a material adverse effect on the Client’s ability to perform any of its obligations under the Agreement;

 

(c) 发生任一违约事件或 ( 根据有关通知或随时间的流逝 ) 可能构 成违约事件的任何情况 ( 依融资行合理判断 )  

(c) the occurrence of any Event of Default or situation that, based on certain notice and/or in the passage of time, may lead to an Event of Default (subject to the reasonable judgment of the Financing Bank);

 

(d) 任何客户的经营、资产或财务等状况发生重大不利变化 ( 依 融资行合理判断 ) ;及  

(d) the occurrence of any material adverse change in relation to the business, assets, financial or other conditions of any Client hereof (subject to the reasonable judgment of the Financing Bank); and

 

(e) 任何客户发生其他可能影响客户在本协议项下债务履行能 力的重大不利事项 ( 依融资行合理判断 )  

(e) the occurrence of any other material adverse event that may affect any Client’s ability to fulfil its obligations under this Agreement (subject to the reasonable judgment of the Financing Bank).

 

  18  

 

 

第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

4.12 未经融资行事先书面同意,本协议项下客户不得:  

4.12 Without the prior written consent of the Financing Bank, any Client hereof shall not:

 

(a) 对于客户的收入或资产的全部或任何主要部分,通过一项或 多项交易或一系列交易 ( 无论是否相关 ) 进行出售、出租、转 让或进行其他处分;  

(a) sell, lease, transfer or dispose in any other manner, through one or several or a series of transactions (whether they are related or not), all or any of the majority part of its revenues or assets;

 

(b) 进行对外投资或增加任何第三方债务;  

(b) make outbound investment or increase its indebtedness from any third party;

 

(c) 就其现有的或未来的收入或资产为任何第三方设定或允许 设定抵押、质押、留置等担保权益或任何权利负担,但本协 议签署之前已经存在的或经融资行同意的除外;  

(c) create or permit to create any mortgage, pledge, lien and other security interest or any other encumbrances over its current or future revenues or assets, for any third party, except for those existing before the signing of this Agreement or otherwise agreed and permitted by the Financing Bank;

 

(d) 减少本协议签署时的客户章程中所规定的注册资本;  

(d) decrease the registered capital provided in the Articles of Association at the date hereof;

 

(e) 改变客户的经营性质、经营范围;及  

(e) change the nature or scope of any Client’s business; or

 

(f) 与任何他人进行合并、重组或兼并,并在融资行看来,将对 客户履行本协议项下的义务的能力造成重大不利影响。  

(f) enter into any merger, reorganization or consolidation with any third party, which, subject to the reasonable judgment of the Financing Bank, would lead to a material adverse effect on the Client’s ability to fulfil any of its obligations under this Agreement.

 

4.13 只要本协议仍然有效,若监管机构 ( 包括但不限于中国银监 会、中国人民银行及外汇管理局 ) 对与贷款或授信有关的任 何方面发布新的政策或规定的,本协议项下客户确认将配合 融资行就该等新政策或规定的遵守采取所有适当的行动,以 使本协议的履行以及融资行依据本协议提供贷款或授信始 终符合监管要求;本协议项下客户应按照融资行的通知配合 履行相关义务,及 / 或签署相关补充文件 ( 如融资行要求 ) 。若 客户违反本款承诺的,融资行保留拒绝客户进一步提用本协 议项下任何额度或贷款以及提前收回全部或任何融资的权 利。  

4.13 As long as this Agreement remains in effect, if any new regulatory policy or regulation regarding the provision of the facility or loan is published by the regulatory authorities (including but not limited to CBRC, PBOC, SAFE), each Client hereof confirms that it shall take all proper actions in relation to staying in compliance with such policies or regulations, so as to ensure the performance of this Agreement and the provision of the loan or facility  by the Financing Bank always in compliance with the regulatory requirements; any Client hereof shall, in accordance with the notice of the Financing Bank, assist to perform the related obligations, and/or sign the related supplementary documents(if required by the Financing Bank). If the Client fails to comply with the undertakings provided in this clause, the Financing Bank shall have the right to refuse any further facility utilization request or loan funding request made by the Client, and require the Client to repay any or all of the obligations under this Agreement to the Financing Bank prior to the original maturity date of the finance hereof.

 

4.14 客户在此不可撤销的确认和承诺,将按照融资行要求及时 支付与本协议项下业务有关的各类费用;具体种类和费率以 融资行不时公开适用者为准。  

4.14 The Client hereby irrevocably confirms and undertakes that it would, as per the requirements of the Financing Bank, promptly pay all kinds of charges in relation to the business hereunder; and the types and fee standards shall refer to the criteria that the Financing Bank adopts publicly from time to time.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

5. 关于贷款类额度提用的特别约定  

5. SPECIAL COVENANTS CONCERNING THE DISBURSEMENT OF LOAN PROCEEDS

 

5.1 贷款类额度提用之支付条款  

5.1 Disbursement

 

(a) 根据中国银监会发布的《流动资金贷款管理暂行办法》 ( 银 监会令 2010 年第 1 号, 2010 2 12 日发布 ) ,融资行 将对所发放贷款真实用途进行监督、控制及核实。倘若客户 迄今尚未在融资行处开立过银行账户的,则该客户承诺将在 本协议项下申请任何提款前完成开立银行账户所需的一切 手续。  

(a) In accordance with the Interim Measures for the Administration of Working Capital Loans (Order No.1, 2010, CBRC, Feb. 12, 2010) and related requirements, the Financing Bank is required to monitor, control and verify the true loan purpose. In case any Client has so far not yet opened a bank account with the Financing Bank, such Client undertakes it shall complete all formalities required for the opening of such account before any new loan drawdown under this Agreement can occur.

 

(b) 贷款资金的具体支付方式将根据具体提款金额或对外付款 金额及其他有关条件进行确定。贷款资金的支付方式分为 “自主支付”或“受托支付”,其中:“自主支付”系指客户 提款后自行将贷款资金通过其账户支付给交易对象;“受托 支付”系指融资行根据有关支持文件审核客户提款目的后, 依据客户的提款申请和支付委托,将贷款通过客户账户直接 支付给客户交易对象。本协议项下贷款类额度提用时的支付 方式将根据有关具体业务条款以及本协议下述相关规定操 作。  

(b) The method of loan proceeds disbursement is to be determined in accordance with the loan advance amount or the amount needed to satisfy the outward payment as well as any other related conditions hereof. The disbursement method of loan proceeds can be in the form of either (i) the Independent Payment Method by Client (“ the Independent Payment Method ”) or (ii) the Entrusted Payment Method by the Financing Bank (“the Entrusted Payment Method”) . The Independent Payment Method means that the Client independently uses the loan funds to make payment through its account to its commercial counterparty. The Entrusted Payment Method means that the Financing Bank based on supporting documents verifies the loan purpose before accepting the Client’s drawdown application/notice and payment authorization to pay the loan proceeds through the Client’s account to his commercial counterparty directly. The disbursement of loan funds shall be made in accordance with the stipulations stated in the relevant Specifications and the disbursement method specified below.

 

就以下任一或全部情形,流动资金类贷款应当采用受托支付 方式:    

For Working Capital Loans, the Entrusted Payment Method shall apply under any or all of the following circumstances:

 

(i) 任何客户根据本协议申请的单笔金额在等值人民币 500 万元以上 ( 为免疑义,不含本数 ) 的贷款资金支付; 融资行有权对该金额根据其需要不时进行调整;或  

(i) any single payment of any Client with loan funding amount that exceeds RMB5,000,000.00 under this Agreement (for avoidance of doubt, exclusive of the number) or its equivalents in other currencies; the Financing Bank has the right to revise this amount at any time as considered appropriate; or

 

(ii) 融资行认为有必要采取受托支付方式的其他情形。  

(ii) any other circumstance the Financing Bank considers necessary to apply the Entrusted Payment Method .

 

  20  

 

 

第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

(c) 依据本协议实行受托支付时,客户应当在提交的提款通知书 中包括支付委托指令,并连同相应的商务合同等证明材料提 交融资行。融资行审核同意后,将贷款资金及时 ( 通常在同 一营业日 ) 通过客户账户支付给客户指定交易对象。客户请 求的支付对象、支付金额等信息与相应的发票、商务合同等 证明材料不符的,融资行有权拒绝发放本次提款。客户应对 该等商务合同等证明材料的真实性、准确性负责,如因该等 材料缺乏真实性、准确性导致的任何损失均由客户自行承 担,如因此导致融资行的任何损失的,客户应全额予以赔偿 以使融资行免受损失。  

(c) If a payment is to be made by the Entrusted Payment Method, the Client shall submit to the Financing Bank a drawdown application/notice which contains a clause of payment authorization, together with the relevant transaction materials. After examination and consent, the Financing Bank shall promptly pay, generally within the same business day, the loan proceeds to the Client’s specified commercial counterparty related to such commercial transaction through the Client’s account. In case of any discrepancy between the information in the payment authorization letter/payment order such as the amount of payment or the payee and that stated in the relevant transaction materials such as invoice or business contract, the Financing Bank shall have the right to decline such drawdown request. The Client shall guarantee the authenticity and accuracy of such materials including transaction contract, and will be liable for any loss arising from the lack of authenticity and accuracy of the said materials. In case there is any associated loss incurred by the Financing Bank, the Client shall reimburse the Financing Bank fully and keep the Financing Bank harmless from such losses.

 

(d) 任何经由受托支付方式对外支付的款项,如果由于客户在支 付指令中提供的付款信息不完整或者不正确或任何其他原 因被退回客户的原账户,在客户重新提交正确的付款指令之 前,就该等退回款项,融资行有权暂不贷记客户账户,或者 冻结已贷记客户账户的该等退回款项。  

(d) If any payment made by the Entrusted Payment Method is returned to the original account of the Client due to the incomplete and incorrect information in the payment order provided by the Client or any other reason whatsoever, the Financing Bank shall reserve the right not to credit such returned amount to the Client’s account for the time being or to freeze such returned amount if it has already been credited to the Client’s account until a new and correct payment order is provided by the Client to the Financing Bank.

 

(e) 依据本协议实行自主支付时,客户应在每次提款前向融资行 提供提款计划 ( 若有 ) 及用途说明,并应在提款后每三个月内 ( 或融资行同意的其他时间 ) 向融资行提交贷款资金支付情况 的汇总报告,证明贷款资金的使用情况符合本协议项下之贷 款用途。客户还应提供令融资行满意的与贷款用途匹配的任何与支付有关的发票、商务合同和支付凭证和 / 或融资行认 可的其他证明材料,供融资行进行核对。融资行有权不时通 过账户分析、凭证查验或现场调查等方式核查贷款支付是否 符合约定用途。  

(e) If payments are made by the Independent Payment Method , the Client shall provide the drawdown schedule (if any) and the loan purpose statement before each drawdown, and from the date of drawdown, provide to the Financing Bank summary reports periodically every 3 months (or any time as required by the Financing Bank), evidencing the proper utilization of the loan proceeds according to the loan purpose specified in this Agreement. The Client shall also be obliged to provide other evidences satisfactory to the Financing Bank and in compliance with the loan purpose for the Financing Bank’s checking and examination, including all invoices, business contracts and payment certificates in connection with the concerned payments or any other evidence acceptable to the Financing Bank. The Financing Bank shall have the right to check whether the payment conforms to the stipulated loan purpose through analysis of the account, inspection and verification of the vouchers, on-site investigation and other means from time to time.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

(f) 若贷款采用自主支付方式的,融资行有权在依融资行看来以 下情形出现时将贷款支付方式立即变更为受托支付方式,且 融资行有权根据自行判断,进一步采取包括但不限于停止放 款并要求本协议项下全部或部分客户立即偿还所有贷款的 措施: (i) 客户擅自改变贷款用途; (ii) 根据融资行合理判断, 客户信用状况下降、业务或财务状况恶化或贷款资金使用出 现异常的; (iii) 客户通过化整为零方式 ( 即将本应为单笔大额 贷款支付的申请分拆为多笔贷款支付申请,降低单笔贷款支 付金额 ) 规避受托支付方式 ( 根据有关交易资料诸如合同发票 等进行判断 ) (iv) 融资行认为应该变更支付方式的其他情 况。  

(f) If payments are made by the Independent Payment Method and, in the opinion of the Financing Bank, any or all of the following circumstances occur, the Financing Bank shall have the right to immediately change the loan proceeds disbursement method from the Independent Payment Method to the Entrusted Payment Method, and further, subject to its sole judgment, the Financing Bank shall also have the right to take necessary measures including but not limited to the cease of additional loan funding and demand for all or part of the Clients to repay all the outstanding debts hereof immediately: (i) any misuse of loan funds by the Client(s); (ii) in the opinion of the Financing Bank, a deterioration in any Client’s credit standing, its business or financial conditions, or any abnormal usage of the loan funds; (iii) any Client’s avoidance of the Entrusted Payment Method through separation a single payment into several drawdowns /payments with smaller amounts (to be judged based on related transaction information such as business contract or invoice); (iv) any other circumstance the Financing Bank considers necessary to change the disbursement method.

 

5.2 贷款及财务信息提供、贷后检查和回笼资金管理  

5.2 Related loan and financial Information Report, Post-loan Examination and Sale’s Proceeds Management

 

  根据中国银监会关于流动资金类贷款管理的要求,本协议项下每 一客户均在此承诺并确认:    

Subject to the regulatory requirements from CBRC concerning the management of working capital loans, each Client hereof undertakes and confirms the following:

 

(a) 构、公司治理情况; (ii) 客户经营范围、核心主业、生产经 营、贷款期内经营规划和重大投资计划情况; (iii) 客户所在 行业状况; (iv) 客户应收账款、应付账款、存货等真实财务 状况; (v) 客户营运资金总需求和现有负债情况; (vi) 客户关 联方及关联交易等情况; (vii) 贷款具体用途及与贷款用途相 关的交易对手资金占用等情况; (viii) 还款来源情况,包括资 产负债表信息、生产经营产生的现金流、综合收益及其他 合法收入等; (ix) 客户通过担保人担保 / ( 如有 ) 实现的偿债 能力等情况。客户应承诺并确保该等信息在协议履行期内 始终真实、有效、完整。  

(a) The Client(s) hereof shall be obliged to provide all necessary  information  concerning  the  working  capital loan for the review and supervision by the Financing Bank, including but not limited to (i) the organizational structure, corporate governance of the Client(s); (ii) each Client’s scope of business, core business, and production and/or operational status of the Client, its operation plan and any significant investment plan throughout the term of the Facility; (iii) the situation of the industry which the Client is engaged in; (iv) the Client’s account receivables, payables, inventory and other actual financial conditions of the Client; (v) the total working capital demand and current indebtedness of the Client; (vi) Client’s related parties and related transactions; (vii) the specific purpose of the loan and the use of funds by the counterpart in the transaction; (viii) the source of funds for  repayment, including balance sheet cash, cash flow generated from operations, consolidated income and other legal income from production and operation; (ix) the Client’s loan repayment capability resulting from the liquidation of Security (property security or guarantor). The Client(s) hereof shall warrant and confirm that such information is consistently true, effective and complete during the lifetime of the Agreement.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

(b) 融资行有权根据客户所属行业经营特点,自行决定对客户 采取定期与不定期现场检查与非现场监测,了解客户最新 经营、财务、信用、支付及还款能力、担保及融资数量和 渠道变化等状况,掌握各种可能影响客户在本协议项下之 任何偿债能力的风险因素。本协议项下每一客户均对此应 予以必要配合和同意,客户应保存贷款资金使用记录或其 他资料,并按融资行要求及时提供前述材料。  

(b) The Financing Bank may, at its full discretion and based on the characteristics of the industry each Client belongs to, decide to take periodic or one-off on-site (or off-site) inspection on any Client hereof in order to understand the Client’s updated business operation and financial conditions, as well as its credit status, its loan repayment ability, security, the  amount and other details of debt finance, the variation of distribution channels and any other risk factors that might affect any Client’s ability to repay any of its debt obligations hereunder. Each Client hereof agrees to provide necessary assistance in this regard. The Client hereof shall maintain all the usage record related to each loan funding or any other information, and promptly provide such information to the Financing Bank as requested.

 

(c) 客户确认将按照融资行要求开立或指定专门资金回笼账户 并及时向融资行提供该账户资金进出情况;若客户故意通 过融资行指定账户以外的其他账户收取回笼资金或融资行 认为其在资金回笼方面有重大不利情形的,融资行有权向 客户要求提前收回贷款。  

(c) Each Client hereof confirms that it shall, per request of the Financing Bank, open or designate a special account for the receipt of its sales proceeds and promptly provide to the Financing Bank its cash flow information of such account(s). The Financing Bank reserves the right to demand early repayment of the loan if the Client is found to have purposely redirect sales proceeds to account(s) other  than  the  account  designated  by  the  Financing Bank, or it is deemed by the Financing Bank that there is a material deterioration in the collection cycle.

 

(d) 客户承诺将满足融资行就流动资金贷款类额度使用提出的 相关贷款支付管理、贷后管理及检查要求。  

(d) Each Client hereof undertakes that it shall meet the Financing Bank’s request in loan disbursement management, post-drawdown management and inspections in relation to the working capital loan.

 

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协议编号 /Agreement Ref. No.: CL201606008

 

6. 还款  

6. REPAYMENT

 

本协议项下每一客户应当在本协议第四部分具体业务品种条款 所规定的相关债务到期日清偿该品种有关债务,并且,无论本协 议第四部分具体业务品种条款对还款时间是否有相反规定,客户 应在本协议第二部分 ( 特别条款 ) 规定的最终到期日前归还本协议 项下所有业务种类项下的全部债务 ( 但经融资行另行同意的情形 除外 )    

Each Client hereof shall, in accordance with the stipulations on debt maturity date of the related facility product provided in the Specification in Part IV hereunder, repay the debts under such facility; in addition, regardless of any contrary provision on the repayment schedule under any Specifications in Part IV hereunder, all outstanding debts of any Client hereof under all Specifications in this Agreement shall be repaid fully on or before the Final Maturity Date specified in Part II (Special Provision) hereunder (unless otherwise agreed by the Financing Bank).

 

任何客户在还款时应以与融资资金相同的币种进行偿还;为免疑 义,即使在根据司法判决可能取得债务币种以外的其他币种还款 资金的情况下,本协议项下客户仍有义务确保将该等还款资金通 过结售汇转换为债务币种以清偿债权,并在此后相应还款义务方 可视为被解除。    

For any repayment under this Agreement, any Client hereof shall use the same currency as one in which the financed funding is denominated; for avoidance of doubt, even if related funds (in currency different from the currency of debts) can be legally (via judicial judgment) made available for the repayment of the loan, the Client(s) hereof shall still be obliged to ensure that such funds would be converted into the debt original currency through the foreign exchange conversion (sell or purchase) so as to complete the repayment denominated in the same loan currency, and the corresponding repayment obligation of the Client under this Agreement will not be deemed as being completely fulfilled until the foregoing requirements on the loan repayments with the required currency have been satisfied.

 

7. 汇率约定  

7. EXCHANGE RATE

 

本协议项下所有涉及抵销、计算授信额度或子额度、基准币种或 可选币种的换算关系等事项中需要确定换算汇率的,除非本协议 另有明确约定,均应由融资行按照其自行确定的汇率进行换算, 相关的汇率风险及损失均应由客户承担。      

In the case where any foreign currency exchange rate is to be used to calculate the amount for, or set-off of the Total Facility Amount or the sub-facility limit(s) hereof, or is required during the determination of the conversion rate and method used for the Base Currency and the Optional Currencies or other similar issues, unless otherwise expressly provided in this Agreement, it shall be determined by the Financing Bank at its sole discretion, and any risk or loss resulting from therefore shall be borne by the Client.  

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

8. 债务抵销及扣划授权约定  

8. SET-OFF AND AUTHORIZATION TO DEDUCT

 

本协议项下每一客户均不可撤销的授权融资行,若客户对于融资 行有任何到期未清偿债务时,融资行均有权无需事先通知,即可 将本协议项下客户在融资行任何账户中的款项(不论该款项存期 是否已到、币种如何)直接用于偿付上述债务,由此产生的利息 或其他损失由客户承担。客户不可撤销地授权融资行有权为上述 抵销目的,以前述账户中全部或部分款项兑换或购买适当的货币 以清偿债务(相关汇率由融资行自行决定),因此导致的汇率风险 因由客户承担。      

Each Client hereof hereby irrevocably authorizes that the Financing Bank shall be entitled to, without any prior notice, set off any debt due and payable by the Client(s) with the amount in any of its account maintained at the Financing Bank (regardless of whether such amount of deposit is at maturity or not, or whatever the currency of such amount is denominated in); any loss in relation to the interest accrued therefore or other costs shall be borne by the Client(s). Each Client hereof hereby also irrevocably authorizes that the Financing Bank may use the entire or any part of the Client’s account balance to convert or purchase the appropriate currency as may be necessary for this purpose (the related exchange rate(s) shall be determined by the Financing Bank at its sole discretion), and the volatility risks resulting from such foreign exchange shall be borne by the Client(s).

 

9. 费用补偿约定  

9. INDEMNITY

 

9.1 除非相关法律另有相反规定或监管机构另有要求,客户应承担 与本协议有关的谈判、准备、签订、登记、履行以及任何有关 本协议的修改、补充、放弃和同意的费用和成本。  

9.1 Unless otherwise provided by the laws to the contrary or required by any regulatory authorities, the Client(s) hereof shall be obliged to assume all costs and expenses in relation to the negotiation, preparation, entry into, registration or performance of this Agreement, and also those relating to any amendment to, supplement of or the waiver or consent with respect to this Agreement.

 

9.2 除非相关法律另有明确的相反规定,对于融资行因追索本协 议及相关文件项下的到期债务或保护及执行其权利而产生 的一切成本、费用及支出,包括但不限于法律服务费及其他 费用、成本及收费以及其他实际发生的费用,客户应全额补 偿融资行。  

9.2 Unless expressly provided by the laws to the contrary, the Client(s) hereof shall be obliged to indemnify the Financing Bank fully against all costs, expenses and expenditures in relation to the recourse or recovery of the creditor's rights under this Agreement and other related documents, and those in relation to the protection or exercising of the rights hereof, including but not limited to the legal or other fee, costs and charges or any other disbursements occurred in this regard.

 

10.   罚息  

10.   PENALTY INTEREST

 

10.1 本协议项下具体业务品种的计结息方式、利率水平及 / 或相 关费用或违约金等,由本协议第四部分 ( 业务条款 ) 约定并按 其执行。    

10.1 The detailed method of interest calculation and settlement, applicable interest rate and/or related fees or penalty fine or such other matters in relation to each product type(s) under this Agreement, shall be provided otherwise in Part IV (Specification) of this Agreement and enforced in accordance with the related terms.

