SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16
OF THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2019
Commission File Number 001-37593
|BORQS TECHNOLOGIES, INC.|
|(Translation of registrant’s name into English)|
Universal Business Park
No. 10 Jiuxianqiao Road
Chaoyang District, Beijing, China
|(Address of principal executive offices)|
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐.
Note : Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐.
Note : Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
On April 29, 2019, Borqs Technologies, Inc., a British Virgin Islands corporation (the “ Company ”), entered into a Securities Purchase Agreement (the “ Purchase Agreement ”) with Chongqing City Youtong Equity Investment Fund, Limited Liability Partnership, a limited liability partnership formed under the laws of the People’s Republic of China (the “ Purchaser ”). Pursuant to the Purchase Agreement, the Company agreed to sell to and the Purchaser agreed to purchase from the Company, an aggregate of 3,734,283 ordinary shares (the “ Shares ”) of the Company at $3.713 per share, for total gross proceeds of approximately $13,865,393, consisting of $10,399,045 cash consideration and rights to use other assets valued at $3,466,348 to be determined within six months after closing of the cash portion. The initial closing of the transactions contemplated by the Purchase Agreement occurred on May 16, 2019, at which the Company received cash consideration in the amount of $10,399,045 in exchange for 2,800,172 newly issued Shares.
The issuance of the Shares is made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended and/or Regulation S thereunder. The Shares are subject to a one-year lock-up starting from the date of the applicable closing date.
As previously reported on its Current Report on Form 8-K filed on December 6, 2018, the Company was in arbitration pending before the International Chamber of Commerce with Samsung Electronics Co., Ltd. (“ Samsung ”) to resolve a dispute regarding royalties payable to the Company under a software license agreement the Company had with Samsung. After arbitration hearings held in May 2018, on November 27, 2018, the International Chamber of Commerce notified the Company of its decision and issuance of an arbitration award (the “ Award ”), which the Company received on November 29, 2018. Pursuant to the Award, the Company has the obligation to pay Samsung an aggregate of $2,546,401 plus an interest of 9% per annum starting May 16, 2018 until full payment is paid. Samsung was also awarded its attorney’s fees and expenses in the aggregate amount of approximately $1.73 million.
On April 26, 2019, the Company and certain subsidiaries of the Company entered into a settlement agreement (the “ Settlement Agreement ”) with Samsung, pursuant to which the Company and Samsung agreed to release and discharge the other party and affiliates thereof from all actions and claims, including, but not limited to, claims and demands that were or could have been raised in connection with the Award. In exchange for such mutual release, the Company agreed to pay Samsung $4,279,945 (the “ Settlement Amount ”) and accrued interest from March 31, 2019 on the outstanding Settlement Amount at a rate of 9% per annum (the “ Settlement Payment ”). The Settlement Payment will be made over a period of 24 months beginning on March 31, 2019 (the “ Payment Term ”) with a monthly installment of $178,331.04 plus interest. The first payment of $100,000 was due on April 30, 2019, the second payment of $309,091.51 was due on May 20, 2019 and each remaining installment will be due on the last day of each month during the Payment Term. In addition, the Company and its subsidiaries granted to Samsung a second priority security interest in their assets, accounts, inventory and other property, and a perfected security interest in an escrow account containing ordinary shares of the Company with an aggregate fair market value of at least $5 million (the “ Escrow Shares ”). The Company initially deposited 1,082,305 unregistered Escrow Shares into the designated escrow account and has agreed to file a registration statement on an appropriate form to register the Escrow Shares by June 28, 2019.
Events of default under the Settlement Agreement include the Company’s failure to perform its obligations thereunder, including, but not limited to, a failure to make the payment on a due date set forth thereunder and a failure to pledge the Escrow Shares pursuant to the terms of the Settlement Agreement. Upon the occurrence of an event of default by the Company, Samsung may pursue all its rights and remedies in law and in equity, including foreclosure on the above referenced collateral and Escrow Shares, and enforce the Award.
The summary descriptions of the Purchase Agreement and the Settlement Agreement do not purport to be complete and are qualified in their entirety by reference to the complete text of such agreements, copies of which are filed as Exhibits 10.1 and 10.2 to this report and are incorporated herein by reference.
Nasdaq Notice of Delisting
On May 17, 2019, the Company received written notice (the “ Notice ”) from the Listing Qualifications Department (the “ Staff ”) of The NASDAQ Stock Market LLC (“ Nasdaq ”) indicating that, based upon the Company’s non-compliance with Nasdaq Listing Rule 5250(c)(1) resulting from its failure to file the Annual Report on Form 20-F for fiscal year 2018 within the time period set forth under rules and regulations of the Securities and Exchange Commission, the Company would be required to submit a plan to regain compliance with Rule 5250(c)(1) for the Staff’s consideration by no later than July 16, 2019.
The Company intends to timely submit a compliance plan for the Staff’s review. If the Staff accepts the plan, the Staff may grant the Company an extension of up to 180 calendar days from the date of the Notice to evidence compliance with Rule 5250(c)(1). If the Staff does not accept the Company’s plan, the Company would be entitled to request a hearing, at which hearing it would present its plan to a Nasdaq Hearings Panel and request the continued listing of its securities on Nasdaq pursuant to and pending the completion of such plan. During the pendency of the hearing process, the Company’s securities would continue to be listed on Nasdaq.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|BORQS TECHNOLOGIES INC.|
|Dated: May 22, 2019||By:||/s/ Anthony K. Chan|
|Anthony K. Chan|
|Chief Financial Officer|
The following exhibits are filed as part of this Form 6-K:
|10.1||Securities Purchase Agreement, dated April 29, 2019, by and between the Company and Chongqing City Youtong Equity Investment Fund, Limited Liability Partnership|
|10.2||Settlement Agreement, dated April 26, 2019, by and among the Company, Borqs International Holdings Corp., Borqs Hong Kong Limited, Borqs Beijing Ltd. and Samsung Electronics Co., Ltd.|
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “ Agreement ”) is dated as of April 29, 2019, between Borqs Technologies, Inc., a British Virgin Islands corporation (the “ Company ”), and the purchaser identified on the signature page hereto (including its successors and assigns, collectively, the “ Purchaser ”).
WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “ Securities Act ”), and Rule 506 promulgated thereunder, the Company desires to issue and sell to the Purchaser, and the Purchaser desires to purchase from the Company, securities of the Company as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and the Purchaser agree as follows:
1.1 Definitions . The following terms have the meanings set forth in this Section 1.1:
“ 6-K Filing ” shall mean the current report on Form 6-K filed on EDGAR with the Commission disclosing the sale of equity securities pursuant to this Agreement and attaching as exhibits thereto all material Transaction Documents, including, without limitation, this Agreement, and other relevant documents.
“ Acquiring Person ” shall have the meaning ascribed to such term in Section 4.6.
“ Action ” shall have the meaning ascribed to such term in Section 3.1(j).
“ Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“ Board of Directors ” means the board of directors of the Company.
“ Business Day ” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
“ Bylaws ” shall have the meaning ascribed to it in Section 3.1(h).
“ Certificate of Incorporation ” shall have the meaning ascribed to it in Section 3.1(h).
“ Closing ” means the closing of the purchase and sale of the Securities pursuant to Section 2.1.
“ Closing Date ” means the Trading Day on which all of the Transaction Documents have been executed and delivered by the applicable parties thereto, and all conditions precedent to (i) the Purchaser’s obligations to pay the Subscription Amount and (ii) the Company’s obligations to deliver the Securities, in each case, have been satisfied or waived.
“ Closing Statement ” means the Closing Statement in the form on Annex A attached hereto.
“ Commission ” means the United States Securities and Exchange Commission.
“ Common Stock ” means the common stock of the Company, par value $0.01 per share, and any other class of securities into which such securities may hereafter be reclassified or changed.
“ Company Counsel ” means Ellenoff Grossman & Schole LLP, with offices located at 1345 Avenue of the Americas, Fl11, New York, New York 10105, U.S.A. or any successor counsel of the Company.
“ Contingent Obligation ” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto;
“ Disclosure Schedules ” shall have the meaning ascribed to such term in Section 3.1.
“ Effective Date ” shall have the meaning ascribed to such term in this Agreement.
“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“ GAAP ” shall have the meaning ascribed to such term in Section 3.1(i).
“ Indebtedness ” of any Person means, without duplication (A) all indebtedness for borrowed money, (B) all obligations issued, undertaken or assumed as the deferred purchase price of property or services (including, without limitation, “capital leases” in accordance with generally accepted accounting principles) (other than trade payables entered into in the ordinary course of business), (C) all reimbursement or payment obligations with respect to letters of credit, surety bonds and other similar instruments, (D) all obligations evidenced by notes, bonds, debentures or similar instruments, including obligations so evidenced incurred in connection with the acquisition of property, assets or businesses, (E) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property), (F) all monetary obligations under any leasing or similar arrangement which, in connection with generally accepted accounting principles, consistently applied for the periods covered thereby, is classified as a capital lease, (G) all indebtedness referred to in clauses (A) through (F) above secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by any Person, even though the Person which owns such assets or property has not assumed or become liable for the payment of such indebtedness, and (H) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (A) through (G) above.
“ Intellectual Property Rights ” shall have the meaning ascribed to such term in Section 3.1(w).
“ Legend Removal Date ” shall have the meaning ascribed to such term in Section 4.1(c).
“ Liens ” means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.
“ Material Adverse Effect ” shall mean (i) a material adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material adverse effect on the results of operations, assets, business, prospects or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under any Transaction Document.
“ Material Permits ” shall have the meaning ascribed to such term in Section 3.1(k).
“ Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“ Proceeding ” means an action, claim, suit, investigation or proceeding (including, without limitation, an informal investigation or partial proceeding, such as a deposition), whether commenced or threatened.
“ Public Information Failure ” shall have the meaning ascribed to it in Section 4.2(b).
“ Public Information Failure Payments ” shall have the meaning ascribed to it in Section 4.2(b).
“ Required Approvals ” shall have the meaning ascribed to such term in Section 3.1(f).
“ Required Minimum ” means, as of any date, the maximum aggregate number of Shares then issued or potentially issuable in the future pursuant to the Transaction Documents, ignoring any conversion or exercise limits set forth therein.
“ Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.
“ Rule 424 ” means Rule 424 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“ SEC Reports ” shall have the meaning ascribed to such term in Section 3.1(i).
“ Securities ” means the Shares.
“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“ Shares ” means the shares of Common Stock issued or issuable to the Purchaser pursuant to this Agreement.
“ Shareholder Approval ” means such approval as may be required by the applicable rules and regulations of the Nasdaq Capital Market (or any successor entity) from the shareholders of the Company with respect to the transactions contemplated by the Transaction Documents, including the issuance of any Shares in excess of 19.9% of the issued and outstanding Common Stock on the Closing Date.
“ Short Sales ” means all “short sales” as defined in Rule 200 of Regulation SHO under the Exchange Act (but shall not be deemed to include the location and/or reservation of borrowable shares of Common Stock).
“Stockholder Approval” shall have the meaning ascribed to it in Section 3.1(a).
“ Subscription Amount ” means, as to the Purchaser, the aggregate amount to be paid for Shares purchased hereunder as specified below the Purchaser’s name on the signature page of this Agreement and next to the heading “Subscription Amount,” in United States dollars, or the equivalent amount in other currencies, and in immediately available funds.