     

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

10.2 本协议项下约定的罚息 ( 及其罚息利率 ) 将适用于任何逾期或 挪用的金额,并应根据本协议的约定计收。为免疑义,适用 于逾期的罚息为逾期罚息 ( “逾期罚息” ) ,适用于融资挪用 情形的罚息为挪用罚息 ( “挪用罚息” )    

10.2 The penalty interest (and related penalty rate) provided in this Agreement shall be applicable to any overdue payment or misappropriated use of loan proceeds according to the stipulations in the Agreement. For avoidance of doubt, the penalty interest rate applied to any overdue situation shall be referred to as overdue penalty rate (“Overdue Penalty Rate”), while the penalty interest rate applied to any misappropriated use of loan proceeds situation shall be referred to as misappropriation penalty rate (“Misappropriation Penalty Rate”).

 

10.3 对任何逾期或未按合同约定用途使用的贷款或融资,从逾期 或未按合同约定用途使用贷款或融资之日起,按约定的相应 罚息利率按日计收利息,直至清偿本息为止。  

10.3 For any loan or finance under this Agreement where an event of overdue payment or funding misappropriation has occurred, an additional penalty interest shall be charged based on the corresponding penalty rate provided in this Agreement, calculating on a daily basis, from the date of such overdue and misappropriation to the date when all the principal and interest hereof are fully repaid.

 

11. 债务证明  

11. EVIDENCE OF DEBT

 

融资行将按照其一贯的业务操作准则,在其会计账簿上保持一套 与本协议及所有相关文件所涉及的业务活动相关的会计账目及 凭证。除明显错误外,客户均承认该有关会计账目和凭证的记录 是客户债务的有效证据。      

The Financing Bank will, in accordance with its ordinary course of its business operation, keep a set of accounting items and supporting documents which are related to the business activities specified in this Agreement and other related documents. Unless for those being proven as an explicit error, each Client hereof hereby acknowledges that such accounting items and supporting documents shall be the effective evidences for the debt obligations of the Client. to the Financing Bank.

 

12.   通知  

12. COMMUNICATIONS

 

12.1 通知应采用挂号信、专人递送、传真或电子邮件的方式,需 要传递的通知或文件应送达到本协议开头签署页所列的当 事方地址,若有变更,应提前至少 15 天书面通知对方。    

12.1 Each communication hereunder shall be made by registered mail, courier delivery, facsimile or e-mail. The address used for any communication or delivered of documents between the concerned parties shall be one(s) stated on the Execution Page of this Agreement; in case of any change to  the foregoing address, the changing party shall notify the other party by at least 15-day prior written notice.

     

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

12.2 通知或文件的送达确认方式如下:采用传真或电子邮件方式 的,视为在发送之日送达;采用挂号信方式的,为挂号信寄 发之日起的七个营业日后视为送达;采用专人递送方式的, 视为在送到本协议签署页中载明的地址并签收后送达。 尽管 有上述约定,但向融资行发出或交付的所有通知、文件均须 在融资行实际收到时被视为已经送达。  

12.2 Any communication or delivery of document hereunder shall be deemed as effectively made as below: for the communication or delivery made by facsimile or e-mail, the date of sending; for the communication or delivery made by the registered  mail, when 7 Business Days elapsed from the mailing date, for the communication or delivery made by courier delivery, when delivered at the address specified in the Execution Page of this Agreement and signed for receipt. N otwithstanding the foregoing, any communication or document to be made or delivered to the Financing Bank shall only be deemed effective on the day of actual receipt by the Financing Bank.

 

12.3 客户同意任何公文、传票、命令、判决或其他司法文件若寄 到、送到或留置在其在本协议签署页中载明的地址即视为对 客户生效并有约束力。  

12.3 Each Client hereof agrees that any writ, summon, order, judgment or other legal documents shall be deemed duly and sufficiently served on it only if addressed to it and left at or sent by post to its address specified in the Execution Page of this Agreement.

 

13. 违约事件  

13. EVENTS OF DEFAULT

 

13.1 下述任一事件均构成本协议项下全体客户在本协议项下之违 约:  

13.1 Each of the following events shall constitute and deemed as an Event of Default of all Clients under this Agreement:

 

(a) 任何客户未依本协议约定按时足额支付任何到期应付的本 息或其他款项;  

(a) Any Client’s failure to pay any principal, interest or other sum due and payable under this Agreement on the due date ;

 

(b) 任何客户未遵守在本协议或相关文件中所作的陈述或保证, 或存在或被证明存在该等陈述与保证于被作出或视为被作 出时在重大方面存在不真实或不正确之情形;  

(b) Any Client’s failure to comply with any representation or warranty made by such Client under this Agreement or any related document, or any representation or warranty hereof is or is proved to be unreal or incorrect in any material respect at the time when such representation or warranty is made or deemed to be made;

 

(c) 任何客户未履行或遵守本协议第 3 条、第 4 条、第 5 条中规 定的全部承诺,或违反本协议其他条款;  

(c) Any Client’s failure to perform or observe any of its undertakings or covenants under Clause 3, Clause 4 or Clause 5 hereof, or any other provisions of this Agreement;

 

(d) 任何客户卷入或可能卷入清算、破产、重整、接管等法律程 序, 或发生被指定接管人、管理人、托管人或类似人员等 情形,或其任何或全部资产或收入遭遇上述程序或情形;  

(d) In any situation where any Client hereof is or will be involved in any liquidation, bankruptcy, reorganization, takeover or any other similar legal proceedings, or any receiver, administrator, trustee or other similar staff is designated to take over any Client hereof, or any or all of the assets or revenues of any Client hereof is involved in the aforesaid proceeding or situations;

         

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

(e) 任何客户卷入或可能卷入任何诉讼、仲裁、行政程序或其他类 似程序或遭遇该类程序的威胁,并且 ( 依融资行的合理判断 ) 有 可能限制或对客户履行、执行或遵守本协议项下的义务的能力 造成重大不利影响的;  

(e) In any situation where the Client is or will be involved in any litigation, arbitration, administrative proceedings or other similar proceedings or being threaten by the foresaid circumstances, which, in the reasonable judgment of the Financing Bank, may restrain or lead to a material adverse effect on the Client’s ability to perform, enforce or comply with its obligations under the Agreement;

 

(f) 任何客户的全部或主要资产或收入被扣押、查封、征收、强 制执行或被采取了具有同样效力的其他措施,或者任何客户 的经营、资产或财务等状况发生重大不利变化,或发生其他 情况可能导致任何客户履行本协议项下的义务的能力受到重 大不利影响;    

(f) In any situation where the majority or all of any Client’s assets or revenues are detained, seized, expropriated, or enforced under a compulsory enforcement proceedings or any other similar circumstances, or the occurrence of any material adverse change in the business, assets or financial condition of any Client, or other situations which may lead to a material adverse effect on any Client’s ability to perform its obligations under the Agreement;

 

(g) 任何客户利用关联交易或与关联方串通损害融资行利益;  

(g) In any situation where any Client infringes any benefits or interests of the Financing Bank as a result of its engagement with related parties in conspiracy and such related transactions;

 

(h) 任何客户的股东或控制权结构不再符合融资行在本协议项 下所作要求;  

(h) Any Client’s ownership and shareholder structure no longer meets the requirements set by the Financing Bank under this Agreement;

 

(i) 任何客户突破本协议约定的授信总额度、各子额度限额或财 务指标约束 ( 如有 ) 的;  

(i) Any breach or exceeding of the stipulated Total Facility Amount, any of the sub-limits under specifications or any other financial covenants (if any) by any Client hereof;

 

(j) 任何客户未按约定用途使用本协议项下授信额度或贷款的;  

(j) Any Client’s failure to use the Facility/loan proceeds in accordance with the purposes as stipulated herein;

 

(k) 任何客户未按约定方式进行贷款资金支付的,或任何客户故 意以化整为零的方式规避受托支付,或未及时履行发票等付 款信息及资料提供义务,或所提交资料虚假或与贷款用途不 相符;    

(k) Any Client’s failure to use the funds under the Facility in accordance with the disbursement method stipulated herein, or any such out-of-compliance situations arising from any Client’s attempt to avoid the mandatory requirement of the Entrusted Payment Method by splitting a large amount into several smaller drawdowns or payments, or not providing the payment information (including invoice information) and other materials in a timely manner, or the materials provided by any Client being false or inconsistent with the purposes of the Facility/loan hereof;

 

(l) 任何客户在以其为当事人之一的其他协议或文件项下发生违 约事件,并且 ( 依融资行合理判断 ) 可能限制或对客户履行、执 行或遵守本协议项下的义务的能力造成重大不利影响;为免疑 义,就本项而言,只要发生以下任一情形,即应视为已构成本 条前述之“重大不利影响”: (i) 任何客户在其与融资行签署的 除本协议以外的其他融资文件项下发生任何违约;或 (ii) 任何客 户在其与融资行以外的其他金融机构所签署的融资文件项下发生任何违约;或 (iii) 任何客户在其与金融机构以外机构签署 的合同项下发生违约,且违约所涉金额达到等值 10 万美金的。    

(l) Any occurrence of an event of default by any Client under the agreement or document to which such Client is a party, which, in the reasonable judgment of the Financing Bank, may lead to a restriction or material adverse effect on the Client’s ability to perform, enforce or comply with its obligations under the Agreement; For avoidance of any doubt, if, any of the following occurs, it shall constitute a adverse effect stated in this clause: (i) any contractual breach of any Client hereof under any financing documents other than this Agreement, entered into by and between such Client and the Financing Bank; (ii) any contractual breach of any Client hereof under any finance document entered into by and between such Client and any financial institution other than the Financing Bank under this Agreement; or (iii) any contractual breach of any Client hereof under any agreement entered into by and between such Client and any party other than the financial institution, whereby the amount related to such default is equal to or exceeds USD10,000.00 or its equivalents in other currency;

          

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协议编号 /Agreement Ref. No.: CL201606008

 

(m) 任何担保文件未成立、被撤销、被解除或被宣布无效或不再具 有可执行性,或任何担保文件项下担保人或保证人发生违约 的;及    

(m) If any of the security documents hereof becomes ineffective, or is canceled, dismissed, declared as null and void, or is no longer enforceable, or any security provider or guarantor defaults under the security documents hereof; and

 

(n) 发生任何其他情况或行为,并 ( 依融资行自行判断 ) 有可能对 客户的履约能力或融资行利益造成不利影响的。  

(n) any other circumstances or acts, which, in the sole judgment of the Financing Bank, may lead to a material adverse effect on any Client's ability to perform this Agreement or the benefits of the Financing Bank.

 

13.2 一旦发生任一上述违约事件 ( 无论客户是否已向融资行发出 了通知 ) ,只要融资行未得到满意的补救,则融资行有权立 即通知本协议项下全部或部分客户并宣布取消全部或部分 客户在本协议项下的全部 ( 或部分 ) 未使用之额度,及 / 或要求 任何客户立即偿还本协议项下全部 ( 或部分 ) 未清偿债务 ( 无 论是否到期 ) ;融资行有权在违约事件发生后视情形采取包 括但不限于改变贷款资金支付方式、行使抵消权或扣划任何 客户账户、执行担保项下权利以及法律允许的任何其他措施。    

 

13.2 Upon the occurrence of any Event of Default provided herein (regardless of whether related notice has been given by the Client(s) to the Financing Bank), so long as such Event of Default has not yet been cured to the satisfaction of the Financing Bank, the Financing Bank shall have the right to notify any or all Clients hereof immediately and declare the cancellation of any or all of the unutilised facility provided herein, and/or require any Client hereof to immediately repay any or all outstanding debt amount under the Facility (regardless of whether or not due); in addition, the Financing Bank shall also have the right to take any or all measures (as the case may be) after the occurrence of the Event of Default: change the disbursement method of loan proceeds, set off or deduct the accounts of any Client hereof, enforce the security interest under any collaterals or take any other measures permitted by the laws.

 

13.3 若本协议项下额度系用于贷款以外的其他产品(“ 非贷款品 种授信”),例如开立信用证、保函或类似形式之或有债务 性融资产品的,则发生违约事件时,本协议项下任何客户均应根据融资行要求立即归还或补偿融资行此类产品的名义 金额,或提供令融资行满足的其他担保,而无论融资行在非 贷款品种授信项下之付款责任或垫付资金行为是否已实际 发生。  

13.3 In the event that any Facility hereof is used for the product type other than the loan (“Non-loan Facility”), such as for purpose of the issuance of the Letter of Credit, Letter of Guarantee or any such similar product type with contingent liability, then, upon the occurrence of the Event of Default, any Client hereof shall, per the requirements of the Financing Bank, immediately repay or indemnify the Financing Bank with the nominal amount obligation of such Non-loan Facility products, regardless of whether the actual liability under such Non-loan Facility has been borne or paid by the Financing Bank.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

14.   转让与转移  

14.   ASSIGNMENT AND TRANSFER

 

14.1 未经融资行事先书面同意,本协议项下任何客户不得向第三方 转让本协议项下的任何权利、利益或义务  

14.1 Without the prior written  consent of the Financing Bank, any Client hereof shall not assign or transfer any of its rights, benefits and obligations hereunder to other parties.    

 

14.2 本协议项下客户均在此同意并确认,融资行有权(无需另行 征求客户同意)随时转让本协议项下的全部或部分权利、利 益或义务,并且有权在认为必要时向任何存在或潜在的受让 方或相关人士披露客户的有关信息    

14.2 Each Client hereof hereby agrees and confirms: the Financing Bank may, without obtaining consent from any Client hereof, assign or transfer any or all of its rights, benefits or obligations under this Agreement at any time;also as deemed necessary, the Financing Bank shall have the right to disclose to any actual or potential assignee or related person such information about the Client(s) hereof at the time or manner in which the Financing Bank deems appropriate.

 

15.   生效条款  

15.   EFFECTIVENESS

 

15.1 本协议自融资行与客户有权签字人签字并加盖公章后生效, 并将持续有效直至客户履行完毕本协议项下的全部义务。  

15.1 This Agreement shall become effective and in full force after it has been duly signed by the authorized person(s) of the Client(s) and the Financing Bank and sealed with related common chops, and shall remain effective until all the obligations of the Client(s) under this Agreement have been completely fulfilled to the Financing Bank’s satisfaction.

 

15.2 对本协议的任何变更应取得融资行的事先书面同意,并应采取 书面形式进行。  

15.2 Any alteration to this Agreement shall be made with a prior written consent of the Financing Bank and executed in the written form.

 

16. 无预扣  

16. NO WITHHOLDING

 

本协议下客户应付的所有款项应予全额支付,无任何抵销或反索 赔或任何限制或条件,也不附带任何税项或其他任何性质的扣减 或预提。如果客户或其他人、商行、公司或其他实体依据任何法 律或法规须从任何付款中作出任何税务或其他扣减或预提,客户 应在支付该等款项时,同时支付额外款项,确保融资行收到的款 项除去税务、扣减和预提后金额为如没有该等扣减或预提的情况 下融资行应收到的全部款项。    

All sums payable by the Client(s) under the Agreement shall be paid in full without set-off or counterclaim or any restriction or condition and free and clear of any tax or other deductions or withholdings of any nature. If any Client hereof or any other person, firm, company or other entity is required by any law or regulation to make any deduction or withholding on account of tax or otherwise from any payment, such Client shall, together with its payment due to the Financing Bank, pay such additional amount so as to ensure that the Financing Bank shall receive all amounts due that should have been received by the Financing Bank, as if there is no such deduction or withholding occurred.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

17.   利率适用、调整和市场紊乱  

17.   INTEREST RATE SELECTION, ADJUSTMENT AND MARKET DISRUPTION

 

17.1 本协议项下适用之利率应当符合中国监管机构相关要求。客 户在向融资行提交提款通知书之前,应当事先向融资行询问 所适用的利率。融资行应当根据本协议业务条款相关条款决 定所适用利率的基础是基于人民银行基准利率、 LIBOR WSJ PRIME RATE 或其他基础利率,并告知客户在该笔提 款/所提用额度所适用的具体利率。若客户提交提款通知书 后发生市场变动,融资行将相应通知客户且客户应接受该等 修改后之利率。最终利率将以融资行之提款确认或书面确认 为准。    

17.1 The Interest Rate applied hereunder shall be compliant with the requirements of Chinese regulatory authorities. Before submitting the Drawdown Notice to the Financing Bank, the Client shall inquire with the Financing Bank the Interest Rate. The Financing Bank shall determine the base of the applicable interest rate whether on PBOC Base Interest Rate, LIBOR, WSJ PRIME RATE or other base rate pursuant to the relevant stipulations herein, and inform the Client of the detailed Interest Rate applicable for such loan drawdown or facility utilization. In case of market rate changes after the Client has submitted the Drawdown Notice, the Financing Bank will inform the Client accordingly and the Client agree to accept such revised Interest Rate. The final Interest Rate will be confirmed by the Financing Bank in writing in the Drawdown confirmation or other financial advice.

 

17.2 就人民币额度提用而言,在本协议履行过程中,若遇中国人 民银行调整人民币贷款的基准利率,则自上述人民银行基准 利率调整生效之后的第一次付息之日起,本协议项下已经使 用且未清偿的人民币额度及之后新发生的人民币融资所适 用的基准利率应按中国人民银行届时调整生效的相应期限 基准利率计算。    

17.2 With respect to the utilization of any RMB facility hereof, during the performance of this Agreement, in the event that the People's Bank of China adjusts the base interest rate in relation to the RMB loans, then, from the next interest payment date after such adjustment, such adjusted base interest rate of corresponding period shall be applied as the calculation basis of applicable interest for the utilized but outstanding RMB facility and any other RMB finance occurred under this Agreement thereafter.

 

在本协议履行过程中,若遇中国人民银行实施人民币贷款利 率市场化政策,不再制定和公布任何人民币贷款基准利率, 并且允许借贷双方自行协商确定利率,则客户应与融资行就 本协议项下的适用利率进行协商以确定利率标准;如在协商 开始后的十个营业日内无法达成一致意见,则融资行有权宣 布取消客户在本协议项下全部或部分未使用之额度,及 / 或 宣布客户在本协议项下全部或部分已使用额度项下全部债 务 ( 包括但不限于任何本金、利息及任何应付费用 ) 均立即到 期应付并要求其立即清偿;对于本协议项下额度系用于开立 保函、备用信用证、信用证、银行承兑汇票、提货担保或类 似形式之表外融资产品的情形,融资行还有权要求客户立即 向融资行支付该等融资产品全部名义金额 ( 而无论融资行之 付款责任或垫付资金行为是否已实际发生 )    

If, during the performance of this Agreement, the People's Bank of China starts to enforce the policies of RMB interest rate marketization, ceases to provide and publish any RMB loan interest base rate and allow such rate may be determined by means of negotiation between the lender and the borrower, then, the Client under this Agreement shall negotiate with the Financing Bank on the applicable RMB interest rate; however, if no agreement could be reached by the related parties within 10 Business Days from the beginning of such negotiation, the Financing Bank shall have the right to cancel any or all facility which is not yet utilized by Client under this Agreement, and/or declare any or all of the debts under the facility which is utilized by Client under this Agreement (including but not limited to the principal, interest and any payable fees) deemed as at maturity and payable immediately, and demand immediate repayment of the foregoing debts by the Clients. In case of any Facility that is used for the issuance of Letter of Credit, Letter of Guarantee or any such similar product type with contingent liability, the Client(s) hereof shall immediately repay or indemnify the Financing Bank with the nominal amount of such products (regardless of whether the actual liability under such Non-loan Facility has been borne or paid by the Financing Bank).

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

17.3 就人民币以外其他币种之额度提用而言,在本协议履行过程 中,如果因任何原因融资行无法取得该作为利率计算基础的 LIBOR 或 WSJ PRIME RATE 或已约定的其他基础利率的, 则客户应与融资行就本协议项下的适用利率进行协商以确 定利率标准,如在协商开始后的十个营业日内无法达成一致 意见,则 融资行有权宣布取消客户在本协议项下全部或部分 未使用之额度,及/或宣布客户在本协议项下全部或部分已 使用额度项下全部债务(包括但不限于任何本金、利息及任 何应付费用)均立即到期应付并要求其立即清偿; 若额度系 用于开立保函或信用证或类似形式之或有债务性融资产品 的,则客户应归还或补偿融资行此类产品的名义金额,而无 论融资行之付款责任或垫付资金行为是否已实际发生    

17.3 In respect of the utilization of any facility hereof other than RMB facility, during the performance of this Agreement, In the event that the Financing Bank could not obtain the rate of LIBOR, WSJ PRIME RATE or other stipulated base rate to calculate the Interest Rate, the Client under this Agreement shall negotiate with the Financing Bank on the applicable interest rate; however, if no agreement could be reached by the related paties within 10 Business Days from the beginning of such negotiation, the Financing Bank shall have the right to cancel any or all facility which is yet not utuilized by Client under this Agreement, and/ or declare any or all of the debts under the facility which is utuilized by Client under this Agreement (including but not limited to the principal, interest and any payable fees) deemed as at maturity and payable, and demand immediate repayment of the foregoing debts by the Clients. If any Facility that is used for the issuance of Letter of Credit, Letter of Guarantee or any such similar product type with contingent liability, the Client(s) hereof shall immediately repay or indemnify the Financing Bank with the nominal amount of such products (regardless of whether the actual liability under such Non-loan Facility has been borne or paid by the Financing Bank).

 

17.4 为免疑义:  

17.4 For avoidance of any doubt:

 

  “ 人民银行基准利率 是指中国人民银行不时公布的相关期限 的人民币贷款年基准利率;若没有公布的人民银行基准利 率,则指融资行依据法律或合同约定确定的相关人民币融资 利率基础。      

“PBOC Base Interest Rate” refers to the base interest rate (per annum) of RMB loan which is published by the People's Bank of China with respect to certain period of loan from time to time; in case that no such rate could be obtained from the publishment of the People's Bank of China, it should also refer to the RMB base interest rate that is determined by the Financing Bank for related RMB finance in accordance with the related laws or contractual terms.

 

  “LIBOR” 是指伦敦银行同业拆放利率,并以每个利息期开始 之前两个银行营业日的中午 11 点钟左右 ( 伦敦时间 ) 由伦敦 银行家协会在路透屏幕 LIBOR01 页面公布的数值为准。若 上述 LIBOR 因故无法获得,则本协议中的 “LIBOR” 是指在一 个营业日结束营业时出现在路透屏幕 LIBOR 页面的伦敦银 行间美元存款 ( 等值于本协议项下提款金额 ) 的利率报价之年 利率;若路透屏幕 LIBOR 页面出现了多个利率,则本协议 项下适用的利率应为上述多个利率的算术平均值。      

“LIBOR” refers to the London Interbank Offered Rate as published by the British Bankers Association on “Reuters Screen LIBOR01 Page at or about 11 o’clock a.m. London time two Business Days before the beginning of the respective interest period. If for any reason such rate is not available, the term "LIBOR" shall mean the rate per annum appearing on Reuters Screen LIBOR Page as the London interbank offered rate for deposits in U.S. Dollars at the close of business on the immediately preceding Business Day or its equivalent for a sum of U.S. Dollars equal or comparable to the amount of the applicable advance; provided, however, if more than one rate is specified on Reuters Screen LIBOR Page, the applicable rate shall be the arithmetic mean of all such rates.

 

  “WSJ PRIME RATE” 是指 Wall Street Journal Prime rate , 也即:以下两者之较高者: (a)3.25% (b) Wall Street Journal 在其 “Money Rate” 部分不时公布为 “prime rate”( 最 优惠利率 ) 的、且在美国届时有效的年利率;倘若 Wall Street Journal 不再公布此等利率的,则 WSJ PRIME RATE 应指 融资行宣布为其 “prime rate”( 最优惠利率 ) 的、且在其美国加 利福尼亚州的主要营业地届时有效的年利率,即使该利率并 非融资行的最低利率。    

“WSJ PRIME RATE” refers to the Wall Street Journal Prime rate, which means the greater of (a) 3.25% and (b) the rate of interest per annum from time to time published in the “Money Rate” section of the Wall Street Journal as the “prime rate” then in effect in the United States of America; provided that if such rate of interest is no longer published therein, the “WSJ PRIME RATE” shall mean the rate of interest per annum announced by the Financing Bank as its “prime rate” in effect at its principal office in the state of California, even if it is not the Financing Bank’s lowest rate.

  

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

18. 印花税  

18. STAMP DUTY

 

融资行和客户将根据《中华人民共和国印花税暂行条例》及其施 行细则以及任何其他相关法律的规定,依法缴付印花税。     The Financing Bank and the Client(s) shall pay the stamp duty in accordance with the Interim Regulations of the P.R. China on Stamp Duties, the related implementation rules and any other provisions in this regard.

 

19.   多客户安排  

19.   MULTI-CLIENT ARRANGEMENT

 

19.1 为免疑义,若本协议项下存在多个客户作为借款人的,则除 非本协议另有明确规定,以下规则应适用:    

19.1 For the avoidance of doubt, if more than one Client exists herein as the borrower, then, unless otherwise expressly provided in this Agreement, the following rules shall be applied:

 

(a) 本协议提及“客户”时,均意指任一及 / 或所有客户;    

(a) In case that a “Client” is referred to in this Agreement, it means any and/or all Client(s) hereunder;

 

(b) 本协议项下所有有关客户义务的约定或规定,均应理解为同 时及 / 或分别适用于本协议项下每一客户;  

(b) All stipulations or provisions in relation to any Client’s obligations provided in this Agreement shall be understood as being binding and applicable simultaneously and/or separately to each Client hereof;

 

(c) 本协议中提及或由客户作出的陈述、保证或承诺事项等,均 视为每一单个客户分别作出此等陈述、保证或承诺事项;  

(c) Any representation, undertaking or covenant and similar matters referred to or made by “the Client” in this Agreement, shall be deemed as being separately made by each Client hereof;

 

(d) 本协议项下所有有关客户权利的约定或规定,均可由每一单 个客户分别独立行使;  

(d) Any stipulations or provisions in relation to the Client’s rights may be applicable and exercise separately by each Client hereof;

 

(e) 本协议中提及各项额度限额 ( 如授信总额度及任何其他子额 度 ) 的计算、管理和控制时,应理解为系就本协议项下所有 客户关于该项额度的提用情况进行统计;  

(e) In the case of the calculation, management or control of any Facility limit hereunder (such as Total Facility Amount and any other sub-facility limit), the calculation under such limit(s) shall be understood as being based on all of the Clients heroef;

 

(f) 本协议中提及客户不符合要求或违反相关义务情形时,均视 为任一单个客户发生不符合要求或违反相关义务的情形。  

(f) If any circumstance relating to the non-compliance or violation of any requirements hereof is mentioned in this Agreement with the wording of “the Client”, it shall be understood as that such non-compliance or violation being caused by any single Client hereof.

 

19.2 本协议项下存在多个客户时,每一客户均对其他客户在本协 议项下发生的任何债务互负连带清偿义务。且任何客户的违 约应视为其他任一客户及所有客户的违约。  

19.2 In the case that more than one Client exists herein, each Client hereunder shall bear joint and several liabilities for the indebtedness of any other Client hereunder. And the default of any Client hereunder shall be deemed as the default of any other and/or all Clients hereof.

 

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

19.3 在任何时候,任一单个客户依据本协议约定申请提用本协议 下项下授信额度的前提应包括以下条件:  

19.3 At any time, the conditions precedent to the utilisation of the Facility hereof for any one of the Clients hereof in accordance with the Agreement, shall include:

 

(a)   本协议下项下有充足的可用额度;且  

(a) Sufficient Available Facility Amount remains; and

 

(b) 就该客户所申请提用的具体业务额度而言,在扣除所有客户 ( 包括该申请客户本身 ) 就该类业务品种额度已提用未清偿的 所有额度后仍有足够余额;为免疑义,前述已提用未清偿的 额度包括融资行未解除付款责任或融资行未受足额偿付的 款项 ( 不论是否为或有负债 ) ;且  

(b) In respect of the product type requested by the Client, after deduction of the aggregate of all outstanding utilisations of all Clients hereof (including the Client requests this time) under this product type, sufficient balance remains; for the avoidance of any doubt, the foresaid outstanding utilisation includes those for which the obligation of payment (whether belonging to the contingent liabilities or not) of the Financing Bank has not been released or reimbursed; and

 

(c) 若所提用币种为可选币种时,该可选币种的提用金额于提用 日可为融资行获得;且  

(c) In case of utilisation in any Optional Currency, such amount of optional Currency is available by the Financing Bank at the drawdown date concerned; and

 

(d) 无违反本协议项下任何限额或限制的情形发生或即将发生; 且  

(d) No breach of any limit of facility hereunder occurs or is to be occurred; and

 

(e) 前述额度计算涉及汇率换算的,按本部分第 7 条约定处理。  

(e) If any calculation or exchange conversion in connection with the items above is involved, it shall be referred to the stipulation of Clause 7 in Part III hereunder.

 

19.4 在任何时候,所有客户在本协议项下所提用的未清偿各类额 度及各类额度之和,均应分别符合本协议有关授信总额度及 子额度的规定。 融资行有权随时计算前述额度,并在认为必 要时通知任一客户额度不足之状况并要求任一客户提前清 偿相关债务  

19.4 At any time, both the outstanding facility utilized by all Clients under every product type and the aggregated facility amount under this Agreement shall be in compliance with the requirements of the Total Facility Amount and the sub-limit provided hereunder respectively. The Financing Bank shall have the right to calculate the concerned facility from time to time, and at its sole discretion inform any Client hereof of the event of insufficient balance under any kind of facility limit and request any Client hereunder to prepay the relevant indebtedness.

 

20.   杂项  

20.   MISCELLANEOUS

 

20.1 本协议适用中国法律 ( 为本协议目的,不包含香港、澳门及 台湾地区的法律 ) 。本协议项下或与本协议相关的任何争议 均应接受融资行住所地的法院排他性管辖。  

20.1 The Agreement shall be governed by and construed in accordance with the laws of the P.R.China (for the purpose hereof, excluding the laws of Hong Kong, Macau and Taiwan area). Any dispute arising out of or in connection with the Agreement shall be resorted to the exclusive jurisdiction of the court where the Financing Bank is located.

         

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第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

20.2 本协议由五部分组成,包括第一部分 ( 签署页 ) 、第二部分 ( 特 别条款 ) 、第三部分 ( 一般条款 ) 、第四部分 ( 业务条款 ) 以及第 五部分 ( 附件 ) ;该五部分构成不可分割的完整整体,应当共 同理解和阅读。本协议生效后,将与本协议的附件 ( 包括但 不限于已实际签署的提款通知书或提款确认函或业务申请 文件 ) 共同作为融资行与客户就本协议项下授信相关事项的 完整协议,并取代之前双方达成的关于上述事项的任何口头 或书面的类似约定。  

20.2 The Agreement consists of five parts, namely Part I - Execution Page, Part II - Special Provision, Part III - General Provision, Part IV - Specification and Part V - Schedule; these five parts constitute an indivisible integrity and shall be understood and read as a whole. When the Agreement becomes effective and in full force, the Agreement together with any related schedule (including but not limited to any executed drawdown notice, drawdown confirmation or application documents) embodies the entire agreement entered into by and between the Financing Bank and the Client(s) as to the facility granting issues provided herein, which shall supersede any oral or written agreement or similar stipulations in this regard previously agreed by the Financing Bank and the Client.

 

20.3 若由于任何法律的生效、执行或修改,或任何法律的解释或 适用上发生变化,从而导致融资行为客户提供或维持本协议 项下授信额度、或提供本协议项下全部或部分融资、或履行 其在本协议项下任何义务或在本协议项下收取利息成为非 法或在法律上不可行,则融资行有权通知客户取消本协议项 下额度并且要求任何已使用额度立即到期并偿还,在上述情 形下,融资行可以 ( 但无义务 ) 与客户善意协商采取各方均可 接受的替代处理办法。  

20.3 Where the introduction, imposition or variation of any law or any change in the interpretation or application of any law makes it unlawful or impractical without breaching such law for the Financing Bank to provide or maintain all or part of the Facility or to fund all or part of the Facility or to carry out any or all of its other obligations under the Agreement or to charge or receive interest at the rate or rates applicable, then the Financing Bank shall have the right to notify the Client(s) hereof that any or all of the remaining facility availability shall be cancelled, and/or any or all of the facility utilised shall become immediately due and repayable by the Client(s). In any such event, the Financing Bank may (but shall not be obliged to) negotiate with the Client(s) hereof in good faith for any substitute arrangements acceptable to all parties.

 

20.4 本协议部分条款无效或不可执行不影响其他条款的效力及 可执行。  

20.4 The invalidity and unenforceability of any provision of the Agreement shall not affect the validity or enforceability

 

20.5 融资行未行使或推迟行使任何权利或违约救济不得被视为弃 权;融资行行使一项或部分权利或违约救济不得被视为放弃了 其他权利或违约救济。本协议中规定的融资行的权利及违约救 济是累积性的,不排斥融资行根据法律规定而享有的其他权利 或违约救济。  

20.5 The Financing Bank’s failure to exercise, or any delay in exercising any of its rights and remedies shall not represent or imply as a waiver thereof, nor shall any single or partial exercising of any right or remedy prevent any further or other exercising of the rights or remedies thereof. The rights and remedies provided herein shall be accumulative and shall not exclude any other rights orremedies that the Financing Bank may have in accordance with the laws.

       

  35  

 

 

第三部分 一般条款/Part III General Provision

协议编号 /Agreement Ref. No.: CL201606008

 

20.6 除非本协议另有约定,客户在此不可撤销的同意:对于与本 协议相关的任何信息,融资行除了可以根据任何法律、政府 机构及监管部门的要求进行披露外,还可向其总部、分支机 构、关联机构、顾问以及这些机构所聘请的人员进行披露。  

20.6 Unless otherwise provided herein, the Client(s) hereof hereby irrevocably agrees that the Financing Bank may, in addition to the disclosure of any information relating to the Agreement per the requirements of any laws, governments and regulatory authority, disclose such information to its head offices, branches, subsidiaries, affiliates and advisors and their respective employees.

 

20.7 本协议项下的标题仅为参阅方便之用,不作为本协议内容解 释的依据。本协议中所提及的 营业日 ,均是指融资行在其所 在地正常对外营业的时间。

20.7 The headings under this Agreement are provided only for purpose of reference, which shall not be deemed as the basis  of  any  interpretation  to  the  contents  of  this Agreement. Any reference to the “Business Day” in this Agreement shall refer to a date on which the Financing Bank is open for business in the place where it is located.

 

20.8 本协议以中文和英文书就,若两种语言版本的内容发生任何 不一致,则应以中文为准。  

20.8 This Agreement is being expressed in both Chinese and English. However, in the event of any inconsistency between these two versions, the Chinese version shall always prevail.

 

20.9   本协议置备正本若干,具有同等法律效力;融资行与客户各 执一份正本。若涉及抵押、质押登记或其他用途时,协议正 本相应增加。  

20.9 This Agreement will be executed in several original counterparts with the same legal effect; the Financing Bank and each Client hereof shall keep one original copy. If required, additional original counterparts may be increased for registration of mortgage, pledge or other purposes.

 

  - 一般条款末尾 -    

- End of General Provision    -

 

  36  

 

 

第四部分 业务条款/Part IV Specification

协议编号 /Agreement Ref. No.: CL201606008

 

业务条款

Specification

 

业务品种:应收账池贷款 类别:短期融资
Product Type: Pooled A/R Loan Category: Short-term Finance

 

本业务条款适用于应收账池贷款业务,本协议项下发放的每笔应收账池贷款应符合以下条款与条件。

This Specification is used for the granting of the Pooled A/R Loan. Each Pooled A/R Loan shall be in compliance with the terms and conditions set forth below.

 

业务额度

Pooled A/R Loan Limit

基准币种

Base Currency

可选币种

Optional Currency

金额/Amount:

人民币/RMB 15,000,000.00

大写/in words:

人民币 壹仟伍佰万元整

RMB FIFTEEN MILLION ONLY

币种 1

Currency 1

不适用

N/A

币种 2

Currency 2

不适用

N/A

币种 3

Currency 3

不适用

N/A

循环

Revolving

可循环

Revolving

可动用期

Availability Period

在本业务额度到期日前均可使用

Available before the Maturity Date of the Loan Limit of the Specification

用途

Purpose

用于满足企业日常的流动资金开支

To finance daily working capital needs

业务额度到期日

Maturity Date of the Loan Limit

自本协议签署之日起12个月届满之日

12 months from the execution date of this agreement

最小提款额

Minimum Drawdown Amount

不适用

N/A

不适用

N/A

用款期(月数)

Loan Tenor Period (Month)

不超过 12 个月

Up to 12 months allowed

不适用

N/A

贷款利率

Interest Rate

人民银行基准利率加 2.65%(年利率)利差(但受限于法律或适用政策之允许)

the PBOC Base Interest Rate plus a Margin of 2.65% (p.a.) (however subject to the permission of laws and applicable regulatory policies)

 

( 利率以融资行的提款确认或书面确认所载为准 )

(The final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank)

利息期(月数)

Interest Period (Month)

1 1

提前还款最低限额

Minimum Prepayment Amount

不适用

N/A

不适用

N/A

罚息利率

Penalty Interest Rate

逾期罚息/Overdue Penalty Rate:

所适用贷款利率基础上加收 50% 150% of the Applicable Interest Rate

 

  37  

 

 

第四部分 业务条款/Part IV Specification

协议编号 /Agreement Ref. No.: CL201606008

 

 

挪用罚息/Misappropriation Penalty Rate:

所适用贷款利率基础上加收 100% 200% of the Applicable Interest Rate

应收账池财务指标

Borrowing Formula

融资率: 在任何时点,客户在本业务条款项下的未清偿贷款余额,不得超过客户应收账

池中的合格应收账款余额的 80%。

Advance Rate: at any time, the outstanding amount under this Specification shall not exceed 80% of total Eligible Accounts Receivable in the A/R pool of the Client.

 

合格应收账款不包括且不限于:账龄超过 90 天的应收账款,抵消账户及预计可抵消

的递延收入账户产生的应收账款,超过 90 天账款 50%的余额,超过
90 天的贷方余 额;关联交易产生的应收账款,政府账户
( 除非根据债权转让 ) 产生的应收账款,
单一 债务人集中度超过
25%的应收账款
( 基于客户总的应收账款 ) 。海外债务人所对应产生的应收账款(即中国大陆以外的债务人所对应产生的应收账款)
应逐笔评估,未开具发票的应收账款也是不合格的。

Eligible Accounts shall exclude, but are not limited to, the following: Accounts greater than 90 days from invoice date; Contra accounts and accounts with potential off-set with deferred revenue; Cross Age accounts; Credit Balances over 90 Days; Affiliate accounts; Government accounts (unless under an assignment of claims); Amounts exceeding 25% concentration limit (of the Client’s total AR base) for a single debtor; Foreign account receivables (owed by account debtors outside of Mainland China jurisdiction) considered on a case by case basis; Unbilled A/R is not eligible.

费用

Fee

 

贷款支付方式

Disbursement Method

受托支付

Entrusted Payment

 

 

融资行有权根据实际情形调整和变更贷款支付方式。

The Financing Bank reserves the right to adjust or alter the loan proceeds disbursement method depending on the actual situation.

还款日

Repayment Date

还款计划/Repayment schedule:

 

 

本金于到期日偿还。

Principal due at maturity.

 

 

且,利息应每月支付一次。

And, Interest shall be paid monthly.

财务约定

Financial Covenants

 

其他补充约定(如有)

Other stipulations(if any)

 

 

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第四部分 业务条款/Part IV Specification

协议编号 /Agreement Ref. No.: CL201606008

 

用途  

Purpose

 

本协议项下应收账池贷款业务项下的业务额度是本协议特别 条款中所规定的授信总额度的分项子额度,仅限用于补充一般流动资金或满足公司日常经营所需,不得用于固定资产、股权 等投资,不得用于国家禁止生产、经营的领域和用途。流动资 金贷款不得挪用,融资行有权随时检查、监督客户流动资金贷 款的使用情况。    

The Pooled A/R Loan Limit is a sub-limit of the Total Facility Amount stipulated in Special Provision of this Agreement, which can only be used for the working capital purpose or the Client’s normal business operations, but cannot be used for investment(s) over fixed assets, equity or any others, or be used in areas or for purposes for which the production or operation is prohibited by the government. No misappropriation of the loan proceeds hereof is allowed, and the Financing Bank shall have the full right to examine and monitor the Client’s usage of the loan proceeds hereof at any time.

 

合格应收账款和应收帐池 作为提用本业务条款项下额度的前提,客户应按月(或在融资行 要求的任何其他时间)首先向融资行提供足够的以其为债权人 的应收账款信息。融资行将使用经其接受的应收账款(以下简称 为“合格应收账款”,具体有关要求另附)为基础建立客户在本业 务条款项下的可借款额度(“借款基础”)。    

Eligible Account Receivable and A/R Pool As a condition precedent to the drawdown under this Specification, the Client shall, monthly, or anytime requested by the Financing Bank, provide sufficient information in relation to the accounts receivable to which the Client is the creditor. The Financing Bank will use those accounts receivable that are deemed acceptable by the Financing Bank (the “Eligible Account Receivable”; please refer to Schedule for more detailed criteria) as the basis to establish borrowing availability under this Specification (the “Borrowing Base”).

 

客户应当按照融资行要求,在每月月末后的三十(30)天内(或按 融资行不时要求的频率)向融资行提交其应收账款以及应付款 项的增减变动的最新情况,并完成融资行要求的每月借款基础 信息表以更新和计算每月的借款基础信息。    

The Client shall, pursuant to the requirements of the Financing Bank, submit to the Financing Bank with updated information relating to the change or variation of its accounts receivable and accounts payable within 30 days of each month end (or other time frequency requested by the Financing Bank from time to time), along with the monthly Borrowing Base calculation by completing the related Borrowing Base Certificate required by the Financing Bank.

 

融资行有权根据经其随时计算的合格应收账款情况及有关的 客户借款基础情况,并根据有关应收账款合格程度以及客户维 持本业务条款所要求的财务指标及其他约定之能力,全权决定 客户在本业务条款项下任何时点的可以动用的应收账池项下 最高业务额度,决定是否同意(i)在当前业务额度项下客户的进 一步提款申请,或(ii)要求客户在超额放款情形下强制提前归还 本业务条款项下全部或部分债务。为免疑义,若根据融资行全 权判断,客户的应收账款借款基础指标不足以覆盖本业务条款 项下已发放的贷款余额时,即构成“超额放款”情形的发生。 前述“超额放款”之数额等于全部应收账池贷款的未清偿贷款 与经融资行确定的最近的应收账款借款基础金额之间的差额。    

The Financing Bank shall be entitled to, in accordance with the status of the Eligible Accounts Receivable and the associated Borrowing Base calculated from time to time, and based on the Accounts Receivable’s eligibility and the Client’s ability to remain compliance with financial covenants and other covenants under this Specification, determine at its sole discretion the total Pooled A/R Borrowing Base amount that may be used by the Client at each time, and determine whether or not (i)to accept the following drawdown application of the Client, or (ii) to require the Client to make a mandatory repayment on any or all of its debts in an Over-Advance situation. For avoidance of the doubt, an Over-Advance situation occurs when the Client’s Accounts Receivable Borrowing Base is deemed, at the  Financing Bank’s sole discretion, insufficient to cover the already disbursed loan amount under this Specification. Such Over-advance amount is equal to the difference between the total Account Receivable loan outstanding hereof and the most recent Account Receivable Borrowing Base available amount determined by the Financing Bank.

 

  39  

 

 

第四部分 业务条款/Part IV Specification

协议编号 /Agreement Ref. No.: CL201606008

 

只要本业务条款项下债务尚未清偿完毕,客户同意其将履行所 有相关承诺以确保始终遵守本业务条款要求的全部应收账池 财务指标及其他相关约定。  

Until all debt obligations under this Specification have been fully repaid, the Client agrees that it would fulfill all undertaking required to remain in compliance with all financial covenants and other related requirements under this Specification

 

提款 除本协议第三部分(一般条款)另有特别约定外,客户应当至少 提前 3 个营业日向融资行提交《提款通知书》(且如为受托支 付的,还应包括支付委托条款;格式均可参见附件)供融资行审 查。该通知书应当书写完整并经客户适当签署。除非融资行书 面同意客户撤回该通知书,否则该通知书不可撤销。如指定的 提款日不是营业日,则提款应推迟于其后的第一个营业日进 行。本业务条款项下提款的批准受限于应收帐池财务指标的满 足并由融资行全权酌定。    

Drawdown Unless otherwise stipulated in Part III - General Provision, the Client shall, at least 3 Business Days before the drawdown date, submit to the Financing Bank the Drawdown Notice (which shall contain a clause of payment authorization in case that the disbursement of loan is the Entrusted Payment Method; please see Schedules for reference format) for the approval by the Financing Bank. This Notice shall be in written form, completely and duly signed and sealed. The Notice shall be deemed irrevocable unless written consent for the Client’s withdrawal is given by the Financing Bank. If a designated drawdown date is not a Business Day, the drawdown shall be postponed to the first following Business Day. The approval of the drawdown request shall be subject to the satisfaction of all financial indices and requirements hereof, and be determined by the Financing Bank at its sole discretion.