“ Subsidiary ” means any subsidiary of the Company as set forth on Schedule 3.1(b) and shall, where applicable, also include any direct or indirect subsidiary of the Company formed or acquired after the date hereof.
“ Trading Day ” means a day on which the principal Trading Market is open for trading.
“ Trading Market ” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE AMEX, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).
“ Transaction Documents ” means this Agreement, all exhibits and schedules thereto and hereto and any other documents or agreements executed in connection with the transactions contemplated hereunder.
“ Transfer Agent ” means Continental Stock Transfer and Trust Company, the current transfer agent of the Company, with a mailing address of One State Street, 30th Floor, New York, NY 10004-1561, U.S.A., and any successor transfer agent of the Company.
“ Trigger Date ” shall have the meaning ascribed to it in Section 4.1(b).
PURCHASE AND SALE
1.2 Closing . On the Closing Date, upon the terms and subject to the conditions set forth herein, substantially concurrent with the execution and delivery of this Agreement by the parties hereto, the Company agrees to sell, and the Purchaser agrees to purchase, up to an aggregate of 3,734,283 Shares at a per share purchase price equal to US$3.713 per share. The Purchaser shall deliver to the Company via wire transfer of funds equal to the Purchaser’s Subscription Amount as set forth on the signature page hereto executed by the Purchaser, and the Company shall deliver to the Purchaser its irrevocable instructions to the Transfer Agent for the issuance of respective Common Stock as determined pursuant to Section 2.2(a), and the Company and the Purchaser shall deliver the other items set forth in Section 2.2 deliverable at the Closing. Upon satisfaction of the covenants and conditions set forth in Sections 2.2 and 2.3, the Closing shall occur at the offices of Ellenoff Grossman & Schole LLP at 1345 Avenue of the Americas, New York, NY 10105, U.S.A., or such other location as the parties shall mutually agree.
1.3 Deliveries .
(a) On or prior to the Closing Date, the Company shall deliver or cause to be delivered to the Purchaser the following:
(i) this Agreement duly executed by the Company; and
(ii) a copy of the instructions to the Transfer Agent instructing the Transfer Agent to deliver, on an expedited basis, a certificate evidencing a number of Shares equal to the Purchaser’s Subscription Amount divided by the per share purchase price of US$3.713 per share, issued in the name of the Purchaser.
(b) On or prior to the Closing Date, the Purchaser shall deliver or cause to be delivered to the Company the following:
(i) this Agreement duly executed by the Purchaser;
(ii) the Purchaser’s Subscription Amount by wire transfer to the account as specified in writing by the Company; and
(iii) the Purchaser Questionnaire in the form on Annex B-1 or B-2 , as applicable, attached hereto.
1.4 Closing Conditions .
(a) The obligations of the Company hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects on the Closing Date of the representations and warranties of the Purchaser contained herein (unless as of a specific date therein);
(ii) all obligations, covenants and agreements of the Purchaser required to be performed at or prior to the Closing Date shall have been performed; and
(iii) the delivery by the Purchaser of the items set forth in Section 2.2(b) of this Agreement.
(b) The respective obligations of the Purchaser hereunder in connection with the Closing are subject to the following conditions being met:
(i) the accuracy in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) when made and on the Closing Date of the representations and warranties of the Company contained herein (except for those which by their terms specifically refer to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects (except that any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects) as of such earlier date);
(ii) all obligations, covenants and agreements of the Company required to be performed at or prior to the Closing Date shall have been performed;
(iii) the delivery by the Company of the items set forth in Section 2.2(a) of this Agreement;
(iv) there shall have been no Material Adverse Effect with respect to the Company since the date hereof; and
(v) from the date hereof to the Closing Date, trading in the Common Stock shall not have been suspended by the Commission or the Company’s principal Trading Market (except for any suspension of trading of limited duration agreed to by the Company, which suspension shall be terminated prior to the Closing).
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1 Representations and Warranties of the Company . Except as set forth in the Disclosure Schedules, which Disclosure Schedules shall be deemed a part hereof and shall qualify any representation or otherwise made herein to the extent of the disclosure contained in the corresponding section of the Disclosure Schedules, the Company hereby makes the following representations and warranties to the Purchaser:
(a) Subsidiaries . All of the direct and indirect subsidiaries of the Company are set forth on Schedule 3.1(b) . The Company owns, directly or indirectly, such percentage of the Subsidiary as set forth in Schedule 3.1(b) .
(b) Organization and Qualification . The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no Proceeding has been initiated in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.
(c) Authorization; Enforcement . The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board of Directors or the Company’s stockholders in connection therewith other than in connection with the Required Approvals. Each Transaction Document to which it is a party has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof and thereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(d) No Conflicts . The execution, delivery and performance by the Company of the Transaction Documents, the issuance and sale of the Securities and the consummation by it of the transactions contemplated hereby and thereby to which it is a party do not and will not: (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect.
(e) Issuance of the Securities . The Shares are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens other than restrictions on transfer provided for in the Transaction Documents.
(f) Litigation . There is no undisclosed action, suit, inquiry, notice of violation, proceeding or investigation pending or, to the knowledge of the Company, threatened against or affecting the Company before or by any court, arbitrator, governmental or administrative agency or regulatory authority (federal, state, county, local or foreign) (collectively, an “ Action ”) which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) could, if there were an unfavorable decision, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company. The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company under the Exchange Act or the Securities Act.
(g) Listing and Maintenance Requirements . The Company’s Common Stock is currently listed on the Nasdaq Capital Market (“Nasdaq”), and has not received notice from Nasdaq that the Company is not in compliance with the listing or maintenance requirements of Nasdaq. The Company is unaware of any facts or circumstances that could reasonably be expected to cause failure to maintain the continued listing of its Common Stock on Nasdaq.