 

利率、利息计算和利息支付 贷款利率应按以下方式并于提款前确定:(a) 融资行认可的人 民银行基准利率及调整幅度(按百分比计或增加一定利差,视具 体情形而定)(人民币额度提用适用);或 (b) 融资行认可的基础 利率及约定利差(外币额度提用适用);或(c) 经融资行同意的其 他利率确定方式,并应以经融资行确认的《提款通知书》所载 为准。    

Interest, Interest Calculation and Interest Payment The applicable Interest Rate of each drawdown shall be calculated based on the following: (a) the PBOC Base Interest Rate and the corresponding adjustment range (by percentage or by specific margin, as the case may be) as recognized by the Financing Bank (for RMB facility); or (b) the base rate plus the margin as recognised by the Financing Bank; or (c) any other way of determining a rate of interest as agreed by the Financing Bank, and determined before the drawdown with a drawdown notice confirmed by the Financing Bank.

 

对于每笔提款,利息应在各利息期的最后一天(应为每个月的第 二十天或经融资行同意的其他日期,即“付息日”)到期应付。每笔提款的利息期自该笔提款的提款日起算(“起始日”),至最近一 个付息日止;如用款期的最后一天与利息期的最后一天不一致 的,则最后一期利息应截止计算至用款期末的前一营业日,并 在用款期的最后一天到期支付(“最后付息日”)。      

For each drawdown hereof, the interest shall be payable in arrears on the last day of the respective Interest Period (the twentieth day of each month or any other date agreed by the Financing Bank, collectively the "Interest Payment Day"). The first Interest Period of each drawdown shall be calculated from the date of drawdown (“Starting Day”) to the most recent Interest Payment Day; If the last day of the Loan Tenor Period is not the last day of the last Interest Period, the interest for the final Interest Period shall be calculated through one Business Day prior to the last day of the Loan Tenor Period and paid on the last day of the Loan Tenor Period (the "Last Interest Payment Day").

 

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第四部分 业务条款/Part IV Specification

协议编号 /Agreement Ref. No.: CL201606008

 

利息将按照上述约定的贷款利率和实际用款的天数逐日计算; 日利率=年利率/360。

The interest shall accrue from day to day and shall be calculated at the above Interest Rate on the actual number of days elapsed; the daily interest rate shall be calculated based on the following formula: the interest rate (per annum) / 360.

 

如利息期结束于非营业日,则利息期的最后一日应顺延至当月 (公历月)的下一营业日(如有),或如当月没有下一营业日的,则 提前至前一营业日。  

If the Interest Period ends on a day which is not a Business Day, that Interest Period shall instead end on the next Business Day of that calendar month (if there is one) or the preceding Business Day (if there is none).

 

融资行有权在每一利率厘定日(定义如下)根据市场情形重新厘 定所适用的贷款利率,并根据本业务条款约定的贷款利率计算 方式计算和得出新的适用利率,并自最近的下一个利息期开始 适用;融资行应及时通知客户该等变动。为免疑义,前述”利率 厘定日”系指每个公历月的第二十天或其他任何融资行同意的 日期;对于人民币以外币种的额度,具体厘定频率可根据提款 所选择适用的具体贷款利率(如 LIBOR 等)所对应的时间档次 确定。    

The Financing Bank may, on each Interest Review Day (as defined below), review the applicable interest rate in accordance with the market situation, and calculate and determine the new applicable interest rate by means of the method stated in this Specification, and apply such new interest rate to the beginning of the next Interest Period; the Financing Bank shall notify the Client of such change in interest rate promptly. For avoidance of any doubt, the “Interest Review Day” means the 20th day of each calendar month or any other date agreed by the Financing Bank; with respect to the facility other than RMB facility,, the frequency of the Interest Review may be determined in accordance with the corresponding adjustment period of the interest rate (such as Libor or others) which is chosen to and applied for the drawdown.

 

还款 除非融资行另行同意或本协议另有约定,客户在本业务条款项 下的每笔提款均应在其提款通知书(需经融资行接受)中指明的 用款期届满日或业务额度到期日清偿。但无论如何,本业务条 款项下所有提款均应在本协议约定的最终到期日(如有)全部清 偿完毕。    

Repayment Unless otherwise agreed by the Financing Bank or stipulated herein, each drawdown under this Specification made by the Client shall be completely and fully repaid on the last day of the Loan Tenor Period or the maturity date of the Loan Limit specified in its drawdown notice (which shall be accepted by the Financing Bank). However, all outstanding amounts of drawdowns under this Specification shall be paid off on or before the Final Maturity Date (if stipulated) provided in this Agreement.

 

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第四部分 业务条款/Part IV Specification

协议编号 /Agreement Ref. No.: CL201606008

 

提前还款 客户可以在满足上述提前还款最低限额的基础上向融资行申 请自愿提前还款但提前偿还最后余欠之金额的情形不受最低 限额限制),但客户应当在计划提前还款日之前至少提前3个营 业日向融资行提交书面通知。    

Prepayment The Client may make prepayments based on the minimum prepayment amount requirements as stated above, by providing the Financing Bank with a written notice at least 3 Business Days before the intended prepayment date (however, a prepayment for all remaining loan outstanding amount will not be subject to the restriction of Minimum Prepayment Amount).

 

若经融资行自行判断本业务条款约定的任一财务指标或约定 被违反或不满足时,则除非该等违反或不满足已经客户补救至 融资行满意的程度,否则融资行有权要求客户立即就本业务条 款项下部分或全部债务进行强制提前还款,以使客户重新满足 本协议项下前述约定;为前述目的,融资行有权采取包括但不 限于直接扣划客户任一账户款项等的各种措施。    

If, in the sole judgment of the Financing Bank, any financial covenant or stipulation provided in this Specification for the Client is breached or not abided by, then, unless such breaching or dissatisfaction has been cured or remedied by the Client to the satisfaction of the Financing Bank, the Financing Bank shall have the right to require the Client to immediately repay any or all of the debts under this Specification, so as to enable the Client to be back in compliance with the foregoing covenants under this Agreement; for the foregoing purpose, the Financing Bank shall be entitled to take any or all measures including but not limited to directly deduct any amount from any of the accounts of the Client.

 

所有提前还款应当按照本金到期顺序的倒序进行清偿。并且, 如客户的任何一笔提前还款未在该笔提款对应的利率厘定日 进行的,则客户应额外向融资行支付一笔资金中断成本,资金 中断成本的金额为该笔提前还款从提前还款日直至该笔提款 的用款期最后一日止融资行预计可得到的利息与融资行收到 该笔提前还款后将该笔提前还款在同业市场放出直至该笔提 款用款期最后一日止的期间实际所收得到的利息的差额。  

All prepayments shall be applied towards the repayment of the principal in a reverse order of maturity. Besides, if any prepayment is not made by the Client on the corresponding Interest Review Day, then, the Client shall reimburse the Financing Bank with a break funding cost, which is calculated as below: the difference between (a) the interest that the Financing Bank may expect to receive from the prepayment day to the last date of the Loan Tenor Period of such drawdown, if such prepayment is not made, and (b) the interest that the Financing Bank could have earned if such prepayment amount were placed into the inter-bank market from the prepayment date to the last date of the Loan Tenor Period of such drawdown.

 

  42  

 

 

第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

附件一:

Schedule 1

 

 

提款通知书(格式)

Drawdown Notice (Format)

  

编号/Ref No.:                                          

 

[客户]
From: [Client]

 

致 : 浦发硅谷银行有限公司
To: SPD SILICON VALLEY BANK CO., LTD.

 

敬启者,

To whom it may concern,

 

我们在此提及贵行(作为融资行)与我方(作为客户)于                                   年 月 日共同签署的《授信协议》( 编号:                                  , 下称“《授信协议》”)。我方在此不可撤销的通知贵行:根据《授信协议》及该协议规定的相关条件,我方现申请办理 以下提款/融资业务:

With reference to the Facility Agreement (ref. number:                                     , hereinafter the “Facility Agreement”) dated [Date] and executed between the Financing Bank and us as Client. We hereby give you irrevocable notice that, pursuant to the Facility Agreement and the terms and conditions contained therein, we apply to make a drawdown as follows:

 

I.提款明细 /PARTICULAR    

金额 /Amount:

提款日 /Drawdown Date:
到期日/期限 /Maturity Date/Tenor:
用途 /Purpose:
本次申请系在《授信协议》之以下业务

项下发起 /This application is proposed under the Product Type of Facility Agreement as left:

   

 

II.支付方式 / DISBURSEMENT METHOD

本次提款的支付方式为 / The disbursement method for this drawdown should be: [ (A) ]

 

(A) 受托支付    

Entrusted Payment Method

 

本次提款的贷款支付方式为受托支付。我们不可撤销地授权和委 托贵行,请贵行将本次提款放至我司提款账户后代我们将该等款 项支付给我方商业交易对手(收款账户信息及支持文件另附):

This drawdown should be made under Entrusted Payment Method; we hereby irrevocably authorize/entrust your Bank that: after transferring the drawdown amount to our Loan Account, please use the same to make payment to our commercial counterparty on behalf of us (related accounts info. and supporting documents to be attached otherwise):

       

我们确认:截止我们做出本支付委托之时,《授信协议》中所有陈 述、保证、承诺及约定条款在主要方面依然真实有效,且无任何 违约事件(或潜在的违约事件)发生或持续。本支付委托中所有文 字定义与其在《授信协议》中的含义是一致的。

We  confirm that, at  and until the issuance of this Payment Authorization Letter, all the representations, warranties, undertakings and covenants provided in the Facility Agreement are true and valid in all material respects and no Events of Default (or potential Events of Default)  are  existing  or  continuing.  Terms  defined  in  the Facility Agreement shall have the same meaning in this Payment Authorization Letter.

  

  43  

 

 

第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

我们在此确认,贵行收到本支付委托后有权进行付款审核。如贵 行认为本支付委托中的资料/信息不正确、不完整、不够清晰,或 执行本项受托支付将违反有关法律、法规或双方的约定,或本支 付委托中所列支付对象、支付金额等信息与相应的商务合同等证 明材料不相符的,或贵行放款后我司贷款接收账户内可用存款余 额仍不足,贵行有权不处理本对外付款申请。如因任何前述原因 导致付款延误、拒收、退回或贵行推迟处理或决定不处理付款申 请而引致任何人遭受损失或损害,贵行不须承担任何责任。

We hereby confirm that, where your Bank has received this payment authorization, your bank reserves the right not to process the payment if you are of the opinion that there are insufficient available funds even if the drawdown amount has been granted, or if the information given is incorrect, incomplete or is not sufficiently clear, or conflicts with that of supporting documents such as business contracts, or the processing  thereof  will  lead  to  a breach of  any applicable laws, regulations or stipulations in some agreement. Your Bank shall not be liable for any loss or damage suffered by any person arising out of payment delay, rejection and/or return, or any delay by your Bank in processing the payment or your Bank's decision in not processing the same, where any information given is, in the opinion of your Bank, incorrect, incomplete  or is not  sufficiently  clear  or  the  processing thereof will be in breach of any applicable laws, regulations or stipulations.

 

除非我们以书面形式另行通知贵行解除本委托并已征得贵行同 意,否则本函项下委托始终有效。

Unless another written notice of authorization cancellation is delivered to you otherwise and agreed by you, the authorization and entrustment hereunder shall always be valid.

 

(B) 自主支付 Independent Payment Method  

 

请将本次提款金额划入我司的提款账户,由我司自行对外支付。 我们承诺将每三个月按贵行要求的形式向贵行提交一份支付记录 的清单用以证明我们使用贷款的用途。

Please transfer the amount of this drawdown to our Loan Account for our discretionary payment. We undertake hereby we would provide to you a list of payment records within three months of such drawdown for purpose of evidencing our compliance with loan purpose hereof.

       

我司在贵行的提款账户(同时亦为上述 第(A)项之下对外付款账户)为:    

Our Loan Account at your bank (also as Outward Payment Account under Item (A) above) is:    

 

  44  

 

 

第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

我们确认:直至本次提款日,《授信协议》第 3 条、第 4 条、第 5 条中所规定的所有陈述、保证、承诺及约定条款在 主要方面依然真实有效,并且没有任何违约事件(或潜在的违约事件)发生或持续。本通知书中使用的词语与其在《授 信协议》中的含义是一致的。

We confirm that, at and until the drawdown date hereof, all the representations, warranties, undertakings and covenants in Clause 3, Clause 4 and Clause 5 in the Facility Agreement are true and valid in all material respects and no Events of Default (or potential Events of Default) are existing or continuing. Terms defined in the Facility Agreement shall have the same meaning in this Drawdown Notice.

 

此致

Yours faithfully,

  

     
客户有权签字人签字   客户公章
Authorized Signatures Client   Seal of Client
     
代表   日期
On behalf of   Date
以下银行专用    

 

For Bank Only

兹同意按以下执行利率条件批准本次提款申请:

 

The drawdown application above is approved with the condition of the applicable interest rate as below:

 

 

本次提款的执行利率为:(请打勾勾选)

The applicable Interest Rate under this drawdown shall be: (Please choose with the tick)

 

人民银行基准利率的[1XX]%;

[1XX]% of the PBOC Base Interest Rate;

 

提款当前的利率为:

The current interest rate at the time of drawdown shall be:

       

人民银行基准利率加[ ]%(年利率)利差(但受限于法律或 适用政策之允许);

the PBOC Base Interest Rate plus a Margin of [X.X]% (p.a.) (however subject to the permission of laws and applicable regulatory policies);

 

提款当前的利率为:

The current interest rate at the time of drawdown shall be:

                                                   

       
LIBOR 加 [        ]% (年利率) (利差)

LIBOR plus [         ]% (p.a.) (Margin)

 

提款当前的利率为:

The current interest rate at the time of drawdown shall be:

       

WSJ PRIME RATE 加 [        ]% (年利率) (利差)

WSJ PRIME RATE plus [          ]% (p.a.) (Margin)

 

提款当前的利率为:

The current interest rate at the time of drawdown shall be:

                                                        
       
其他:    
  Other:                                                 
       
Please be advised that the applicable interest rate above may fluctuate or be adjusted in accordance with the provisions provided in the Facility Agreement.

银行印章/Bank seal:                               经办/Operator signature:                                               日期/Date:                                            

  

  45  

 

 

第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

收款账户信息

ACCOUNT INFORMATION

(受托支付适用/for Entrusted Payment Method)

 

提款通知书编号

Ref No of drawdown notice:                                    

 

收款人(全称)

Payee (full name)

收款账号信息

Payee’s Account Info.

付款金额

Amount to pay

备注

Remarks

       
       
       
       
       
       
       
       
       
       
       
       
       
       

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   
客户公章  
Seal of Client  
日期  
Date  

 

  46  

 

 

第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

附件二:

Schedule 2

 

关于“允许的投资”

Re “Permitted Investments

 

Permitted Investments ” are: 允许的投资包括:

 

(a) Investments (including, without limitation, Subsidiaries) existing on the Effective Date and shown on the Perfection Certificate; 有效之日即存在的和抵押证书上显示的投资(包括但不限于子公司);

 

Investments consisting of Cash Equivalents; 现金等值物的投资;

 

Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of Borrower; 为借款人日常业务中存款、回款或类似交易担保的可转让证券投 资

 

Investments consisting of deposit accounts in which Bank has a perfected security interest; 银行拥有登记过 的抵押权的存款帐户的投资;

 

Investments accepted in connection with Transfers permitted by Section 4.12; 4.12 章节处允许的交易相关 的投资;

 

Investments consisting of the creation of a Subsidiary for the purpose of consummating a merger transaction permitted by Section 4.12 of this Agreement, which is otherwise a Permitted Investment; 子公司进 行的为了完成 4.12 章节处允许的并购交易,即一种“允许的投资”而进行的投资;

 

Investments (i) by Borrower in Subsidiaries (other than Borrower) not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year; (ii) by Subsidiaries in other Subsidiaries (other than Borrower) not to exceed One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year or in Borrower; and (iii) Investments by Borrower or its Subsidiaries in any Borrower; 如下投资:(i)借款人在子公 司(除借款人外)任意财政年度累计不超过十万美元的投资(ii)子公司对其它子公司(除借款人外)或对借款人 任意财政年度累计不超过十万美元的投资 (iii)借款人或其子公司对借款人的投资;

 

Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower’s Board of Directors; (i)日常运营的差旅支取和员工派驻贷款和其它员工贷 款和提款的投资(ii)按照借款人董事会批准的员工股票购买计划和协议,给员工、管理层和董事的用于购买借款 人或其子公司股权的投资;

 

Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; 在客户或供应商破产或重组、解决日常经营中与客户或供应 商的拖欠帐款或其它纠纷时获得的投资(包括债权);

 

Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph shall not apply to Investments of Borrower in any Subsidiary. 如果不适用于借款人在任何子公司的投资,企业日常经营中 对非关联企业的客户和供应商的应收票据或预付版税和其它授权的投资。

 

  47  

 

 

第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

附件三:

Schedule 3

 

合规证书

COMPLIANCE CERTIFICATE

 

The Client(s) under this Agreement confirms and undertakes to the Financing Bank that: 本协议中的客户 对融资行确认和承诺:

 

a) COMPLIANCE CERTIFICATE(S) would be completed and provided in accordance with the requirements of the Financing Bank during the period of this Agreement; 在本协议期限内,合规证明将根据融资行要求完成并提供;

 

b) any COMPLIANCE CERTIFICATE submitted by the Client(s) shall comply in substance with the format required by the Financing Bank (including the format set forth below or any further version notified by the Financing Bank).
  任何客户提交的合规证明将符合融资行要求的格式(包括下述格式和日后融资行修订的格式)

 

 

 

COMPLIANCE CERTIFICATE

 

TO: SPD SILICON VALLEY BANK CO., LTD.   Date:
致:浦发硅谷银行有限公司   日期

 

FROM: Borqs Beijing Ltd.

发件人: 播思通讯技术(北京)有限公司

 

The undersigned authorized officer of Borqs Beijing Ltd. (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”): 在下文中签字的播思通讯技术(北京)有限公司(“借款人”)的被授权人证明,根据借款人与银行之间的贷款协议

(“协议”)的条款和条件:

 

(1) Borrower is in complete compliance for the period ending with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.

(1)在截至[ ]的期限内,借款人完全遵守了所有要求的承诺(下文另行载明的除外);(2)不存在任何违约事

件;(3)协议下的所有陈述和保证在本证明日期均是真实和正确的(下文另行载明的除外),但前提条件是:上述重 大方面标准不适用于那些已符合要求或已被实质性修改的陈述或保证;明示提及某个具体日期的陈述和保证,在 该日期做出时在所有重大方面是真实正确的;(4)借款人及其每一个子公司均及时进行了纳税申报和报告;借款人 及时支付了所有海内外税款、征税、保证金和供款;(5)不存在借款人先前未书面通知银行的、就未付员工工资或 福利针对借款人或其子公司设定的留置或提出的索赔。

 

  48  

 

 

第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement. 请查收附件中的有关上述证明的材料。下文签名者证明:该等材料系按一贯适用的 GAAP 从一个期限到下一期限 所准备的(根据所附信函或脚注另行提供解释的除外)。下文中的签名者确认,借款人申请提款在任何时间或日期

均未违反协议的任何条款,合规性确认,并非仅确认在本证明交付日期合规。本证明中未定义的术语的含义与协 议中所给定义相同。

 

Please indicate compliance status by circling Yes/No under “Complies” column.

请在下表内的“符合”栏内圈明合规状态。

 

Reporting Covenant 报告约定 Required 要求

Complies

合规与否

Monthly Company prepared consolidated financial statements

公司准备的合并的月度财务报表

Monthly within 30 days of each month end

于每月结束之后 30 天内

Yes/No

是/否

Accounts Receivable and Payable Aging Report

应收账款账龄报告及应付账款账龄报告

Monthly within 30 days of each month end

于每月结束之后 30 天内

Yes/No

是/否

Compliance Certificate

合规证书

Monthly within 30 days of each month end

于每月结束之后 30 天内

Yes/No

是/否

Borrowing Base Certificate

借款基础证书

Monthly within 30 days of each month end

于每月结束之后 30 天内

Yes/No

是/否

Annual CPA-Audited financial statements

经注册会计师审计的年度财务报表

Annually within 270 days from year end

于每一年度结束之后 270 天内

Yes/No

是/否

Board-approved consolidated financial projections

经公司董事会通过的合并的年度财务运营计划

Within 10 days from Board approval, but no later than 60 days from year end

在每一年度董事会通过后 10 天内提供,但最迟不得

晚于每一年度结束之后 60 天

Yes/No

是/否

AR Field Exam

应收账款年审

Conducted annually and the initial AR Field Exam should be completed within 180 days from from the execution date of this agreement

每年对公司的应收账款进行审计,首次应收账款年

审应于本协议签署之日起 180 天内完成

Yes/No

是/否

  

  49  

 

 

第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

Financial Covenant 财务约定 Required 要求 Actual 实际

Complies

合规与否

客户应确认在合并报表层面上需维持:

The Client shall confirm to maintain on a consolidated basis: 

每月最小调整后速动比率:

Minimum Monthly Adjusted Quick Ratio (AQR):

1.25:1.00  

Yes/No

是/否

调整后速动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

每季度最低 EBITDA:
Minimum Quarterly EBITDA of:
USD500,000.00  

Yes/No

是/否

注:该财务约束指标将在收到并审核 2017 年董事会批准的(最新)预算后更新。

Note: This financial covenant for 2017 will be adjusted upon receipt and review of 2017 board-approved (updated) plan.

 

The following Intellectual Property was registered (or a registration application submitted) after the Effective Date (if no registrations, state “None”)

请列明已登记(或已提交登记申请)的知识产权信息:(若无此等事项,请注明“无”)

 

-----------------------------------------------------------------------------------------------------------------------------         ----------------------------

-----------------------------------------------------------------------------------------------------------------------------         ----------------------------

 

Other Matters

其他事项

 

Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? (☐  Yes ☐  No)

借款人的资本构成表(capitalization table)以及借款人或其任何子公司的运营文件是否发生了修改或变动?

(□是 □否)

 

If yes, provide copies of any such amendments or changes with this Compliance Certificate.

若选择“是”,请随本证书一并提供此等修改文件之副本。

 

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

以下是关于上述证明的除外事项:(若无除外事项,请注明“无除外事项可写”)

 

-----------------------------------------------------------------------------------------------------------------------------             ----------------------------

---------------------------------------------------------------------------------------------------------------------------------------------------------

-----------------------------------------------------------------------------------------------------------------------------             ----------------------------

 

COMPANY   BANK USE ONLY
播思通讯技术(北京)有限公司    
Borqs Beijing Ltd.    
       
By:                                          Received by:          
       AUTHORIZED SIGNER

 

Name:     Date:  
         
      Verified:            
Title:     AUTHORIZED SIGNER

 

      Date:                  
         
      Compliance Status:     Yes      No

 

  50  

 

 

第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

签署人:                                       仅银行填写
     
姓名:                                       接收人:                                    
    授权签字人
职务:                                       日期:                                    
     
    核人:                                    
    授权签字人
    日期:                                    
   

是否符合:是 否

 

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第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

附件四:   借款基础证书
Schedule 4   BORROWING BASE CERTIFICATE

  

借款人/Borrower:   播思通讯技术(北京)有限公司 / Borqs Beijing Ltd.
贷款人/Lender:   浦发硅谷银行有限公司 / SPD SILICON VALLEY BANK CO., LTD.
承诺金额:   人民币壹仟伍佰万元整
Commitment Amount:   RMB15,000,000.00

 

应收账款/ACCOUNTS RECEIVABLE

币种/金额

Currency/Amount

 
1.

应收账款(发票)账面价值(                                                    )

Accounts Receivable (invoiced) Book Value (as of                                         )

 

 

 
       
2.  附加金额(请在下页中解释)

Additions (Please explain on next page)

   
       
3. 减去:关联/员工/非交易性账目

Less: Intercompany / Employee / Non-Trade Accounts

   
       
4.

 净贸易应收账款

NET TRADE ACCOUNTS RECEIVABLE

   
       
 

应收账款抵扣(不重复计算)

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

   
       
5. 

发票账期超过 90 天的

90 Days Past Invoice Date

   
       
6.

超过 90 天的信用余额

Credit Balances over 90 Days

   
       
7.

超过 90 天账款 50%的余额(跨帐龄的或影响目前的)

Balance of 50% over 90 Day Accounts (Cross-Age or Current Affected)

 

 

 
       
8.

海外债务人所对应产生的应收账款

Foreign account receivables

   
       
9.

未由借款人出具发票的账款

Accounts not invoiced by Borrower

   
       
10.

抵消帐户/客户储蓄账目

Contra / Customer Deposit Accounts

   
       
11.

政府/机关账目

Government / Authority Accounts

   
       
12.

推广账目或演示账目;保证销售账目或寄售账目

Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts

 

 

 
       
13.

含备忘录的或预结算的账目

Accounts with Memo or Pre-Billings

   
       
14.

合同账目;进度/节点结算的账目

Contract Accounts; Accounts with Progress / Milestone Billings

   
       
15.

保留款结算的账目

Accounts for Retainage Billings

   
       
16.

信托/报税账目

Trust / Bonded Accounts

   

 

 

  52  

 

 

第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

17.

结算及持有账目

Bill and Hold Accounts

   
       
18.

未结算账目

Unbilled Accounts

   
       
19.

非交易性账目(若上述中未抵扣)

Non-Trade Accounts (If not already deducted above)

   
       
20.

具有展期的发票的账目(净 90+)

Accounts with Extended Term Invoices (Net 90+)

   
       
21.

退款账目/借方备忘录

Chargebacks Accounts / Debit Memos

   
       
22.

产品退货/换货

Product Returns / Exchanges

   
       
23.

具有争议的账目;破产债务人账目

Disputed Accounts; Insolvent Account Debtor Accounts

   
       
24.

递延收入/其他(请在下一页中解释)

Deferred Revenue/ Other (Please explain on next page)

   
       
25.

超过集中度限量(25%)

Concentration Limits (25%)

   
       
26.

应收账款抵扣总金额

TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

   
       
27.

合格账目(第 4 项的金额将去第 26 项的金额)

Eligible Accounts (#4 minus #26)

   
       
28.

合格账目的金额(第 27 项的 80%)

ELIGIBLE AMOUNT OF ACCOUNTS (80% of #27)

   
       
余额/BALANCES    
       
29.

最高贷款限额

Maximum Loan Amount

   
       
30.

可放贷金额(第 28 项与第 29 项中的较低者)

Total Funds Available [Lesser of #29 or #28]

   
       
31.

目前在循环贷款 1 下的欠款余额

Present balance owing on Revolving Line 1

   
       
32.

储备头寸(第 30 项减去第 31 项)

RESERVE POSITION (#30 minus #31)

   

 

[续下页/Continued on following page.]

 

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第五部分 附件/Schedule

 

授信协议编号/Agreement Ref. No.: CL201606008

 

对上页中内容的解释:

 

Explanatory comments from previous page:

 

 

 

 

 

 

 

签署人承认并保证上述内容是真实、完整以及准确的,并且本借款基础证书中的所有信息符 合签署人与浦发硅谷银行有限公司所签订的贷款协议下的陈述与保证的规定。

The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in the Loan Agreement between the undersigned and SPD SILICON VALLEY BANK CO., LTD..

 

      仅供银行使用/BANK USE ONLY
公司/Company:     接收人/Received by:                                             
      授权签字人/AUTHORIZED SIGNER
签字/By:                                                             日期/Date:                                                          
授权签字人/Authorized Signer     核验/Verified:                                                       
      授权签字人/AUTHORIZED SIGNER
日期/Date:                                                      Date:                                                           
      是否合规/Compliance Status:是/Yes 否/No

 

 

54  

 

Exhibit 10.61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

应收账款质押协议(最高额)

Pledge Agreement of Accounts Receivable(Maximum Amount)

 

 

 

 

 

 

 

( 文件编号 /Ref No.: CL201606008-AR)

 

 

 

 

第一部分签署页/Part I Execution Page 协议编号/ Agreement Ref. No.: CL201606008-AR

 

签署页

Execution Page

  

质权人

Pledgee

出质人

Pledgor

   

浦发硅谷银行有限公司

SPD SILICON VALLEY BANK CO., LTD.

播思通讯技术(北京)有限公司

Borqs Beijing Ltd.

   

住所地

with address at

住所地

with address at

   

上海市杨浦区大连路 588 号宝地广场 B 座 21 楼

200082

北京市海淀区八里庄路 62 号院 1 号楼 8 层

943 室

   

21/F, Block B, Baoland Plaza,

No. 588, Dalian Road, Shanghai 200082

Room 943, 8/F, Building No. 1, No. 62, Balizhuang Road, Haidian District, Beijing
   

以上当事人在本协议中简称为“质权人”

hereinafter referred to as “Pledgee”

以上当事人在本协议中简称为“出质人”

hereinafter referred to as "Pledgor"

 

上述各方当事人在此同意并接受本协议中所述之全部条款;出质人特此确认, 就本协议项下有关条件和条款,质权人已向出质人作出充分的说明和解释, 出质人已理解、同意、承认该等条款。

The parties above hereby agree to and accept all terms and conditions set forth in this Agreement. The Pledgor hereby confirms that sufficient interpretations and explanations have been made by the Pledgee in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Pledgor completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

  

1

 

 

第二部分正文/Part II Content  协议编号/Agreement Ref. No.: CL201606008-AR

 

正文

Content

 

为确保债务人 ( 定义见下文 ) 全面、及时履行其在主债权债务合同 ( 定义见下文 ) 项下各项义务,保障质权人债权的实现,本协议项 下出质人同意将本协议约定范围内的应收账款全部质押予质权 人,并设定其为第一顺序之质权人,以作为债务人全面、及时 履行主债权债务合同项下全部债务之物权担保。

  

为实现上述目的,出质人和质权人经协商一致并达成如下条款, 以资各方共同恪守。

  

一、特别条款

 

1. 应收账款质押

 

出质人同意将本协议约定范围内的质物向质权人提供质押担 保,当本协议指明的债务人不履行其在主债权债务合同项下到 期债务或者发生本协议约定的实现质权的情形时,质权人有权 依据本协议的约定就本协议项下质物优先受偿。

  

2. 质物

 

本协议项下质物为:出质人自本协议签署之日起至本协议所担 保主债权债务合同项下全部债务清偿完毕之日所拥有的应收账 款,具体范围参见本协议附件一《质物详情》。

 

3. 主债权债务合同

 

本协议所担保的主债权债务合同为:债务人与本协议质权人在 债权确定期间内签署或履行的一系列债权债务文件,包括但不 限于双方于 2016 年 月 日签署的《授信协议》 ( 编号 : CL201606008)

 

For the security of the well performance of the obligations under the Principal Contract (as defined hereunder) by the Debtor (as defined hereunder) and ensuring the recovery of the Pledgee’s right of credit, the Pledgor hereof agrees to set up a pledge to the Pledgee with the Accounts Receivable stipulated hereunder, and to designate the Pledgee hereunder as the first-priority pledgee.

 

Therefore, a pledge agreement (“the Agreement” or “Guarantee”) is reached by and between the Pledgor and the Pledgee hereof as follows.

 

I SPECIAL PROVISIONS

  

1. Pledge of Accounts Receivable

  

The Pledgor agrees to provide security to the Pledgees with the Pledge (as defined hereunder). In the event that the Debtor indicated hereunder fails to repay the obligation due and payable under the Principal Contract, or that the right of pledge may be exercised in accordance with the stipulations hereunder, the Pledgees hereunder shall have the right to be repaid as first priority under the Pledge.

 

2. Pledge

 

The Pledge hereunder refers to: all of the Accounts Receivable owned by the Pledgor, from the date of this Agreement to the date all debts under the Principal Contract secured hereunder are fully and completely repaid. For more details please refer to Schedule 1 (Details of the Pledge).

 

3. Principal Contract

  

The Principal Contract hereunder means: a series of documents of claims and liabilities executed or performed between the Debtor and the Pledgee hereunder within the stipulated Period for Claims’ Determination, including but not limited to Facility Agreement (Agreement No. CL201606008) dated (Month) (Day), 2016.

 

2

 

 

第二部分正文/Part II Content  协议编号/Agreement Ref. No.: CL201606008-AR

 

4. 质押所担保的主债权/被担保主债权

 

本协议项下被担保的主债权为:质权人在债权确定期间内,向 债务人连续提供的一笔或多笔融资余额。

  

5. 债权确定期间

 

(1) 本协议所指债权确定期间为:自 2016 年 月 日 至              年 月 日止。

  

(2) 为免疑义,前述有关债权,包括以下情形:

  

(a) 任何债权债务文件,只要债务人与质权人系在债权确定期 间内签署,系视为符合本协议担保要求,该文件项下所有 债务均纳入本协议项下最高额质押的担保;及 /

  

(b) 债务人与质权人虽未签署有关债权债务文件,但有证据证 明其在债权确定期间内实际发生有此等债权的情形。

  

(3) 为免疑义,对于前款 (a) 项所述之债权债务文件项下的具体 债务,即使其实际发生的时间晚于债权确定期间届满日 ( 包 括但不限于:有关贷款或贷款额度系在债权确定期间届满 后方始提用;有关保函、信用证等表外额度在债权确定期 间内提用,质权人对外开具了付款承诺性文件,但在债权 确定期间届满后发生质权人对外垫付的;或有关保函、信 用证等表外额度在债权确定期间届满后方始提用对外开具 承诺性文件等 ) ,该等债务同样受本协议项下最高额质押的 担保。

 

4. Principal Amount secured by the Pledge

 

The Principal Amount secured by the Guarantee means: the balance of one or several finances, provided by the Pledgee to the Debtor within the Period for Claims’ Determination specified hereunder.

 

5. Period for Claims’ Determination

  

(1) The Period for Claims’ Determination hereunder refers to: from (Month) (Day), 2016 to (Month) _______ (Day), 20    .

  

(2) For the avoidance of doubt, the wording of “Claim” in the preceding paragraph, includes the circumstances set forth below:

 

(a) Any document in relation to the creditor’s rights or the debts, if only signed and/or sealed by the Debtor and the Pledgee within the Period for Claims’ Determination, would be deemed complying with the requirements of this Agreement, and all debts arising therefrom would be secured by the maximum amount pledge hereunder; and/or

 

(b) Although no written documents in relation to the creditor’s rights or the debts is signed and/or sealed between the Debtor and the Pledgee, some evidence exists proving the occurrence of such debts within the Period for Claims’ Determination.

 

(3) For the avoidance of doubt, in respect of the debts under the document in relation to the creditor’s rights or the debts stated in item (a) of the preceding paragraph, even if the actual debt occurs practically after the expiry date of the Period for Claims’ Determination, it would also be secured by the maximum amount guarantee hereunder. The aforesaid debts occurred after the expiration date of the Period for Claims’ Determination includes, but not limited to, the circumstance as follows: any loan or credit line of loan is actually requested or drawn down after the expiration date of the Period for Claims’ Determination; any facility for purpose such as the issuance of the guarantee or the letter of credit is requested and utilized within the Period for Claims’ Determination and the Pledgee issues the formal documents with commitment obligation, while the actual payment or advance under such documents occur after the expiration of the Period for Claims’ Determination; or, any facility for purpose such as the issuance of the guarantee or the letter of credit is requested for utilized after the expiration of the Period for Claims’ Determination.

  

3

 

 

第二部分正文/Part II Content  协议编号/Agreement Ref. No.: CL201606008-AR

 

(4) 为免疑义,对于前述第 (2) (a)(b) 项所述情形下的债务,即 使系属在债权确定期间届满后产生的部分 ( 例如债权确定期 间届满后新产生的利息、罚息或其他费用等 ) ,该等债务均 同样受本协议项下最高额质押的担保。

  

(5) 关于在先债务的约定(如适用,请在方框内打钩选择;为免 疑义,请务必确保中英文本中本选项的勾选状态保持一致)。

   

质权人与出质人特别约定,质权人与债务人在本协议确定 之债权确定期间之前存在的授信或融资协议项下的债务 ( 如 有 ) ,也一并纳入本协议项下最高额质押的担保。

  

6. 最高债权限额

 

本协议项下出质人责任的最高债权限额为 RMB18,000,000.00 元整 ( 大写:人民币壹仟捌佰万元整 ) 或等值其他币种。

 

7 . 债务人

本协议项下所称债务人为:即播思通讯技术(北京)有限公司。

     

(4) For the avoidance of doubt, with respect to any debt under the circumstances stated in both item (a) and (b) of the preceding paragraph (2), even for the part of the debts that occur after the expiration of the Period for Claims’ Determination (e.g. the interest, penalty interest and other fees of an existing debt accrued after the expiration of the Period for Claims’ Determination), such part of the debts would also be secured by the maximum amount pledge hereunder.

 

(5) Special stipulations on the preceding debts (please check the appropriate box if it’s agreed b y both parties; for the avoidance of doubt, please ensure that the selected item is consistent between English and Chinese version ).

 

It is specially agreed between the Pledgor and the Pledgee that, all the existing and outstanding debts(if any) under any facility or loan agreement(s) which is entered into by both the Debtor and the Pledgee prior to the Period for Claims’ Determination, would also be secured by the maximum amount pledge hereunder.

 

6. Maximum Limit of Claiming

  

The Maximum Limit of Claiming to the extent that the Pledgor shall assume as a security liability under this Agreement shall be: RMB18,000,000.00 (SAY: RMB EIGHTEEN MILLION

ONLY) or its equivalents in other currency.

 

7. The Debtor

 

The Debtor hereunder, in terms of this Agreement, refers to Borqs Beijing Ltd.

 

4

 

 

第二部分正文/Part II Content  协议编号/Agreement Ref. No.: CL201606008-AR

 

二、一般条款

  

1. 担保范围 本协议担保范围包括因主债权债务合同而产生的 融资本金、利息、罚息、需补足的保证金、复利、违约金、 赔偿金、评估费、公证费、手续费、实现债权的费用(包括 但不限于诉讼费用、财产保全费、差旅费、拍卖费、律师 费用、执行费用等)、因出质人在本协议下违约而给质权人 造成的损失和债务人在主债权债务合同项下的其它所有应 付费用

 

2. 担保权益之选择 若因债务人发生主债权债务合同项下的违 约和 / 或出质人发生本协议项下违约,而造成质权人依本协 议约定行使担保权益时,若被担保的主债权既有物的担保 又有人的担保的,质权人可以先就相关担保文件 ( 包括本协 议 ) 项下物的担保实现债权,也可以根据相关担保文件的规 定先要求实现人的保证责任。出质人同意,在任何情况下, 质权人未行使或未及时行使其与债务人在其他任何文件项 下的任何权利,包括但不限于债权、担保物权、违约救济 权,均不得被视为质权人怠于或放弃行使权利,亦不会影 响其充分行使本协议项下的权利。

  

3. 出质人的陈述与保证 出质人向质权人作出如下陈述与保证, 并确认质权人系依赖于该等陈述与保证而签署和履行本协 议:

  

(1) 出质人系依据其中国法律 ( 为本协议目的,不包括香港、澳 门特别行政区及台湾地区的法律,下同 ) 成立并有效存续之 法人,并且出质人依据中国法律具有完全的民事权利能力 并能独立对外承担民事责任。

  

II GENERAL PROVISIONS

  

1. Secured Extent. The Secured Extent of this Guarantee hereunder covers the following items resulting from Principal Contract: the Principal Amount hereof, interest, penalty interest, required cash deposit, compound interest, penalty fine, damage compensation, assessment fees, notarization fees, commission, expenses for realization of the Pledgee’s rights (including but not limited to litigation fees, property preservation fees, travel fees, auction fees, legal services fees and execution fees), the loss and damage resulting from the defaults of the Pledgor and any other expenses payable by the Debtor under Principal Contract.

 

2. Choice of Security Interests. When the Pledgee intends to exercise the security interests due to any default of the Debtor under Principal Contract and/or that of the Pledgor hereunder, if the Principal Amount secured hereunder is secured by both property security and non-property guarantee, the Pledgee shall, at its full discretion, choose the security interest to be first claimed; namely, it may either recover the debts with the property security thereunder (including this Agreement) first, or require the Pledgor to assume guaranteed liability thereunder first. The Pledgor agrees that in any case, the Pledgee's failure to promptly exercise or Pledgee’s delay in exercising any of its right under the other agreements to which the Debtor is a party, such rights including but not limited to right of claiming, right of security interest, right of relief under breach of contract, shall not be deemed as the Pledgee’s intention to forego such rights to exercise or as a waiver thereof, and shall not preclude the exercise of any right hereunder.

 

3. Representations and warranties. The Pledgor represents and warrants to the Pledgee as follows; the Pledgor confirms its understanding that the performance of any obligation hereunder by the Pledgee is totally based on such Representations and Warranties.

 

(1) The Pledgor guarantees it is a legal person duly incorporated and validly existing under the laws of P. R. China (for the purpose of this Agreement, not including the laws of Hong Kong SAR, Macau SAR and the area of Taiwan , sic passim ), and has full capacity for civil rights and to bear civil liabilities independently in accordance with PRC laws.

  

5

 

 

第二部分正文/Part II Content  协议编号/Agreement Ref. No.: CL201606008-AR

 

(2) 出质人根据中国法律有权签署本协议,以及行使其在本协 议项下的权利及履行其在本协议项下的义务,并已完成签 署本协议及履行其在本协议项下的义务所需的一切授权及 / 或批准。

 

(3) 本协议的签署和履行不违反出质人所应遵守的法律、法规、 规章、判决、裁决,也不与出质人的章程或其签署的任何 合同、协议或承担的任何其他义务相抵触。

 

(4) 本协议各条款均是出质人的真实意思表示,对出质人具有 法律约束力。

 

(5) 出质人保证其向质权人出具的所有财务报表是按照其适用 的会计准则编制的,真实、公正地表明了出质人的财务状 况,并且本协议所涉及的全部资料、文件均是真实、有效、 准确、完整而无任何隐瞒的。

 

(6) 出质人保证对本协议项下所有的质物 ( 无论是现在的或将来 的 ) 均拥有合法的所有权或处分权,不存在且不会存在任何 来自第三方的关于应收账款权利的争议或索赔等可能影响 质权人质权的情况。

 

(7) 出质人确认除因本协议设定外,本协议项下质物 ( 无论是现 在的或将来的 ) 上并未或不会被设置任何其他抵押、质押、 留置、抵销或法律上的任何权利限制措施。

 

(8) 出质人保证完成应由其作出的为本协议的有效并能合法履 行所需的备案、记录或登记,并支付所有税项。

  

(2) The Pledgor, according to PRC laws, has full power to enter into this Agreement and exercise/perform rights and obligations hereunder, and has all necessary authorization and ratification in respect of the execution of this Agreement and the performance of the obligations hereunder.

 

(3) The execution of this Agreement will neither constitute any breach of the laws, regulations, rules, judicial decisions, and awards that the Pledgor shall abide by, nor conflict with its articles of association, any contracts/agreements it signed and any other obligations assumed by it.

 

(4) All the provisions hereunder are the expression of true intention and interest made by the Pledgor, and shall be legally binding thereupon.

 

(5) All the financial statements provided by the Pledgor to the Pledgee are prepared in accordance with the general accounting standards , which indicate the financial status of the Pledgor truly and fairly; all the materials and documents in relation to this Agreement are truthful, effective, accurate, integral without any hidden facts purposely undisclosed to Pledgee.

 

(6) The Pledgor guarantees that it shall have full and lawful ownership and disposal right upon the Pledge (whether current or future), and there is (or will be) no dispute or claim currently or in the future from any other party concerning the rights in relation to the Accounts Receivable hereof, which might affect the exercising of the pledge right of the Pledgee.

 

(7) The Pledgor confirms that except for the right of pledge established in accordance with this Agreement, there is no other mortgage, pledge, lien or any other priority right which is (or is to be) established or maintained in any form upon the Pledge (whether current or future).

 

(8) The Pledgor guarantees it shall duly complete all the formalities of filing, recording or registration that it shall assume to ensure the validity of this Agreement and its performance; it shall also bear all the taxes thereof.