(h) Disclosure . Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided any of the Purchaser or their agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Purchaser will rely on the foregoing representation in effecting transactions in securities of the Company. All of the disclosure furnished by or on behalf of the Company to the Purchaser regarding the Company, its business and the transactions contemplated hereby, including the Disclosure Schedules to this Agreement, is true and correct and does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.
(i) No Integrated Offering . Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, neither the Company, nor any of its Affiliates, nor any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause this offering of the Securities to be integrated with prior offerings by the Company for purposes of (i) the Securities Act which would require the registration of any such securities under the Securities Act, or (ii) any applicable shareholder approval provisions of any Trading Market on which any of the securities of the Company are listed or designated.
(j) No General Solicitation . Neither the Company nor any person acting on behalf of the Company has offered or sold any of the Securities by any form of general solicitation or general advertising. The Company has offered the Securities for sale only to the Purchaser and certain other “accredited investors” within the meaning of Rule 501 under the Securities Act.
(k) Acknowledgment Regarding Purchaser’s Purchase of Securities . The Company acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated thereby. The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchaser’s purchase of the Securities. The Company further represents to the Purchaser that the Company’s decision to enter into this Agreement and the other Transaction Documents has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.
(l) Title to Assets . The Company and the Subsidiaries have good and marketable title in all personal property owned by them that is material to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries and Liens for the payment of federal, state or other taxes, the payment of which is neither delinquent nor subject to penalties. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases with which the Company and the Subsidiaries are in compliance.
(m) Shell Company Status . The Company is an issuer identified in Rule 144(i)(1).
2.2 Representations and Warranties of the Purchaser . The Purchaser, for itself and for no other Purchaser, hereby represents and warrants as of the date hereof and as of the Closing Date to the Company as follows (unless as of a specific date therein):
(a) Organization; Authority . The Purchaser is either an individual or an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of the Transaction Documents and performance by the Purchaser of the transactions contemplated by the Transaction Documents have been duly authorized by all necessary corporate, partnership, limited liability company or similar action, as applicable, on the part of the Purchaser. Each Transaction Document to which it is a party has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except: (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.
(b) Own Account . The Purchaser understands that the Securities are “restricted securities” and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Securities as principal for its own account and not with a view to or for distributing or reselling such Securities or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no direct or indirect arrangement or understandings with any other persons to distribute or regarding the distribution of such Securities in violation of the Securities Act or any applicable state securities law (this representation and warranty not limiting the Purchaser’s right to sell the Securities pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws). The Purchaser is acquiring the Securities hereunder in the ordinary course of its business. The amount of shares the Purchaser is acquiring pursuant to this Agreement will result in owning less than 10% of the outstanding shares of the Company; and in the absence of other conditions that may cause an alteration of the Purchaser’s status, the Purchase may resale or dispose of the Shares as a non-affiliated stockholder under Rule 144 after a holding period of one year.
(c) Purchaser Status . At the time the Purchaser was offered the Securities, it was, and as of the date hereof, it is either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the Securities Act. The Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.
(d) Experience of the Purchaser . The Purchaser, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Purchaser is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.
(e) General Solicitation . The Purchaser is not, to its knowledge, purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or, to the Purchaser’s knowledge, any other general solicitation or general advertisement.
(f) Access to Information . The Purchaser acknowledges that it has had the opportunity to review the Transaction Documents (including all exhibits and schedules thereto) and the SEC Reports and has been afforded, (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Securities and the merits and risks of investing in the Securities; (ii) access to information about the Company and its financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment.
(g) Certain Transactions and Confidentiality . Other than consummating the transactions contemplated hereunder, the Purchaser has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with the Purchaser, executed any purchases or sales, including Short Sales, of the securities of the Company during the period commencing as of the time that the Purchaser first received a term sheet (written or oral) from the Company or any other Person representing the Company setting forth the material terms of the transactions contemplated hereunder and ending immediately prior to the execution hereof. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of the Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of the Purchaser’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement, the Purchaser has maintained the confidentiality of all disclosures made to it in connection with this transaction (including the existence and terms of this transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect Short Sales or similar transactions in the future.
(h) Investment Representations, Warranties and Covenants by Non-United States Persons
The Purchaser who is a Non-U.S. person (as that term is defined in Section 4.8(c)) hereby represents and warrants to the Company as follows:
(i) This Agreement is made by the Company with the Purchaser, who is a Non-U.S. person, in reliance upon such Non-U.S. person’s representations, warranties and covenants made in this Section 4.8.
(ii) Such Non-U.S. person has been advised and acknowledges that:
1) the Securities have not been, and when issued, will not be registered under the Securities Act, the securities laws of any state of the United States or the securities laws of any other country;
2) in issuing and selling the Securities to such Non-U.S. person pursuant hereto, the Company is relying upon the “safe harbor” provided by Regulation S and/or in Section 4(a)(2) of the Securities Act;
3) it is a condition to the availability of the Regulation S “safe harbor” that the Securities not be offered or sold in the United States or to a U.S. person until the expiration of a one-year “distribution compliance period” (or a six-month “distribution compliance period,” if the issuer is a “reporting issuer,” as defined in Regulation S) following the Closing Date; and
4) notwithstanding the foregoing, prior to the expiration of the one-year “distribution compliance period” (or six-month “distribution compliance period,” if the issuer is a “reporting issuer,” as defined in Regulation S) after the Closing (the “ Restricted Period ”), the Securities may be offered and sold by the holder thereof only if such offer and sale is made in compliance with the terms of this Agreement and either: (A) if the offer or sale is within the United States or to or for the account of a U.S. person (as such terms are defined in Regulation S), the securities are offered and sold pursuant to an effective registration statement or pursuant to Rule 144 under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act; or (B) the offer and sale is outside the United States and to other than a U.S. person.
(iii) As used herein, the term “ United States ” means the United States of America, its territories and possessions, any State of the United States, and the District of Columbia, and the term “ U.S. person ” means any “U.S. person” as defined in Rule 902(k)(2). As used herein, the term “ Non-U.S. person ” means any person who is not a U.S. person or is deemed not to be a U.S. person under Rule 902(k)(2) of the Securities Act.
(iv) Such Non-U.S. person agrees that with respect to the Securities, until the expiration of the Restricted Period:
1) such Non-U.S. person, its agents or its representatives have not and will not solicit offers to buy, offer for sale or sell any of the Securities, or any beneficial interest therein in the United States or to or for the account of a U.S. person; and
2) notwithstanding the foregoing, the Securities may be offered and sold by the holder thereof only if such offer and sale is made in compliance with the terms of this Agreement and either: (A) if the offer or sale is within the United States or to or for the account of a U.S. person, the securities are offered and sold pursuant to an effective registration statement or pursuant to Rule 144 under the Securities Act or pursuant to an exemption from the registration requirements of the Securities Act; or (B) the offer and sale is outside the United States and to other than a U.S. person; and
3) such Non-U.S. person shall not engage in hedging transactions with regard to the Securities unless in compliance with the Securities Act.
The foregoing restrictions are binding upon subsequent transferees of the Securities, except for transferees pursuant to an effective registration statement. Such Non-U.S. person agrees that after the Restricted Period, the Securities may be offered or sold within the United States or to or for the account of a U.S. person only pursuant to applicable securities laws.
(v) Such Non-U.S. person has not engaged, nor is it aware that any party has engaged, and such Non-U.S. person will not engage or cause any third party to engage, in any “directed selling efforts” (as such term is defined in Regulation S) in the United States with respect to the Securities.
(vi) Such Non-U.S. person: (i) is domiciled and has its principal place of business outside the United States; (ii) certifies it is not a U.S. person and is not acquiring the Securities for the account or benefit of any U.S. person; and (iii) at the time of the Closing Date, the Non-U.S. person or persons acting on Non-U.S. person’s behalf in connection therewith will be located outside the United States.
(vii) At the time of offering to such Non-U.S. person and communication of such Non-U.S. person’s order to purchase the Securities and at the time of such Non-U.S. Person’s execution of this Agreement, the Non-U.S. person or persons acting on Non-U.S. person’s behalf in connection therewith were located outside the United States.
(viii) Such Non-U.S. person is not a “distributor” (as defined in Regulation S) or a “dealer” (as defined in the Securities Act).
(ix) Such Non-U.S. person acknowledges that the Company shall make a notation in its stock book regarding the restrictions on transfer set forth in this Section 4.8 and shall transfer such shares on the books of the Company only to the extent consistent therewith. In particular, such Non-U.S. person acknowledges that the Company shall refuse to register any transfer of the Securities not made in accordance with the provisions of Regulation S, pursuant to registration under the Securities Act or pursuant to an available exemption from registration.
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions and Lock Up Period .
(a) The Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of Securities other than pursuant to an effective registration statement or Rule 144, the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. As a condition of transfer, any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights and obligations of a Purchaser under this Agreement. The Purchaser understands and agrees that the purchased Shares shall be locked-up from transfer or selling for a period of one year from the Closing Date (the “Lock Up Period”).
(b) The Purchaser agrees to the imprinting, so long as is required by this Section 4.1, of a legend on the purchased Shares, in substantially the following form:
“THESE SECURITIES ARE BEING OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE SECURITIES ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED UNDER THE SECURITIES ACT. TRANSFER OF THESE SECURITIES IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S PROMULGATED UNDER THE SECURITIES ACT, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO AVAILABLE EXEMPTION FROM REGISTRATION. HEDGING TRANSACTIONS MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”
3.2 Integration . The Company shall not sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market such that it would require shareholder approval prior to the closing of such other transaction unless shareholder approval is obtained before the closing of such subsequent transaction.
3.3 Securities Laws Disclosure; Publicity . The Company shall within four Business Days immediately following the date hereof, issue a Current Report on Form 6-K and press release disclosing the material terms of the transactions contemplated hereby, and including the Transaction Documents as exhibits thereto. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Purchaser, or include the name of any Purchaser in any filing with the Commission or any regulatory agency or Trading Market, without the prior written consent of the Purchaser, except: (a) as required by federal securities law in connection with the filing of final Transaction Documents (including signature pages thereto) with the Commission and (b) to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Purchaser with prior notice of such disclosure permitted under this clause (b).
3.4 Certain Transactions and Confidentiality . The Purchaser, severally and not jointly with the other Purchasers, covenants that neither it, nor any Affiliate acting on its behalf or pursuant to any understanding with it will execute any purchases or sales, including Short Sales, of any of the Company’s securities during the period commencing with the execution of this Agreement and ending at such time that the transactions contemplated by this Agreement are first publicly announced pursuant to the initial press release as described in Section 4.5. The Purchaser, severally and not jointly with the other Purchasers, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company, the Purchaser will maintain the confidentiality of the existence and terms of this transaction and the information included in the Transaction Documents and the Disclosure Schedules. Notwithstanding the foregoing, in the case of a Purchaser that is a multi-managed investment vehicle whereby separate portfolio managers manage separate portions of the Purchaser’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of the Purchaser’s assets, the covenant set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement.
4.1 Termination . This Agreement may be terminated by any Purchaser, as to the Purchaser’s obligations hereunder only and without any effect whatsoever on the obligations between the Company and the other Purchasers, by written notice to the other parties, if the Closing has not been consummated on or before April 30, 2019.