  

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(9) 出质人保证本协议履行期间不存在任何由法院或行政部门 或任何相关方提起或将提起可能会对出质人的业务或财务 状况造成重大不利影响的行动或任何法律程序的情况,包 括但不限于破产、清算等。

 

4. 进一步承诺

 

就本协议项下应收账款质押而言,出质人向质权人作出进一步 承诺和确认如下:

 

(1) 作为本协议质物的每笔应收账款均为有效并可执行,其为 正常业务过程中的实际、诚信的销售和交付的体现,并且 符合出质人关于其日常业务的描述和相关交易合同和 / 或发 票规定的支付条款。

 

(2) 本协议项下质物对应的交易合同 ( 如有 ) 在所适用法律下均 为完全有效并可执行,并且根据其条款构成对出质人的债 务人 ( “相对方” ) 的约束义务,相对方根据其条款应支付每 张商业发票上列明的金额。

 

(3) 就出质之应收账款而言,不存在与其相关的业务合同被终止的情况或潜在被终止的情况。

 

(4) 就出质之应收账款而言,出质人未且不向任何机构进行过 转让安排,也无进行过保理或其他类似的融资安排。

 

(5) 就出质之应收账款而言,就出质人所知无逾期或事实上已 超过诉讼时效等情形。

  

(9) The Pledgor guarantees no any action or legal procedure is (or is to be) brought forward by any court, administration authorities or other concerned party, which may induce material adverse effects upon its business or financial status, including but not limited to the bankruptcy and liquidation.

 

4. Further Undertakings

  

With respect to the Pledge of Accounts Receivable hereunder, the Pledgor hereby undertakes and confirms to the Pledgee further as follows:

 

(1) Each Accounts Receivable pledged hereunder shall be valid and enforceable, embodying the practical and honest nature of sales and delivery in the normal course of business, and complying with the description of the Pledgor with respect to its ordinary business and the payment clause provided in the related business contracts and/or invoices.

 

(2) Each business contract (if any) in relation to the Pledge hereunder shall be valid and enforceable under its applicable laws, and shall be binding upon the debtor of the Pledgor (the "Counterparty") in accordance with its contents. The Counterparty concerned is duty-bound to pay the face amount stipulated on each invoice.

 

(3) With respect to the pledged Accounts Receivable hereunder, no event of termination or potential event of termination occurs under the business contract in relation to the Accounts Receivable hereunder. [ Note: the revised language in Chinese version is to make it consistent with the English version. ]

 

(4) With respect to the pledged Accounts Receivable hereunder, the Pledgor has not transferred to or will not transfer to any institution, and also has not arranged or will not arrange factoring or other similar financing plan.

 

(5) With respect to the pledged Accounts Receivable hereunder, to the best knowledge of the Pledgor, no circumstance of overdue or the actual expiry of the period limitation of suit-filing exists.

 

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5. 约定事项

 

出质人向质权人承诺,并同意在本协议有效期间内,除非质权 人事先书面同意,出质人应:

  

(1) 出质人应及时协助质权人根据本协议一般条款要求办理相 应的出质登记及相关手续。质押相关登记证明文书 ( 如有 ) 均应由质权人收执保管。

 

(2) 出质人应及时将可能实质影响质物或其价值的任何事件 ( 包 括但不限于质物价值的明显大幅下降可能影响质权人质权 担保的 ) 通知质权人,并在经质权人要求后的五 (5) 营业日内 提供进一步的、质权人认可和接受的担保;质物价值未减 少的部分,仍作为本协议下的担保。

 

(3) 出质人应根据质权人的要求,将本协议项下质物已质押予 质权人的情况以书面通知的方式 ( 格式见附件二 ) 通知有关 付款义务人,并取得付款义务人盖章的确认回函。出质人 应将此等通知及确认回函正本原件交由质权人收执。

 

(4) 如有涉及出质人或质物的任何诉讼、仲裁或行政程序,出 质人应立即将详情以书面形式通知质权人。

 

(5) 质权人将其在主债权债务合同项下所享有的债权全部或部 分转让于第三人的,其在本协议项下的质权中的份额亦同 时全部或部分转让给该第三人,出质人应当为此完成相应 的法定手续,且出质人在原质押担保范围内继续承担担保 责任。

 

(6) 未经质权人同意,出质人不得转让已按本协议规定质押之 应收账款。出质人依据本协议规定转让应收账款所得的价 款,应当向质权人提前清偿债务或者提存。

  

5. Covenants.

  

The Pledgor undertakes and agrees with the Pledgee throughout the continuance of this Guarantee that the Pledgor will, unless the Pledgee otherwise agrees in writing:

 

(1) assist thePledgee in the completion of the formalities of Pledge registration required by the General Provisions hereof. The certificates or documents concerning the registration of other rights over Pledge shall be kept and retained by the Pledgee.

 

(2) inform the Pledgee promptly of any event which may substantially affect the Pledge or its value (including but not limited to the material decrease of the Pledge value that may affect the pledge right of the Pledgee). In case of the request by the Pledgee, the Pledgor shall, within the next five (5) Business Days from such request, provide additional security which shall be recognized and accepted by the Pledgee. The unaffected part of the original Pledge shall continue to be as security hereunder.

 

(3) The Pledgor shall inform the Obligor that the Accounts Receivable has been pledged to the Pledgee in writing form (refer to Schedule 2) as required by the Pledgee. The Pledgor shall submit the original copy of the Notification and the Acknowledgement Letter sealed by the Obligor to the Pledgee once received from the Obligor.

 

(4) In the event that the Pledgor or the Pledge is involved in any litigation, arbitration or administrative procedure, the Pledgor shall immediately inform the Pledgee of the details in writing.

 

(5) In the event that the Pledgee hereof transfers or assigns its creditor’s rights under the Principal Contract in whole or in part to a third-party transferee, the corresponding benefits of the Pledge hereunder shall be transferred to that transferee at the same time. The Pledgor shall assist to complete the necessary legal procedures, and shall continue to assume the security liability as provided within the original Secured Scope.

 

(6) Without prior consent of the Pledgee, the Pledgor shall not transfer or assign any Accounts Receivable that has been pledged hereunder. If some Accounts Receivable is transferred or assigned by the Pledgor in accordance with this Agreement, the proceeds from such transfer or assignment shall be used for the prepayment of secured debts hereof to the Pledgee or to be deposited with the Pledgee for the payment thereafter.

  

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(7) 出质人不得采取任何可能对质权人对质物或质权人在本协 议项下的任何权利产生重大不利影响或损害的行为。

  

(8) 应收账款质押予质权人后,出质人仍然有责任全部履行交 易合同中所应遵守的条件和义务。在任何情况下,质权人 均无须承担或履行该等交易合同项下的责任或义务,或是 履行或遵守该等交易合同中的任何陈述、保证、条件、契 约、协议或其他条款。

 

(9) 除非取得质权人的书面同意,否则出质人不得将在本协议 项下的全部或部分权利通过授权书或其它方式委托给其他 任何个人或法人。

 

(10) 出质人应在与质物有关的所有已经或即将签署的交易合同 中,明确告知交易对手质物已经设立质押的事实并将本协 议约定的收入账户 ( 或质权人指定的其他账户 ) 作为收取收 益的唯一银行账户。

 

(11) 出质人承诺将努力确保出质人的债务人适当按时地将本协 议项下的约定的应收账款存入收入账户。

 

(12) 出质人将根据有关法律法规的规定,按时缴纳与交易合同 有关的各项税收以及费用,遵守交易合同的要求,履行义 务。

 

(13) 未经质权人事先书面同意,出质人不得转让交易合同项下 的任何权利。

 

(14) 未经质权人事先书面同意,不得擅自或允许做出对交易合 同的任何重大修正、修改或变更,不得行使终止上述法律 文件的权利或权限,不得委托他人承担交易合同项下的义 务,不得放弃对交易合同的违约行为的权利主张 ( 惟在正常 经营过程中进行的不会对出质人造成重大不利影响的修 正、修改、变更、终止或权利主张的放弃的除外 )

 

(7) The Pledgor shall not take any action which may have a Material Adverse Effect on, or impair the Pledge or any rights of the Pledgees hereunder.

 

(8) After the Accounts Receivable have been pledged to the Pledgee the Pledgor shall still be obliged to fulfill and comply with all the obligations and conditions under the business contract(s) in relation to these Accounts Receivable. Under any circumstance, the Pledgee hereof shall not be obliged to bear or perform any liability or obligation of the business contract(s), or to perform or observe any representation, warranty, condition, covenant, agreement or any other term under such business contract.

 

(9) Without prior written consent from the Pledgee, the Pledgor shall not assign all or part of the rights hereunder to any other individual or legal person by the power of attorney or other means.

 

(10) The Pledgor shall inform its counter party or account debtor about the establishment of the pledge on the Accounts Receivable by stating it in all of its current or future contract in relation to the Pledge hereof, and make the Income Account stipulated herein (or such other account designated by the Pledgee) as the only bank account of the Pledgor to receive the proceeds.

 

(11) The Pledgor undertakes it would endeavour to ensure its account debtor to make timely payment and to deposit the corresponding amount into the Income Account hereof.

 

(12) In accordance with applicable laws and regulations, the Pledgor undertakes it would make timely payment of any tax or expense in relation to the transaction contract, and comply with the requirement of such contract and perform the obligations thereunder.

 

(13) Without prior written consent of the Pledgee, the Pledgor shall not transfer any right under the transaction contract.

 

(14) Without prior written consent of the Pledgee, the Pledgor shall not make or allow to make any material amendment, revision to the transaction contract, shall not exercise the right of termination on the foregoing legal documents, shall not entrust any third party to assume the liability under the transaction contract, and shall not waive the right of claiming on any default under the transaction contract (except for those made during the normal course of business operations which would not result in a Material Adverse Effect on the Pledge).

 

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(15) 出质人确认将及时签署一切必要文件,并且办理质权人可 能要求的有关维持应收账款质押在本协议期间始终有效或 实现质权的一切相关事宜。

 

6. 质押登记

 

(1) 出质人应协助质权人在本协议签署后及时办理有关质物出 质的应收账款质押初始登记手续。出质人应协助质权人及 时办理本协议项下质押登记展期手续,并签署或提供必要 的文件资料,以确保质押登记在本协议履行过程中始终有 效。

 

(2) 仅当出质人在主债权债务合同项下所有本金、利息及其他 费用等债务全部清偿完毕后,质权人应为出质人办理相应 的应收账款质押登记注销手续。

  

7. 资金监管

 

(1) 出质人同意,自本协议签署之日三个月之后起,除本协议另有约定或经质权人另行同意外, 出质人确保本协议项下所有被质押应收账款均应付至出质 人开立于质权人处的如下收入账户并继续作为主债权债务 合同项下还款担保及接受质权人监管:

  

账户名      _________________________

开户行      _________________________

账户号      _________________________

  

(15) The Pledgor confirms that it will promptly sign all necessary documents and handle all related matters that it may be required by the Pledgee for maintenance of the effectiveness of the Accounts Receivable pledge during the period of this Agreement or for the realization of the right of pledge.

 

6. Pledge Registration

  

(1) After the execution of this Agreement, the Pledgor shall promptly assist the Pledgee with the relevant registrations of Accounts Receivable in relation to the Pledge. To ensure the pledge registration remains in effect during the implementation of this Agreement, the Pledgor shall assist the Pledgee in undertaking all relevant extension procedures for the pledge hereunder, as well as signing and submitting necessary documents.

 

(2) Only in the event that all the debts under the Principal Contract concerning the principal, the interest and any related fees have been repaid fully and completely, the Pledgee shall conduct the relevant pledge deregistration formality of Accounts Receivable.

 

7. Supervision

  

(1) The Pledgor agrees that, from and after the date falling three months after the date of this Agreement, unless otherwise agreed in this Agreement or by the Pledgee, all pledged Accounts Receivable hereunder shall be paid to the following Income Account opened by the Pledgor with the Pledgee, and continue to serve as the collateral for the debt repayment under the Principal Contract, and be subject to monitoring by the Pledgee:-

 

Account Name:           _____________________

Bank of Account:       _____________________

Account No.:               _____________________

 

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(2) 出质人承诺,自本协议签署之日起,至主债权债务合同项 下全部债务被清偿完毕之日止,除下述已列明的用途外, 出质人未经质权人允许不得擅自动用收入账户内款项: (a) 支付相关税款、政府收费; (b) 支付员工工资; (c) 支付企业 日常运营费用; (e) 其他经质权人书面同意的用途。

  

(3) 出质人承诺,出质人应当在向质权人提交了真实、有效、 合理的支付凭据或用途说明后方可动用上述收入账户中资 金。

  

8. 质权的实现

 

(1) 债务人未按主债权债务合同约定清偿到期 ( 包括宣布提前到 期的情形 ) 债务,或违反主债权债务合同或本协议约定的, 质权人有权宣布主债权及 / 或债权确定期间提前到期,并要 求行使本协议项下质权,包括但不限于:

  

a) 要求被质押应收账款的付款义务人 ( 即相对方 ) 将其应 付的应收账款直接支付至质权人指定账户用于清偿被 担保债权;

 

b) 质权人有权将收入账户内已经收取的应收账款直接扣 划用于清偿被担保债权;

 

c) 以其它法律允许的方式处置应收账款,从而实现质权。

   

(2) The Pledgor undertakes that, without prior consent of the Pledgee, the Pledgor shall not use the relevant funds in the Income Account from the date of this Agreement to the date that all debts under the Principal Contract are repaid fully and completely, except for the usages listed below:- (a) in payment of the relevant taxes, government fees and charges; (b) in payment of the staff wages; (c) in payment of the daily operating costs of the Pledgor; (d) in payment of other purposes as provided under the Loan Agreement or agreed by the Pledgee in written form.

 

(3) The Pledgor undertakes that, only after providing to the Pledgee the real, effective and reasonable evidence of the payment or the purpose of the payment stated herein, it may then use the funds in the Income Account for any payment.

 

8. Realization of Pledge Right

  

(1) In the event that the Debtor fails to repay any debts due (including the debts being declared as early maturity) pursuant to the Principal Contract, or breaches any stipulations hereunder or under the Principal Contract, the Pledgee shall have right to declare the early prepayment of the Principal Amount under the Principal Contract and/or the Period for Claims’ Determination, and take measures to realize the right of pledge hereof, including but not limited to:

 

a) Request the associated account debtor with payment obligation (the Counterparty) of the Pledged Accounts Receivable to pay its payable amount directly to the account designated by the Pledgee for the repayment of the debts secured by the Pledge;

 

b) The Pledgee shall have the right to deduct the funds in the Income Account directly for the repayment of the debts secured by the Pledge;

 

c) Dispose the Accounts Receivable in any other way legally allowed to realize the pledge right.

 

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(2) 实现本协议设立的担保所获得的所有收益,应按照以下顺 序分配,但中国法律另有规定或主债权债务合同另有约定 的除外:

  

a) 支付应付费用、违约金、赔偿金;

 

b) 支付应付罚息;

 

c) 支付应付利息;

 

d) 支付应付的本金。

 

对于执行质物后所获款项,若其金额超过本质物所担保的 全部债务的,超过部分应属出质人所有并退回出质人。

 

9. 费用和开支

 

(1) 出质人在此承诺,一经要求,即将质权人为行使或保护质 权人在本协议项下的各项权利及权力而产生的、或因本协 议所引起的应归咎于出质人的任何争议或因出质人对本协 议的任何违反而使质权人合理地产生的所有成本、开支及 费用 ( 包括诉讼费、律师费等法律费用 ) 立即支付或偿付给质 权人。

 

(2) 出质人须支付与本协议或与本协议项下的转让有关的依法 应由出质人承担的所有印花税或类似其它税项,并在未能 支付或延误支付该等税费而导致质权人发生任何责任、费 用、索赔和开支时向质权人作出赔偿。

 

10. 授权扣款与抵消出质人不可撤销的授权质权人,在出质人 对于质权人有任何到期未清偿债务的时候,质权人均有权 在任何时间无需通知出质人,即可将出质人在质权人任何 账户中的款项(不论币种、期限如何)直接用于偿付上述债 务;为本协议目的,出质人确认质权人有权自行决定相关 货币兑换的适用汇率,因此导致的任何存款损失或汇率风 险均由出质人承担。

 

(2) Unless otherwise provided in PRC laws or in the Principal Contract, the proceeds acquired from the disposal of the security hereunder shall be distributed in the sequence set forth below:

 

a) Any fee, penalty fine and compensation payable;

 

b) Any penalty interest payable;

  

c) Any interest payable;

 

d) Any principal payable.

 

For the monies obtained after the enforcement of the Pledge hereunder, if they exceed all the amount of the indebtedness secured by the Pledge, the excess part shall belong and be returned to the Pledgor.

 

9. Expense and Fees.

  

(1) The Pledgor undertakes hereby, once requested, it shall immediately pay to the Pledgee the related costs, expenses and fees (including litigation fee, reasonable attorney’s fee and other legal service fees) resulting from the exertion or protection of the rights/powers hereunder, or from any dispute in relation to this Agreement which is ascribed to the Pledgor, or from any default by the Pledgor hereunder.

 

(2) The Pledgor shall assume all of the stamp duty or any other taxes in relation to this Agreement or the transfer hereunder; in case of any failure or delay of the said payment which leads to the occurrence of any liability, fee, claiming and expense of the Pledgee, the Pledgor shall compensate for it.

 

10. Deduction Authorization and Set-off. The Pledgor hereby irrevocably authorizes, in case of any failure by the Pledgor to pay the debts due and payable to the Pledgee, the Pledgee shall have the right to deduct corresponding amount directly (regardless of the currency and deposit term) in any account of the Pledgor opened at the Pledgee to repay the debt, without any prior notice; for the purpose of this Agreement, the Pledgor confirms the Pledgee shall, at its sole discretion, decide the applicable exchange rate of currency conversion, and any deposit loss or exchange risk resulting from such conversion shall be borne by the Pledgor.

 

12

 

  

第二部分正文/Part II Content  协议编号/Agreement Ref. No.: CL201606008-AR

 

11. 独立性 本协议的效力独立于主债权债务合同的效力,不因 主债权债务合同的无效或被撤销或未成立而无效或可被撤 销或未成立;本协议部分条款被宣告无效或被撤销,不影 响其余条款的效力。

  

12. 违约事件及违约责任 下列任一事件均构成出质人在本协议 项下的违约事件(“违约事件”):

 

(1) 债务人在主债权债务合同项下的任一违约事件;

 

(2) 出质人在本协议中所作的任何陈述、保证或承诺在任何重 要方面被证明是不正确的或是具有误导性的;

 

(3) 出质人违反本协议下的其他任何义务;

 

(4) 出质人发生严重影响其本协议项下履约能力的其他情形 的。

 

13. 通知

  

(1) 本协议一方发往另一方的任何其他通知,均应发往本协议 开头列明的地址,直到另一方书面通知更改该地址为止。 只要按上述地址发送,则视为在下列日期送达:如是信函, 则按营业地址挂号寄发后的第七个营业日;如果是专程送 达,则为收件人签收之日;如果为传真或电子邮件,则为 传真或电子邮件发送之日。但向质权人发出或交付的所有 通知、要求或其它通讯均须在质权人实际收到时被视为已 经送达。且以传真方式向质权人发出的所有通知、要求须 于事后将原件以当面送交或邮寄于质权人的方式加以确 认。

 

(2) 出质人同意,提起任何诉讼、仲裁的传票或通知可交付或 留置到本协议开头约定的地址即视为已经送达出质人。出 质人放弃一切抗辩权。

 

11. Independence. The effectiveness of this Agreement is independent from that of the Principal Contract, and it will not be invalid or revocable due to the invalidity or revocation of Principal Contract. The invalidity or revocation of any term or condition hereunder shall not affect the validity of the other terms and conditions hereunder.

 

12. Events of default. Each of the following circumstances shall constitute an event of default hereunder with respect to the Pledgor:

 

(1) Any default by the Debtor under Principal Contract;

  

(2) Any presentation and warranty made by the Pledgor is or proves to be incorrect or misleading in any material aspect, or the Pledgor fails to perform or comply with any stipulations hereunder in any material aspect;

 

(3) Any other default by the Pledgor hereunder;

  

(4) Any other circumstances occurred by the Pledgor that have material negative effect on the Pledgor’s ability to fulfill its obligation under this Agreement.

 

13. Notice.

   

(1) Any notice from one party to the other party shall be delivered to the address stated at the beginning of this Agreement, unless such address is changed with written notice by the other party. Any notice delivered to the above address shall be deemed to have been received:- for mail, on the 7 th business day following the registered delivery date to the main business address; for express, on the signing date of the receiver; for fax or E-mail, on the delivering date of the fax or E-mail. All the notices, requirements or any other communications shall be deemed to be received as they are actually received by the Pledgee. The originals of the said notices and requirements delivered via fax shall be sent to the Pledgee via express or mail after the said fax.

 

(2) The Pledgor consents and agrees, any summon or notice in relation to litigations/arbitrations shall be delivered or left to the address listed at the beginning of this Agreement. Once delivered or left to the said address, it shall be deemed as received by the Pledgor. The Pledgor undertakes to forego all claims of defense.

 

 

13

 

     

第二部分正文/Part II Content  协议编号/Agreement Ref. No.: CL201606008-AR

 

14. 其他

 

(1) 本协议自出质人和质权人双方签署之日起生效,至本协议 所担保债务被完全清偿后办理了质权登记注销手续 ( 如有 ) 时终止。

 

(2) 本协议的签订和履行均适用中国法律。

 

(3) 有关本协议的一切争议应通过友好协商解决;协商不成的, 应向质权人住所地有管辖权的人民法院提起诉讼。争议期 间,各方仍应继续履行未涉争议的条款。

 

(4) 本协议需要变更或补充的,双方另行达成书面协议,作为 本协议的附件。本协议附件是本协议不可分割的组成部分, 与本协议正文具有同等的法律效力。

 

(5) 本协议同时配有英文文本供参考。如中英文本存在差异, 应以中文本的约定为准。

 

(6) 本协议包含质权人与出质人就出质人质押其所拥有应收账款的完整协议,并取代之前双方达成的关于上述事项的任何口头或书面的类似约定,包括但不限于双方之前签订的应收账款质押协议(文件编号:CL201508001-AR)。

 

(7) 除非在本协议中另有特别说明,本协议中相关用语和表述 与主债权债务合同具有相同的含义。

  

(8) 本协议一式贰份,具有同等效力。出质人、质权人各执一 份。

 

 

- 本协议末尾 -

 

14. Miscellaneous.

 

(1) This Agreement will come into force upon the seal and signature of both parties, and will terminate when all the debts secured hereof are fully and completely repaid and the pledge registration, if any, has been cancelled.

 

(2) This Agreement shall be governed by and construed in accordance with the laws of P.R. China.

 

(3) All disputes under or relating to this Agreement shall be settled through friendly negotiations; in case of any failure of negotiation, the dispute shall be referred to the jurisdiction of competent people’s court of the place where the Pledgee is located. During the period of dispute, each party shall continue executing the clauses prescribed under the agreement which are not involved in the dispute.

 

(4) This Agreement may be amended during the duration of this Agreement by the Parties, provided that such amendment shall be in writing and be drawn up in Schedules. Any Schedule is the integral part of this Agreement, all of which are of the same effect.