4.2 Fees and Expenses . Except as expressly set forth in the Transaction Documents to the contrary, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees, stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Purchaser.
4.3 Entire Agreement . The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.
4.4 Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via email of the signature pages attached hereto prior to 5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via email to the email address set forth on the signature pages attached hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (c) the second (2 nd ) Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto.
4.5 Amendments; Waivers . No provision of this Agreement may be waived, modified, supplemented or amended except in a written instrument signed, in the case of an amendment, by the Company and the Purchaser holding at least an majority in interest of the Securities purchased hereunder or, in the case of a waiver, by the party against whom enforcement of any such waived provision is sought. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right.
4.6 Headings . The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof.
4.7 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser (other than by merger). Any Purchaser may assign any or all of its rights under this Agreement to any Person to whom the Purchaser assigns or transfers any Securities, provided that such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions of the Transaction Documents that apply to the “Purchaser.”
4.8 No Third-Party Beneficiaries . This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.10.
4.9 Governing Law . All questions concerning the construction, validity, enforcement and interpretation of the Transaction Documents shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced exclusively via arbitration by the Hong Kong International Arbitration Centre (HKIAC) according to the laws of the State of New York. If either party shall commence an action or proceeding to enforce any provisions of the Transaction Documents, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding.
4.10 Survival . The representations and warranties contained herein shall survive the Closing and the delivery of the Securities.
4.11 Execution . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such “.pdf” signature page were an original thereof.
4.12 Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.
4.13 Replacement of Securities . If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof (in the case of mutilation), or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction. The applicant for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs (including customary indemnity) associated with the issuance of such replacement Securities.
4.14 Remedies . In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Purchaser and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations contained in the Transaction Documents and hereby agree to waive and not to assert in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.
4.15 Construction . The parties agree that each of them and/or their respective counsel has reviewed and had an opportunity to revise the Transaction Documents and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of the Transaction Documents or any amendments hereto. In addition, each and every reference to share prices and shares of Common Stock in any Transaction Document shall be subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Agreement.
(Signature Pages Follow)
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
|BORQS TECHNOLOGIES, INC.||Address for Notice:|
Borqs Technologies, Inc.
C/o Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, NY 10105
U. S. A.
|By:||/s/ Pat Sek Yuen Chan||
|Name:||Pat Sek Yuen Chan|
|Title:||Chief Executive Officer|
|With a copy to (which shall not constitute notice):|
|For Purchaser:||Chongqing City Youtong Equity Investment|
|Fund, Limited Liability Partnership|
First closing: on or before May 17, 2019
$10,399,045 in US$ or other acceptable currencies
Second closing: within 6 months after closing of cash portion
|Real property portion:||
$3,466,348 in US$ or equivalent value
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT
IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.
Name of Purchaser: Chongqing City Youtong Equity Investment Fund, Limited Liability Partnership
|Subscription Amount:||US$ 13,865,393|
|Cash portion: $10,399,045||for 2,800,712 Shares|
|Real property portion: $3,466,348||for 933,571 Shares|
Signature of Authorized Signatory of Purchaser : /s/ Xia Jiang (Purchaser Seal Placed)
Name of Authorized Signatory: Xia Jiang
Title of Authorized Signatory: General Manager Assistant
Email Address of Authorized Signatory: email@example.com
Facsimile Number of Authorized Signatory: +86-23- 44559968
Address for Notice of Purchaser:
Administration Committee, Industrial Park
No.123 Jin Tong Avenue, Tongnan District
Chongqing, P.R. China
Address for Delivery of Securities for Purchaser (if not same as address for notice):
INTERNATIONAL COURT OF ARBITRATION
INTERNATIONAL CHAMBER OF COMMERCE
Samsung Electronics Co., Ltd.,
- against -
Borqs Hong Kong Limited,
Case No. 19790/CYK
AGREEMENT OF SETTLEMENT
This settlement agreement (the “ Agreement ”) is entered into as of April 26, 2019 (the “ Effective Date ”), by and among ( i ) Claimant Samsung Electronics Co., Ltd. (“ Samsung ”), ( ii ) Respondent Borqs Hong Kong Limited, ( iii ) Borqs International Holding Corp., ( iv ) Borqs Technologies, Inc., and ( v ) Borqs Beijing Ltd. (collectively with Borqs Hong Kong Limited, Borqs International Holding Corp. and Borqs Technologies, Inc., “Borqs”). Each of Samsung, Borqs Hong Kong Limited, Borqs International Holding Corp., Borqs Technologies, Inc., and Borqs Beijing Ltd. is a “ Party ” and, collectively, they are the “ Parties .” Borqs International Holding Corp., Borqs Technologies, Inc., and Borqs Beijing Ltd., collectively, are the “ Guarantors .”
WHEREAS, on November 27, 2018, the Secretariat of the International Court of Arbitration for the International Chamber of Commerce (“ ICC ”) issued an award in the above-captioned arbitration (the “ Final Award ”) that constituted a final decision on the merits of all claims, counterclaims, demands and defenses asserted in the arbitration; and
WHEREAS, the Final Award orders Borqs Hong Kong Limited to pay Samsung the following sums: US$ 2,546,401 inclusive of interest through May 15, 2018; US$ 1,641,204.25 for its legal fees; US$ 28,840.49 for its expenses; and US$ 63,500 for the costs of the arbitration, plus simple interest on each and all of those amounts, at the New York statutory rate of 9 percent per annum, running from May 16, 2018 until full payment is made; and
WHEREAS, the Parties now desire to fully and finally resolve all of the rights and obligations provided in the Final Award without further proceedings;
NOW, THEREFORE , in consideration of the foregoing recitals and the mutual promises, agreements and releases between the Parties set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, as represented below, hereby agree as follows:
1. SETTLEMENT PAYMENT. In full satisfaction of its obligations under the Final Award, Borqs shall pay to Samsung the sum of: ( i ) US$ 4,279,945 (the “ Principal Amount ”), plus ( ii) accrued interest from March 31, 2019 on the outstanding balance of the Principal Amount at a rate equal to 9% per annum simple interest (together with the Principal Amount, the “ Settlement Payment ”), as further specified in Paragraph 2 of this Agreement.
2. PAYMENT TERM. Borqs shall pay the full and total amount of the Settlement Payment in Monthly Installments, as provided in Paragraph 2(a) below, over a period of twenty-four (24) months beginning on March 31, 2019 (the “ Payment Term ”). Notwithstanding the foregoing, the first payment of US$ 100,000 shall be due no later than 5:00 p.m. Korea Standard Time on April 30, 2019 and the second payment of US$ 309,091.51 shall be due no later than 5:00 p.m. Korea Standard Time on May 20, 2019, and each remaining Monthly Installment (starting with the Monthly Installment due on May 31, 2019) shall be due no later than 5:00 p.m. Korea Standard Time on the last day of each month during the remainder of the Payment Term (the “ Payment Date ”), in accordance with the Payment Schedule attached as Exhibit B. Failure to pay any payment by the time and date prescribed above shall be deemed an Event of Default as defined in Paragraph 7 below.
|a.||MONTHLY INSTALLMENTS. Each Monthly Installment shall consist of ( i ) US$ 178,331.04, plus ( ii ) simple interest at a rate of 9% per annum accrued as of that date on the total outstanding balance of the Principal Amount (the “ Minimum Installment Payment ”). Notwithstanding the foregoing, Borqs has the right to pay any amount of the Settlement Payment above the Minimum Installment Payment before the Payment Date without penalty or fee.|
|b.||PAYMENT METHOD. Borqs shall make each payment towards the Settlement Payment by wire transfer to the following account:|
Name of Account Holder: SAMSUNG ELECTRONICS CO., LTD.
Swift Code: KOEXKRSE
Bank Name: KEB HANA BANK
Branch Name: SAMSUNG ELECTRONICS BRANCH
Bank Address: SAMSUNG-RO 129, YEONGTONG-GU SUWON-SI, GYEONGGI-DO (443-742) KOREA
Account Number: 148-JCD-100001
|c.||ACCELERATED PAYMENTS. Upon an Event of Default, as defined in Paragraph 7 below, Samsung shall be entitled, without further notice or presentment, ( i ) to immediately accelerate the Settlement Payment and demand the prompt payment of the entire outstanding balance of the Settlement Payment, as well as any interest that Samsung had been willing to forgo under Paragraph 1 of this Agreement, including without limitation the additional interest that Borqs owes under the Final Award when interest is accrued from May 16, 2018 onwards, rather than March 31, 2019, as provided for in Paragraph 1; and ( ii ) to exercise all other rights under the escrow agreement provided for in Paragraph 3(a), including to foreclose on and take possession of the shares held in the Escrow Account to retain in its own account, to sell or for any other purpose.|
3. PLEDGE OF ASSETS AND BORQS TECHNOLOGIES, INC. SHARES. As security for its obligations under this Agreement, Borqs grants to Samsung: ( i ) a second priority behind Borqs’ current lender known as Partners For Growth V, L.P, perfected security interest in all of Borqs’ assets, accounts, inventory, equipment, collateral accounts, 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 any 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 (the “ Collateral ”); and ( ii ) a perfected security interest in an escrow account (the “ Escrow Account ”) containing registered, unrestricted and immediately marketable shares of Borqs Technologies, Inc. common stock (the “ Registered Shares ”) that, as of April 30, 2019, shall have an aggregate fair market value of not less than US$ 5,000,000 (the “ Pledge ”), subject to monthly adjustment in accordance with Paragraph 3(c). Notwithstanding the foregoing, Borqs may initially deposit into the Escrow Account unregistered, newly issued shares of Borqs Technologies, Inc. common stock (the “ Unregistered Shares ”), in lieu of some or all of the Registered Shares, by April 30, 2019.