 

(5) This Agreement shall be formed with both Chinese and English. In case of any discrepancy between the said versions, the Chinese version shall prevail.

 

(6) This Agreement embodies the entire agreement entered into by and between the Pledgor and the Pledgee in respect of the pledge of the Accounts Receivable owned by the Pledgor, which shall supersede any oral or written agreement or similar stipulations in this regard previously agreed by the Pledgor and the Pledgee, including without limitation the previous Pledge Agreement of Accounts Receivable between the Pledgor and the Pledge (Ref No. CL201508001-AR).

 

(7) Unless otherwise defined in this Agreement, the relevant words and phrases shall have the same meaning as in the Principal Contract.

 

(8) This Agreement is made in TWO originals with equivalent legal effect; the Pledgor and the Pledgee keeps one of them respectively.

 

- End of this Agreement -

 

14

 

 

第三部分附件/Part III Schedule  协议编号/Agreement Ref. No.: CL201606008-AR

 

附件一

Schedule 1:

   

质物详情

Details of the Pledge

 

本协议项下质物为:

The Pledge hereunder refers to:

 

在自本协议签署之日起至本协议所担保的全部债务被清偿完毕之日止的期间内,出质人将其对所有其他公司或第 三方(“应收账款债务方”)享有的所有销售收益和其他应收款项(包括但不限于逾期付款违约金、赔偿金、保险 理赔金、定金等)(统称为“应收账款”)全部质押予质权人。具体应收账款债务方包括但不限于以下清单:

During the period from the date of entering into this Agreement until all debts that secured hereunder have been paid off, the Pledgor shall pledge all sales revenue and other receivables from other companies or third party ("debtor of the Accounts Receivable") to the Pledgee, the receivables include but not limited to overdue penalty, liquidated damages, insurance proceeds earnest money etc, collectively referred to as “Accounts Receivable”. The account debtor included but not limited to below list:

 

1.    硕尼姆通信技术(深圳)有限公司

2.    苏州乐轩科技有限公司

3.    深圳市埃克斯移动科技有限公司

4.    亚忆电子(深圳)有限公司

5.    深圳市博科供应链管理有限公司

6.    北京远特科技股份有限公司

7.    深圳市蓝魔数码科技有限公司

8.    英特尔(中国)研究中心有限公司

9.    江苏晨晖信息技术有限公司

10.  广东宇天科技有限公司

11.  英特尔亚太研发有限公司

12.  昆山乙盛机械工业有限公司

13.  中国移动浙江公司

 

15

 

 

第三部分附件/Part III Schedule  协议编号/Agreement Ref. No.: CL201606008-AR

 

附件二

Schedule 2:

   

应收账款质押通知函

Notification on Account Receivable Pledge

 

致:[付款义务人]

To: [Obligor]

 

鉴于本公司(作为“出质人”)与浦发硅谷银行有限公司(作为“质权人”)于[       ]年[     ]月[       ]日签署了一份编号为 [              ]的《应收账款质押协议(最高额)》,将以贵方为付款义务人的应收账款债权全部质押予质权人。 Whereas, our Company (as “Pledgor”) and SPD SILICON VALLEY BANK CO., LTD. (as “Pledgee”) have entered into a Pledge Agreement of Accounts Receivable (Maximum Amount) dated [       ] (No.: [       ]), and agreed to set up the pledge to the Pledgee with the Accounts Receivable of which you are the Obligor.

 

现本公司与质权人在此通知贵方上述质押事宜,并请贵方在收到本通知之日起,按照本通知要求将与本公司之间 签订的编号为[       ]的[        ]合同(以下或称“基础合同”)项下应付本公司之相关款项均直接付至下述收款账户(或 由质权人指定的其他收款账户)。本公司对贵方该等支付行为之效力均予确认。

Our company and the Pledgee hereby notify you the above pledge arrangement. Please pay the payable amount under the agreement dated [        ] (No.:       ) (“business contract”) directly to the account indicated below (or designated by the Pledgee) according to this notice. We hereby confirm the effectiveness of such payment.

 

本公司与质权人共同指定的收款账户为:

The account designated by the Pledgor and Pledgee is as below:

 

账户名: _________________________________

Account Name: ___________________________

 

账户号: _________________________________

Account No.: ____________________________

 

开户行: _________________________________

Opening Account: ________________________

 

本公司在此不可撤销地确认:(a) 只要贵方将有关应收账款按时足额付至前述约定账户,即构成贵方在基础合同 项下相应付款义务的履行;(b) 本公司仅将在上述基础合同项下所享有的应收账款予以质押而不涉及任何义务和 责任的转移,基础合同项下的承诺、保证、义务和责任仍由本公司向贵方承担。

We hereby irrevocably confirm that: (a) if only such Account Receivable has been paid to the designated account in time and in full amount, it shall be deemed as the fulfillment of the payment obligation under the related business contract; (b) we pledge to the Pledgee with the Accounts Receivable under the business contract herein instead of transfer any of the obligations or liabilities. All the undertakings, warranties, obligations and liabilities under the business contract shall still be borne by our company.

 

16

 

 

第三部分附件/Part III Schedule  协议编号/Agreement Ref. No.: CL201606008-AR

 

本通知不可撤销。本公司未经质权人事先书面同意不得取消或更改上述各项指示。

This notice is irrevocable. Our company shall not withdraw or change the direction above unless the Pledgee otherwise agrees in writing.

 

本通知以中文和英文书就,若两种语言版本的内容发生任何不一致,则应以中文为准。

This notice is being expressed in both Chinese and English. However, in the event of any inconsistency between these two versions, the Chinese version shall always prevail.

  

出质人(盖章):

Pledgor (Seal):

  

 

_______________________________

法定代表人/授权代表(签字)

 

Legal representative/Authorized Signature

 

日期:

Date:

 

质权人(盖章):

Pledgee (Seal):

 

_______________________________

法定代表人/授权代表(签字)

Legal representative/Authorized Signature

 

日期:

Date:

 

17

 

 

第三部分附件/Part III Schedule  协议编号/Agreement Ref. No.: CL201606008-AR

 

确认回函

Acknowledgement Letter

 

致:[出质人]

To: [Pledgor]

 

致:[质权人]

To: [Pledgee]

 

我方已收到贵两方于[          ]年[       ]月[     ]日出具的《应收账款质押通知函》,现在此确认,《应收账款质押通知函》 项下提及应收账款真实、有效且尚未偿付;我方将严格按照所签署之相关合同通过(且仅通过)《应收账款质押 通知函》规定的收款账户,及时足额履行付款义务。

We hereby acknowledge the receipt of the Notification on Account Receivable Pledge from your side issued in [          ]. We confirm that the Account Receivables mentioned in Notification on Account Receivable Pledge are truthful, effective and payable. We will fulfill the payment obligation under the related business contract and pay such amount to the designated account (as the only account) indicated in the Notification on Account Receivable Pledge in time and in full amount.

 

本函所述及事宜适用中华人民共和国法律,并接受质权人住所地法院作为争议解决的管辖法院。

This Letter shall be governed by and construed in accordance with the laws of the P.R.C. The court where the Pledgee is located shall have the jurisdiction of any dispute.

   

确认方:[付款义务人]

Confirming Party: [Obligor]

 

_______________________________

日期:

Date:

 

 

18

 

 

Exhibit 10.62

 

 

  

变更协议

Amendment Agreement

 

 

 

 

(修订函编号/Ref. No.: CL201606008-001)

 

 

隶属于/Belonging to: 授信协议/Facility Agreement

(编号/Ref. No.: CL201606008)

   

 

第一部分 签署页/Part I Execution Page 变更协议编号/Agreement Ref. No.: CL201606008-001

 

签署页

Execution Page

 

融资行   客户
Financing Bank   Client
     
浦发硅谷银行有限公司   播思通讯技术(北京)有限公司
SPD SILICON VALLEY BANK CO., LTD.   Borqs Beijing Ltd.
     
住所地   住所地
with address at   with address at
     
上海市杨浦区大连路588号宝地广场B座21楼   北京市海淀区八里庄路62号院1号楼8层943室
200082    
     
21/F, Block B, Baoland Plaza,   Room 943, 8/F, Building No. 1, No. 62, Balizhuang Road, Haidian District, Beijing
No. 588, Dalian Road, Shanghai 200082    
     
以上当事人在本协议中简称为“融资行”   以上当事人在本协议中简称为“客户”
hereinafter referred to as “Financing Bank”   hereinafter referred to as "Client"

  

 

上述各方当事人在此同意并接受本变更协议中所述之全部条款;客户特此确认,

就本协议项下有关条件和条款,融资行已向客户作出充分的说明和解释,

客户已理解、同意、承认该等条款。

The parties above hereby agree to and accept all terms and conditions set forth in this Amendment Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Financing Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Client completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

 

  1  
第二部分  正文/Part II Context 变更协议编号/Agreement Ref. No.: CL201606008-001

 

变更协议条款

Terms and Conditions

 

鉴于:

Whereas,

 

浦发硅谷银行有限公司(作为融资行)与客户(作为借款人)于2016年07月20日签署了《授信协议》(编号:CL201606008,下称“ 《授信协议》 ”)以及其他相关文件(连同前述文件的任何变更、修订、补充,以下简称“ 融资文件 ”)。根据融资文件,银行同意向客户提供金额为人民币壹仟伍佰万元整之银行授信(下称“ 授信 ”)。现经各方协商一致,达成如下增补及变更条款(“ 本变更协议 ”),以资协议各方共同恪守:

SPD SILICON VALLEY BANK CO., LTD. (as financing bank) and the Client (as borrower) have entered into a Facility Agreement (“ Facility Agreement ”) dated Jul. 20 th , 2016 (Ref. No. CL201606008) and other related documents (together with any modification, amendment, supplement of/to the foregoing, hereinafter as the “ Finance Documents ”). Pursuant to the Finance Documents, the Financing Bank agrees to make available to the Client the facility up to RMB15,000,000.00 (hereinafter as the “Facility”). Based on the foregoing, the parties hereby further agree to reach the amendment and/or supplementary clause as below (hereinafter as the “ Amendment Agreement ”).

  

1. 各方一致不可撤销地确认本变更协议条款如下:

The parties hereby irrevocably confirm the following amendment clauses below:

 

(1) 《授信协议》第二部分“特别条款”中对于“额度期限/最终到期日”中的如下内容:

The contents of “Facility Validity Period/ Final Maturity Date” in Part II Special Provision of the Facility Agreement quoted below:

 

引用/QUOTE

 

额度期限/最终到期日

Facility Validity
Period/ Final
Maturity Date

最终到期日:

自本协议签署之日起12个月届满之日

Final Maturity Date :

12 months from the execution date of this agreement

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

额度期限/最终到期日

Facility Validity
Period/ Final
Maturity Date

最终到期日:

2017年08月31日

Final Maturity Date :

August 31 st , 2017

   

引用结束/UNQUOTE

 

  2  
第二部分  正文/Part II Context 变更协议编号/Agreement Ref. No.: CL201606008-001

   

(2) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“业务额度到期日”中的如下内容:

The contents of “Maturity Date of the Loan Limit” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

 

业务额度到期日

Maturity Date of the Loan Limit

自本协议签署之日起12个月届满之日

12 months from the execution date of this agreement

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

业务额度到期日

Maturity Date of the Loan Limit

2017年08月31日

August 31 st , 2017

 

引用结束/UNQUOTE

  

2. 客户在此确认,至本变更协议签署之日没有发生任何违约事件或潜在违约事件及所有声明保证在任何事实方面仍然保持真实、准确。客户在融资文件项下所述的每一项声明和保证,在本变更协议和担保文件(如有)签署后均将继续保持真实和准确并被全面遵守。

The Client hereby confirms that, at and until the execution date of the Amendment Agreement, no Events of Default or potential Events of Default are existing or continuing, and all representations and warranties made by any Client remain true and accurate in all material respects. Each representation and warranty made by the Client under the Finance Documents will continue to remain true, accurate and be in complete compliance after the execution of the Amendment Agreement and security documents (if any).

 

3. 本变更协议由封面、第一部分(签署页)和第二部分(正文)组成,并构成不可分割的完整整体。除非另有明确说明,本变更协议中定义和术语与授信协议中具有相同含义。

This Amendment Agreement consists of the cover page, part I (execution page) and part II (context), which shall constitute an integrity. Unless otherwise stated hereunder, terms and definitions defined herein shall bear the same meaning ascribed to it in the Finance Documents.

 

4. 本变更协议是融资文件不可分割的组成部分。本变更协议与融资文件约定不一致的,以本变更协议为准,融资文件其余条款保持不变,本变更协议未涉及事项仍应依照融资文件的约定执行。

This Amendment Agreement shall constitute an integral part of the Finance Documents. In the event of any discrepancy between this Amendment Agreement and the Finance Documents, this Amendment Agreement shall prevail without prejudice to any other provisions of the Finance Documents. Matters not covered in this Amendment Agreement shall still be dealt with by the parties in compliance with the provisions of the Finance Documents.

  

  3  
第二部分  正文/Part II Context 变更协议编号/Agreement Ref. No.: CL201606008-001

 

5. 所有与本变更协议有关的费用,无论是法律费用或其它费用,包括(但不限于)就本协议各份正本应付的中国法下的印花税以及与本变更协议的准备、谈判、签署和执行相关的律师费,均应由客户支付。

Any and all costs in relation to this Amendment Agreement including but not limited to legal fee and other cost, such as stamp duty charged under the PRC law for each original copy of this agreement and any attorney fee payable in relation to the planning, negotiation, execution and implementation of this Amendment Agreement, shall be borne by the Client.

 

6. 本协议自融资行与客户有权签字人签字并加盖公章后生效。

This Amendment Agreement shall come into force after it has been duly signed by the authorized person(s) of the Financing Bank and the Client(s) and sealed with common chops by both/all parties.

 

7. 本协议以中文和英文书就,若两种语言版本的内容发生任何不一致,则应以中文为准。

This Amendment Agreement is written in both Chinese and English. In the event of any inconsistency between these two versions, the Chinese version shall prevail.

 

8. 本变更协议一式 贰 份,所有签署方各执 壹 份,均具有同等法律效力。

This Amendment Agreement may be executed in TWO separate counterparts, each of which when so executed shall have equal legal effect. Each party may have one counterpart.

  

 

 

-以下无正文-

-END OF AMENDMENT AGREEMENT-

 

 

 

担保人(如有)确认:

Confirmed by the Security Provider(s)(if any):

 

我们已充分阅读和了解原融资文件以及本变更协议内容,且所有相关必要说明已有融资行提供;我们在此确认同意和接受上述变更,并愿就本次变更后的客户债务继续承担担保责任。

We have read and understood fully the contents of the previous Finance Documents and Amendment Agreement, and all related and necessary explanation have been given by the Financing Bank; we hereby confirm that we agree and accept the amendment stipulated above, and would continue to assume the security liabilities for the debts of the Clients after such amendments.

 

/s/ Pat Chan  
担保人 ( 保证人 ) 授权代表签字  
Security Provider(Guarantor)’s Authorized Signature  
代表  
on behalf of BORQS International Holding Corp  
公章  
Seal  
日期  2017.07.20  
Date  

 

  4  

Exhibit 10.63

 

 

 

 

变更协议

Amendment Agreement

 

 

 

(修订函编号/Ref. No.: CL201606008-002)

 

 

隶属于/Belonging to: 授信协议/Facility Agreement

(编号/Ref. No.: CL201606008)

 

 

 

 

 

 

 

 

 

第一部分 签署页/Part I Execution Page

变更协议编号/Agreement Ref. No.: CL201606008-002

 

签署页

Execution Page

 

融资行

Financing Bank

 

客户

Client

 

浦发硅谷银行有限公司

SPD SILICON VALLEY BANK CO., LTD.

 

播思通讯技术(北京)有限公司

Borqs Beijing Ltd.

     

住所地

with address at

 

住所地

with address at

 

上海市杨浦区大连路588号宝地广场B座21楼

200082

 

 

 

北京市海淀区八里庄路62号院1号楼8层943室

21/F, Block B, Baoland Plaza,

No. 588, Dalian Road, Shanghai 200082

 

   Room 943, 8/F, Building No. 1, No. 62,

   Balizhuang Road, Haidian District, Beijing

 

以上当事人在本协议中简称为“融资行”

hereinafter referred to as “Financing Bank”

 

 

 

以上当事人在本协议中简称为“客户”

hereinafter referred to as “Client”

 

上述各方当事人在此同意并接受本变更协议中所述之全部条款;客户特此确认,

就本协议项下有关条件和条款,融资行已向客户作出充分的说明和解释,

客户已理解、同意、承认该等条款。

The parties above hereby agree to and accept all terms and conditions set forth in this Amendment Agreement. The Client hereby confirms that sufficient interpretations and explanations have been made by the Financing Bank in relation to the clauses hereunder and all of them have been understood, agreed and acknowledged by the Client completely.

 

有鉴于此,上述各方当事人签章如下:

Accordingly, the above parties execute as follows:

 

 

  1  

 

 

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

变更协议条款

Terms and Conditions

 

鉴于:

Whereas,

 

浦发硅谷银行有限公司(作为融资行)与客户(作为借款人)于2016年07月20日签署了《流动资金贷款类授信协议》(协议编号:CL201606008),于2017年 月 日签署了《变更协议》(协议编号:CL201606008-001,该等《流动资金贷款类授信协议》和《变更协议》以下合称“ 《授信协议》 ”)以及其他相关文件(连同前述文件的任何变更、修订、补充,以下简称“ 融资文件 ”)。根据融资文件,银行同意向客户提供金额为人民币壹仟伍佰万元整之银行授信(下称“ 授信 ”)。现经各方协商一致,达成如下增补及变更条款(“ 本变更协议 ”),以资协议各方共同恪守:

SPD SILICON VALLEY BANK CO., LTD. (as Financing Bank) and the Client (as borrower) have entered into the Facility Agreement for Working Capital Loans dated Jul. 20 th , 2016 (Ref. No.: CL201606008), an Amendment Agreement dated     , 2017 (Ref. No.: CL201606008-001) (such Facility Agreement for Working Capital Loans and Amendment Agreements shall be hereinafter collectively referred to as the “ Facility Agreement ”) and other related documents (together with any modification, amendment, supplement of/to the foregoing, hereinafter as the “ Finance Documents ”). Pursuant to the Finance Documents, the Financing Bank agrees to make available to the Clients the facility up to RMB15,000,000.00 (hereinafter as the “ Facility ”). Based on the foregoing, the parties hereby further agree to reach the amendment and/or supplementary clause as below (hereinafter as the “ Amendment Agreement ”).

  

1. 各方一致不可撤销地确认本变更协议条款如下:

The parties hereby irrevocably confirm the following amendment clauses below:

 

(1) 《授信协议》第二部分“特别条款”中对于“额度”中的如下内容:

The contents of Facility Amount in Part II Special Provision of the Facility Agreement quoted below:

 

引用/QUOTE

 

额度

 

Facility Amount

 

授信总额度:

 

人民币 15,000,000.00元

 

大写金额: 人民币 壹仟伍佰万元整

 

Total Facility Amount :

 

RMB 15,000,000.00

 

In words: RMB FIFTEEN MILLION ONLY

 

基准币种: 人民币

 

可选币种: 不适用

 

Base Currency : RMB

 

Optional Currency : N/A

 

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

  2  

 

  

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

引用/QUOTE

 

额度

 

Facility Amount

 

授信总额度:

 

人民币 25,000,000.00元

 

大写金额: 人民币 贰仟伍佰万元整

 

Total Facility Amount :

 

RMB 25,000,000.00

 

In words: RMB TWENTY-FIVE MILLION ONLY

 

基准币种: 人民币

 

可选币种: 不适用

 

Base Currency : RMB

 

Optional Currency : N/A

 

 

引用结束/UNQUOTE

 

(2) 《授信协议》第二部分“特别条款”中对于“额度期限 / 最终到期日”中的如下内容:

The contents of Facility Validity Period/ Final Maturity Date in Part II Special Provision of the Facility Agreement quoted below:

 

引用/QUOTE

 

额度期限/最终到期日

 

Facility Validity Period/ Final Maturity Date

 

最终到期日:

 

2017年08月31日

 

Final Maturity Date :

 

August 31 st , 2017

 

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

额度期限/最终到期日

 

Facility Validity Period/ Final Maturity Date

 

最终到期日:

 

2018年08月31日

 

Final Maturity Date :

 

August 31 st , 2018

 

 

引用结束/UNQUOTE

  

  3  

 

 

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

(3) 《授信协议》第二部分“特别条款”中对于“关于所有业务品种均应遵循的财务约定”中的如下内容:

The contents of General Financial Covenants for all product-types in Part II Special Provision of the Facility Agreement quoted below:

 

引用/QUOTE

 

客户应确认在合并报表层面上需维持:

 

The Client shall confirm to maintain on a consolidated basis:

 

1) 每月最小调整后速动比率:1.25:1.00

Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00

 

调整后速动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

 

2) 每季度最低EBITDA:USD500,000.00

Minimum Quarterly EBITDA of: USD500,000.00

 

注:该财务约束指标将在收到并审核2017年董事会批准的(最新)预算后更新。

Note: This financial covenant for 2017 will be adjusted upon receipt and review of 2017 board-approved (updated) plan.

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

本协议项下客户应确认在合并报表层面上需维持:

The Client under this Agreement shall confirm to maintain on a consolidated basis:

 

1) 每月最小调整后速动比率:1.25:1.00

Minimum Monthly Adjusted Quick Ratio (AQR) of: 1.25:1.00

 

调整后速动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

 

2) 每季度最低EBITDA:USD750,000.00

Minimum Quarterly EBITDA of: USD750,000.00

 

注:该财务约束指标将在收到并审核2018年董事会批准的(最新)预算后更新。

Note: This financial covenant for 2018 will be adjusted upon receipt and review of 2018 board-approved (updated) plan.

 

客户应确认BORQS International Holding Corp(注册号:OI-192127,亦作为本协议之“保证人”)需满足:

The Client shall confirm that, BORQS International Holding Corp (Registration No. OI-192127, the Guarantor under this agreement) to achieve:

 

1) 在2017年08月31日之前与Pacific Special Acquisition Corp完成合并。

To complete the merger with Pacific Special Acquisition Corp by the end of August 31 st , 2017.

 

  4  

 

 

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

引用结束/UNQUOTE

 

(4) 《授信协议》第二部分“特别条款”中对于“其他约定”中的如下内容:

The contents of Others in Part II Special Provision of the Facility Agreement quoted below:

 

引用/QUOTE

 

关于资料提交,自本协议签署后,客户应:

Upon entering into this Agreement, the Client shall:

5) 每年对公司的应收账款进行审计,首次应收账款年审应于本协议签署之日起180天内完成;

AR Field Exam shall be conducted annually and the initial AR Field Exam should be completed within 180 days from the execution date of this agreement;

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

关于资料提交,自本协议签署后,客户应:

Upon entering into this Agreement, the Client shall:

5) 每年对公司的应收账款进行审计,下一次应收账款年审应于2017年09月30日之前完成;

AR Field Exam shall be conducted annually and the next AR Field Exam should be completed before September 30 th , 2017;

 

引用结束/UNQUOTE

 

(5) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“业务额度”中的如下内容:

The contents of “Pooled A/R Loan Limit” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

 

业务额度

Pooled A/R Loan Limit

基准币种

Base Currency

可选币种

Optional Currency

金额/Amount:

人民币/RMB 15,000,000.00

大写/in words:

人民币 壹仟伍佰万元整

RMB FIFTEEN MILLION ONLY

币种1

Currency 1

不适用

N/A

币种2

Currency 2

不适用

N/A

币种3

Currency 3

不适用

N/A

 

引用结束/UNQUOTE

 

  5  

 

  

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

业务额度

Pooled A/R Loan Limit

基准币种

Base Currency

可选币种

Optional Currency

金额/Amount:

人民币/RMB 25,000,000.00

大写/in words:

人民币 贰仟伍佰万元整

RMB TWENTY-FIVE MILLION ONLY

币种1

Currency 1

不适用

N/A

币种2

Currency 2

不适用

N/A

币种3

Currency 3

不适用

N/A

 

引用结束/UNQUOTE

 

(6) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“可动用期”中的如下内容:

The contents of “Availability Period ” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

 

可动用期

Availability Period

在本业务额度到期日前均可使用

Available before the Maturity Date of the Loan Limit of the Specification

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

可动用期

Availability Period

第1段:人民币15,000,000.00的授信可于本变更协议相关文件全部签署后即可提款;

Tranche 1: RMB15,0 00,000.00 available upon the execution of loan documents of this Amendment Agreement;

 

第2段:人民币10,000,000.00的授信可于融资行与Partners for Growth IV, L.P.签署令其满意的提高债权从属金额的从属协议后方可提款。

Tranche 2: RMB10,0 00,000.00 available upon the Financing Bank signing updated satisfactory Subordination Agreement with Partners for Growth IV, L.P. to increase the cap of senior debt.

 

引用结束/UNQUOTE

 

  6  

 

  

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

(7) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“业务额度到期日”中的如下内容:

The contents of “Maturity Date of the Loan Limit” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

 

业务额度到期日

Maturity Date of the Loan Limit

2017年08月31日

August 31 st , 2017

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

业务额度到期日

Maturity Date of the Loan Limit

2018年08月31日

August 31 st , 2018

 

引用结束/UNQUOTE

 

(8) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“贷款利率”中的如下内容:

The contents of “Interest Rate” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

 

贷款利率

Interest Rate

人民银行基准利率加2.65%(年利率)利差(但受限于法律或适用政策之允许)

the PBOC Base Interest Rate plus a Margin of 2.65% (p.a.) (however subject to the permission of laws and applicable regulatory policies)

 

(利率以融资行的提款确认或书面确认所载为准)

(The final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank)

 

引用结束/UNQUOTE

  

  7  

 

 

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

贷款利率

Interest Rate

人民银行基准利率加1.65%(年利率)利差(但受限于法律或适用政策之允许)

the PBOC Base Interest Rate plus a Margin of 1.65% (p.a.) (however subject to the permission of laws and applicable regulatory policies)

 

(利率以融资行的提款确认或书面确认所载为准)

(The final applicable interest rate for each drawdown hereof shall be that stated in the written or drawdown confirmation by the Financing Bank)

 

引用结束/UNQUOTE

 

(9) 《授信协议》第四部分“业务条款”中“业务品种:应收账池贷款”中“应收账池财务指标”中的如下内容:

The contents of “Borrowing Formula” of “Product Type: Pooled A/R Loan” in Part IV Specification of the Facility Agreement quoted below:

 

引用/QUOTE

 

应收账池财务指标

Borrowing Formula

融资率: 在任何时点,客户在本业务条款项下的未清偿贷款余额,不得超过客户应收账池中的合格应收账款余额的80%。

Advance Rate: at any time, the outstanding amount under this Specification shall not exceed 80% of total Eligible Accounts Receivable in the A/R pool of the Client.

 

合格应收账款不包括且不限于:账龄超过90天的应收账款,抵消账户及预计可抵消的递延收入账户产生的应收账款,超过90天账款50%的余额,超过90天的贷方余额;关联交易产生的应收账款,政府账户(除非根据债权转让)产生的应收账款,单一债务人集中度超过25%的应收账款(基于客户总的应收账款),海外债务人所对应产生的应收账款(即中国大陆以外的债务人所对应产生的应收账款)应逐笔评估,未开具发票的应收账款也是不合格的。

Eligible Accounts shall exclude, but are not limited to, the following: Accounts greater than 90 days from invoice date; Contra accounts and accounts with potential off-set with deferred revenue; Cross Age accounts; Credit Balances over 90 Days; Affiliate accounts; Government accounts (unless under an assignment of claims); Amounts exceeding 25% concentration limit (of the Client’s total AR base) for a single debtor; Foreign account receivables (owed by account debtors outside of Mainland China jurisdiction) considered on a case by case basis; Unbilled A/R is not eligible.

 

引用结束/UNQUOTE

 

将在本变更协议生效后调整为以下内容:

shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

  8  

 

 

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

引用/QUOTE

 

应收账池财务指标

Borrowing Formula

融资率: 在任何时点,客户在本业务条款项下的未清偿贷款余额,不得超过客户应收账池中的合格应收账款余额的80%。

Advance Rate: at any time, the outstanding amount under this Specification shall not exceed 80% of total Eligible Accounts Receivable in the A/R pool of the Client.

 

合格应收账款不包括且不限于:账龄超过90天的应收账款,抵消账户及预计可抵消的递延收入账户产生的应收账款,超过90天账款50%的余额,超过90天的贷方余额;关联交易产生的应收账款,政府账户(除非根据债权转让)产生的应收账款,单一债务人集中度超过25%的应收账款(基于客户总的应收账款),海外债务人所对应产生的应收账款(即中国大陆以外的债务人所对应产生的应收账款)应逐笔评估,未开具发票的应收账款也是不合格的。

Eligible Accounts shall exclude, but are not limited to, the following: Accounts greater than 90 days from invoice date; Contra accounts and accounts with potential off-set with deferred revenue; Cross Age accounts; Credit Balances over 90 Days; Affiliate accounts; Government accounts (unless under an assignment of claims); Amounts exceeding 25% concentration limit (of the Client’s total AR base) for a single debtor; Foreign account receivables (owed by account debtors outside of Mainland China jurisdiction) considered on a case by case basis; Unbilled A/R is not eligible.

 

引用结束/UNQUOTE

 

(10) 《授信协议》第五部分“附件”中“附件三”将在本变更协议生效后调整为以下内容:

The contents of “Schedule 3” in Part V Schedule of the Facility Agreement shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

附件三:

Schedule 3

 

合规证书

COMPLIANCE CERTIFICATE

 

The Client(s) under this Agreement confirms and undertakes to the Financing Bank that: 本协议中的客户对融资行确认和承诺:

 

a) COMPLIANCE CERTIFICATE(S) would be completed and provided in accordance with the requirements of the Financing Bank during the period of this Agreement;

在本协议期限内,合规证明将根据融资行要求完成并提供;

 

b) any COMPLIANCE CERTIFICATE submitted by the Client(s) shall comply in substance with the format required by the Financing Bank (including the format set forth below or any further version notified by the Financing Bank).

任何客户提交的合规证明将符合融资行要求的格式(包括下述格式和日后融资行修订的格式)

 

  9  

 

 

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

COMPLIANCE CERTIFICATE

 

TO: SPD SILICON VALLEY BANK CO., LTD. Date:
致: 浦发硅谷银行有限公司 日期

 

FROM: Borqs Beijing Ltd.

发件人: 播思通讯技术(北京)有限公司

 

The undersigned authorized officer of Borqs Beijing Ltd. (“Borrower”) certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”):

在下文中签字的播思通讯技术(北京)有限公司(“借款人”)的被授权人证明,根据借款人与银行之间的贷款协议(“协议”)的条款和条件:

 

(1) Borrower is in complete compliance for the period ending _________ with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously provided written notification to Bank.

(1)在截至[ ]的期限内,借款人完全遵守了所有要求的承诺(下文另行载明的除外);(2)不存在任何违约事件;(3)协议下的所有陈述和保证在本证明日期均是真实和正确的(下文另行载明的除外),但前提条件是:上述重大方面标准不适用于那些已符合要求或已被实质性修改的陈述或保证;明示提及某个具体日期的陈述和保证,在该日期做出时在所有重大方面是真实正确的;(4)借款人及其每一个子公司均及时进行了纳税申报和报告;借款人及时支付了所有海内外税款、征税、保证金和供款;(5)不存在借款人先前未书面通知银行的、就未付员工工资或福利针对借款人或其子公司设定的留置或提出的索赔。

 

Attached are the required documents supporting the certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

请查收附件中的有关上述证明的材料。下文签名者证明:该等材料系按一贯适用的GAAP从一个期限到下一期限所准备的(根据所附信函或脚注另行提供解释的除外)。下文中的签名者确认,借款人申请提款在任何时间或日期均未违反协议的任何条款,合规性确认,并非仅确认在本证明交付日期合规。本证明中未定义的术语的含义与协议中所给定义相同。

 

  10  

 

  

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

Please indicate compliance status by circling Yes/No under “Complies” column.

请在下表内的“符合”栏内圈明合规状态。

 

Reporting Covenant报告约定 Required要求

Complies

合规与否

Monthly Company prepared consolidated financial statements

公司准备的合并的月度财务报表

Monthly within 30 days of each month end

于每月结束之后30天内

Yes/No

是/否

Accounts Receivable and Payable Aging Report

应收账款账龄报告及应付账款账龄报告

Monthly within 30 days of each month end

于每月结束之后30天内

Yes/No

是/否

Compliance Certificate

合规证书

Monthly within 30 days of each month end

于每月结束之后30天内

Yes/No

是/否

Borrowing Base Certificate

借款基础证书

Monthly within 30 days of each month end

于每月结束之后30天内

Yes/No

是/否

Annual CPA-Audited financial statements

经注册会计师审计的年度财务报表

Annually within 270 days from year end

于每一年度结束之后270天内

Yes/No

是/否

Board-approved consolidated financial projections

经公司董事会通过的合并的年度财务运营计划

Within 10 days from Board approval, but no later than 60 days from year end

在每一年度董事会通过后10天内提供,但最迟不得晚于每一年度结束之后60天

Yes/No

是/否

AR Field Exam

应收账款年审

Conducted annually and the next AR Field Exam should be completed before September 30 th , 2017

每年对公司的应收账款进行审计,下一次应收账款年审应于2017年09月30日之前完成

Yes/No

是/否

 

Financial Covenant财务约定 Required要求 Actual实际

Complies

合规与否

本协议项下客户应确认在合并报表层面上需维持:

The Client under this Agreement shall confirm to maintain on a consolidated basis:

每月最小调整后速动比率:

Minimum Monthly Adjusted Quick Ratio (AQR):

1.25:1.00  

Yes/No

是/否

调整后速动比率定义为:(非绑定现金 + 应收帐款净额)除以(流动负债 - 递延收入)。

AQR is defined as (unrestricted cash + net account receivables) divided by (current liabilities - deferred revenue).

每季度最低EBITDA:

Minimum Quarterly EBITDA of:

USD750,000.00  

Yes/No

是/否

客户应确认BORQS International Holding Corp(注册号:OI-192127,亦作为本协议之“保证人”)需满足:

The Client shall confirm that, BORQS International Holding Corp (Registration No. OI-192127, the Guarantor under this agreement) to achieve:

完成合并:

Completion of merger:

在2017年08月31日之前与Pacific Special Acquisition Corp完成合并。

To complete the merger with Pacific Special Acquisition Corp by the end of August 31 st , 2017.

 

Yes/No

是/否

 

注:该财务约束指标将在收到并审核2018年董事会批准的(最新)预算后更新。

Note: This financial covenant for 2018 will be adjusted upon receipt and review of 2018 board-approved (updated) plan.

 

  11  

 

 

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

The following Intellectual Property was registered (or a registration application submitted) after the Effective Date (if no registrations, state “None”)

请列明已登记(或已提交登记申请)的知识产权信息:(若无此等事项,请注明“无”)

 

 

 

 

 

Other Matters

其他事项

 

Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? (☐ Yes ☐ No)

借款人的资本构成表(capitalization table)以及借款人或其任何子公司的运营文件是否发生了修改或变动?

(☐ 是 ☐否)

 

If yes, provide copies of any such amendments or changes with this Compliance Certificate.

若选择“是”,请随本证书一并提供此等修改文件之副本。

 

The following are the exceptions with respect to the certification above: (If no exceptions exist, state “No exceptions to note.”)

以下是关于上述证明的除外事项:(若无除外事项,请注明“无除外事项可写”)

 

 

 

 

 

 

COMPANY   BANK USE ONLY
播思通讯技术(北京)有限公司      
Borqs Beijing Ltd.   Received by:  
      authorized signer

 

By:     Date:  
         
Name:     Verified:  
        authorized signer
Title:     Date:  
         
     

Compliance Status:     Yes       No

         
签署人:     仅银行填写:
         
姓名:     接收人:  
        授权签字人
职务:        
      日期:  
         
      审核人:  
        授权签字人
         
      日期:  
         
      是否符合:是  否

 

引用结束/UNQUOTE

 

  12  

 

 

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

(11) 《授信协议》第五部分“附件”中“附件四”将在本变更协议生效后调整为以下内容:

The contents of “Schedule 4” in Part V Schedule of the Facility Agreement shall be amended by the contents quoted below after the effectiveness of this Amendment Agreement:

 

引用/QUOTE

 

附件四: 借款基础证书
Schedule 4 BORROWING BASE CERTIFICATE

 

 

借款人/Borrower: 播思通讯技术(北京)有限公司 / Borqs Beijing Ltd.
贷款人/Lender: 浦发硅谷银行有限公司 / SPD SILICON VALLEY BANK CO., LTD.
承诺金额: 人民币贰仟伍佰万元整
Commitment Amount: RMB25,000,000.00

 

  应收账款 /ACCOUNTS RECEIVABLE

币种/金额

Currency/Amount

       
  1.

应收账款(发票)账面价值(____________________)

Accounts Receivable (invoiced) Book Value (as of ____________________)

 

  2.

附加金额(请在下页中解释)

Additions (Please explain on next page)

 

  3.

减去:关联/ 员工 / 非交易性账目

Less: Intercompany / Employee / Non-Trade Accounts

 

  4.

净贸易应收账款

NET TRADE ACCOUNTS RECEIVABLE

 

       
 

应收账款抵扣(不重复计算)

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)

 

  5.

发票账期超过90 天的

90 Days Past Invoice Date

 

  6.

超过90 天的信用余额

Credit Balances over 90 Days

 

  7.

超过90 天账款 50% 的余额(跨帐龄的或影响目前的)

Balance of 50% over 90 Day Accounts (Cross-Age or Current Affected)

 

  8.

海外债务人所对应产生的应收账款

Foreign account receivables

 

  9.

未由借款人出具发票的账款

Accounts not invoiced by Borrower

 

  10.

抵消帐户/ 客户储蓄账目

Contra / Customer Deposit Accounts

 

  11.

政府/ 机关账目

Government / Authority Accounts

 

  12.

推广账目或演示账目;保证销售账目或寄售账目

Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts

 

  13.

含备忘录的或预结算的账目

Accounts with Memo or Pre-Billings

 

 

  13  

 

 

  14.

合同账目;进度/ 节点结算的账目

Contract Accounts; Accounts with Progress / Milestone Billings

 

  15.

保留款结算的账目

Accounts for Retainage Billings

 

  16.

信托/ 报税账目

Trust / Bonded Accounts

 

  17.

结算及持有账目

Bill and Hold Accounts

 

  18.

未结算账目

Unbilled Accounts

 

  19.

非交易性账目(若上述中未抵扣)

Non-Trade Accounts (If not already deducted above)

 

  20.

具有展期的发票的账目(净90+

Accounts with Extended Term Invoices (Net 90+)

 

  21.

退款账目/ 借方备忘录

Chargebacks Accounts / Debit Memos

 

  22.

产品退货/ 换货

Product Returns / Exchanges

 

  23.

具有争议的账目;破产债务人账目

Disputed Accounts; Insolvent Account Debtor Accounts

 

  24.

递延收入/ 其他(请在下一页中解释)

Deferred Revenue/ Other (Please explain on next page)

 

  25.

超过集中度限量(25%

Concentration Limits (25%)

其中债务人 Reliance Retail Limited, Vizio. Inc, E La Carte Inc., Fossil (East) Limited 以及 Sprint 的集中度为 50%

The concentration limit for Reliance Retail Limited, Vizio. Inc, E La Carte Inc., Fossil (East) Limited and Sprint is 50%

 

 

 

 

  26.

应收账款抵扣总金额

TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

 

       
  27.

合格账目(第4 项的金额将去第 26 项的金额)

Eligible Accounts (#4 minus #26)

 

  28.

合格账目的金额(第27 项的 80%

ELIGIBLE AMOUNT OF ACCOUNTS (80% of #27)

 

       
    余额 /BALANCES

 

  29.

最高贷款限额

Maximum Loan Amount

 

  30.

可放贷金额(第28 项与第 29 项中的较低者)

Total Funds Available [Lesser of #29 or #28]

 

  31.

目前在循环贷款1 下的欠款余额

Present balance owing on Revolving Line 1

 

  32.

储备头寸(第30 项减去第 31 项)

RESERVE POSITION (#30 minus #31)

 

 

  14  

 

  

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

对上页中内容的解释:

 

Explanatory comments from previous page:

 

 

 

 

 

 

签署人承认并保证上述内容是真实、完整以及准确的,并且本借款基础证书中的所有信息符合签署人与浦发硅谷银行有限公司所签订的贷款协议下的陈述与保证的规定。

 

The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in the Loan Agreement between the undersigned and SPD SILICON VALLEY BANK CO., LTD..

 

公司 /Company:

 

 

签字 /By: ___________________________

授权签字人 /Authorized Signer

 

 

 

日期 /Date: ________________________

 

仅供银行使用 /BANK USE ONLY

接收人 /Received by: _____________________

授权签字人 /authorized signer

 

日期 /Date: __________________________

 

核验 /Verified: ________________________

授权签字人 /authorized signer

 

Date: ___________________________

 

是否合规 /Compliance Status: /Yes   /No

 

 

引用结束/UNQUOTE

 

2. 客户在此确认,至本变更协议签署之日没有发生任何违约事件或潜在违约事件及所有声明保证在任何事实方面仍然保持真实、准确。客户在融资文件项下所述的每一项声明和保证,在本变更协议和担保文件(如有)签署后均将继续保持真实和准确并被全面遵守。

The Client hereby confirms that, at and until the execution date of the Amendment Agreement, no Events of Default or potential Events of Default are existing or continuing, and all representations and warranties made by any Client remain true and accurate in all material respects. Each representation and warranty made by the Client under the Finance Documents will continue to remain true, accurate and be in complete compliance after the execution of the Amendment Agreement and security documents (if any).

 

3. 本变更协议由封面、第一部分(签署页)和第二部分(正文)组成,并构成不可分割的完整整体。除非另有明确说明,本变更协议中定义和术语与授信协议中具有相同含义。

This Amendment Agreement consists of the cover page, part I (execution page) and part II (context), which shall constitute an integrity. Unless otherwise stated hereunder, terms and definitions defined herein shall bear the same meaning ascribed to it in the Finance Documents.

 

4. 本变更协议是融资文件不可分割的组成部分。本变更协议与融资文件约定不一致的,以本变更协议为准,融资文件其余条款保持不变,本变更协议未涉及事项仍应依照融资文件的约定执行。

This Amendment Agreement shall constitute an integral part of the Finance Documents. In the event of any discrepancy between this Amendment Agreement and the Finance Documents, this Amendment Agreement shall prevail without prejudice to any other provisions of the Finance Documents. Matters not covered in this Amendment Agreement shall still be dealt with by the parties in compliance with the provisions of the Finance Documents.

 

  15  

 

 

第二部分 正文/Part II Context

变更协议编号/Agreement Ref. No.: CL201606008-002

 

5. 所有与本变更协议有关的费用,无论是法律费用或其它费用,包括(但不限于)就本协议各份正本应付的中国法下的印花税以及与本变更协议的准备、谈判、签署和执行相关的律师费,均应由客户支付。

Any and all costs in relation to this Amendment Agreement including but not limited to legal fee and other cost, such as stamp duty charged under the PRC law for each original copy of this agreement and any attorney fee payable in relation to the planning, negotiation, execution and implementation of this Amendment Agreement, shall be borne by the Client.

 

6. 本协议自融资行与客户有权签字人签字并加盖公章后生效。

This Amendment Agreement shall come into force after it has been duly signed by the authorized person(s) of the Financing Bank and the Client(s) and sealed with common chops by both/all parties.

 

7. 本协议以中文和英文书就,若两种语言版本的内容发生任何不一致,则应以中文为准。

This Amendment Agreement is written in both Chinese and English. In the event of any inconsistency between these two versions, the Chinese version shall prevail.

 

8. 本变更协议一式 贰 份,所有签署方各执 壹 份,均具有同等法律效力。

This Amendment Agreement may be executed in TWO separate counterparts, each of which when so executed shall have equal legal effect. Each party may have one counterpart.

 

 

 

-以下无正文-

 

-END OF AMENDMENT AGREEMENT-

 

 

 

担保人(如有)确认:

 

Confirmed by the Security Provider(s)(if any):

  

我们已充分阅读和了解原融资文件以及本变更协议内容,且所有相关必要说明已有融资行提供;我们在此确认同意和接受上述变更,并愿就本次变更后的客户债务继续承担担保责任。

We have read and understood fully the contents of the previous Finance Documents and Amendment Agreement, and all related and necessary explanation have been given by the Financing Bank; we hereby confirm that we agree and accept the amendment stipulated above, and would continue to assume the security liabilities for the debts of the Clients after such amendments.

 

 

/s/ Pat Chan

 

担保人(保证人)授权代表签字

Security Provider(Guarantor)’s Authorized Signature

代表

on behalf of BORQS International Holding Corp

公章

Seal

日期    2017.08.31

Date

 

  16