|a.||ESCROW AGREEMENT. No later than April 30, 2019, the Pledge in the Escrow Account shall be fully funded pursuant to an escrow agreement among Samsung, Borqs Technologies, Inc., and Continental Stock Transfer & Trust Company, the escrow agent, in form, content and the specific escrow agent all subject to Samsung’s discretion. Borqs shall not unreasonably withhold from Samsung terms of the escrow agreement requested by Samsung and attached as Exhibit C.|
|b.||ESCROW COSTS AND FEES. Borqs shall bear and be solely responsible for all costs and fees of the escrow agent associated with the Escrow Account.|
|c.||MONTHLY ADJUSTMENT. At all times during the Payment Term, the aggregate fair market value of all Registered Shares and Unregistered Shares in the Escrow Account, as calculated based on the average of the daily highest and lowest prices of Borqs Technologies, Inc. shares of common stock as traded on the Nasdaq market for the twenty trading days immediately preceding the Payment Date (the “ Current Stock Value ”), shall not be less than 125% of the unpaid Final Award amount plus applicable unpaid accrued interest (the “ Then Outstanding Amount ”). On each Payment Date, to the extent that the aggregate fair market value of the shares in the Escrow Account is less than the Then Outstanding Amount, Borqs shall deposit into the Escrow Account additional Registered Shares of Borqs Technologies, Inc. as is necessary such that the Current Stock Value of the Escrow Account is equal to at least 125% of the Then Outstanding Amount but not more than US$ 5,000,000. Notwithstanding the foregoing, , and solely to the extent that Borqs’ registration of shares, as described in Paragraph 3(d) below, is not effective, Borqs may fulfill its obligations to deposit shares in the Escrow Account with Unregistered Shares.|
|d.||REGISTRATION OF SHARES. Borqs agrees ( i ) to file Borqs Technologies, Inc.’s registration statement with the U.S. Securities and Exchange Commission no later than June 28, 2019, and to use its reasonable best efforts to expedite the registration of Borqs Technologies, Inc.’s shares ; ( ii ) to include the escrowed Unregistered Shares in that registration statement; and ( iii ) within 10 days of the date that Borqs Technologies, Inc.’s registration of shares is effective, to cause removal of the restrictive legend on the escrowed shares at its own cost. Following registration of Borqs Technologies, Inc.’s shares, if required to deposit additional shares into the Escrow Account, Borqs will deposit only Registered Shares.|
|e.||PLEDGE OBLIGATIONS . All of Borqs’ obligations provided in this Paragraph 3, including its obligations to ( i ) deposit and maintain the Pledge in the Escrow Account as provided in Paragraph 3(a), ( ii ) bear all costs and fees associated with the Escrow Account as provided in Paragraph 3(b), ( iii ) make monthly adjustments as provided in Paragraph 3(c), and ( iv ) register shares as provided in Paragraph 3(d), are referred to collectively as the “ Pledge Obligations .”|
4. GUARANTIES. Each Guarantor shall execute and deliver to Samsung a guaranty consistent with the forms attached as Exhibit A contemporaneous with the signing of this Agreement.
5. REQUIRED POWER AND AUTHORITY; PRIORITY OF CLAIMS.
Borqs hereby represents and warrants that it has all necessary power and authority to enter into this Agreement and all the terms and obligations contemplated hereunder. In addition, on or before the Effective Date of this Agreement, Borqs shall provide Samsung with copies of signed consents, permissions and grants of authority from and of creditors, lenders and other third parties holding a secured interest in any Collateral, including but not limited to Partners For Growth V, L.P., to enter into this Agreement .
6. MUTUAL RELEASES.
|a.||RELEASE BY BORQS. Borqs, on behalf of itself, its affiliates, agents, predecessors, successors and assigns, in consideration of any and all other consideration set forth in this Agreement, hereby releases and discharges Samsung and all of Samsung’s past and present affiliates, agents, predecessors, successors and assigns from all actions, causes of action, counterclaims, claims, entitlements, demands, suits, debts, penalties, reimbursements, dues, sums of money, accounts, contracts, controversies, obligations, liabilities, agreements, indemnities, responsibilities, promises, damages, losses, fees, costs, expenses, judgments, claims and demands whatsoever, whether known or unknown, asserted or unasserted, vested or contingent, suspected or unsuspected, in law or in equity, including but not limited to any claims and demands that were or could have been raised or asserted in, or relate in any way, directly or indirectly to the facts, acts, events transactions, occurrences, course of conduct, representations, omissions, circumstances or other matters in any way relating to or connected with the above-captioned arbitration proceeding, including but not limited to the Final Award, and any collateral litigation or post-decision enforcement actions related thereto.|
|b.||RELEASE BY SAMSUNG. Upon Borqs’ satisfaction of all of its obligations under this Agreement, Samsung, on behalf of itself, its affiliates, agents, predecessors, successors and assigns, in consideration of the Settlement Payment and any and all other consideration set forth in this Agreement, shall release and discharge Borqs and all of Borqs’ past and present affiliates, agents, predecessors, successors and assigns from all actions, causes of action, counterclaims, claims, entitlements, demands, suits, debts, penalties, reimbursements, dues, sums of money, accounts, contracts, controversies, obligations, liabilities, agreements, indemnities, responsibilities, promises, damages, losses, fees, costs, expenses, judgments, claims and demands whatsoever, whether known or unknown, asserted or unasserted, vested or contingent, suspected or unsuspected, in law or in equity, including but not limited to any claims and demands that were or could have been raised or asserted in, or relate in any way, directly or indirectly to the facts, acts, events transactions, occurrences, course of conduct, representations, omissions, circumstances or other matters in any way relating to or connected with the above-captioned arbitration proceeding, including but not limited to the Final Award, and any collateral litigation or post-decision enforcement actions related thereto.|
7. EVENT OF DEFAULT. Borqs’ failure to make any payment due on a Payment Date as provided in Paragraphs 1 and 2, its failure to strictly comply with the Pledge Obligations, including but not limited to causing timely removal of the restrictive legend on Unregistered Shares as provided in Paragraph 3(d), or its failure to strictly comply with any other provision of this Agreement or with any deadline provided in this Agreement shall be deemed a material breach of this Agreement (an “ Event of Default ”).
8. REMEDIES UPON ANY EVENT OF DEFAULT. Upon any Event of Default by Borqs, Samsung, in its sole discretion, shall have the right: ( i ) to pursue all its rights and remedies under this Agreement in law and in equity, including to foreclose without notice on the Collateral and shares of Borqs Technologies, Inc. common stock held in the Escrow Account; and ( ii ) to obtain judicial confirmation and enforcement of the Final Award, and entry of judgment in the amount of the Final Award as specified in Paragraph 14 of this Agreement, in any court of competent jurisdiction, as further specified in Paragraph 14. In addition to all other rights and remedies under this Agreement and under the Final Award, Samsung shall be entitled to recover its attorneys’ fees and other fees and expenses associated with collecting amounts due under this Agreement and the Final Award.
9. TOLLING OF STATUTE OF LIMITATIONS FOR ENFORCING FINAL AWARD. Samsung agrees to stay the exercise of its rights to bring any action or proceeding to confirm, recognize or enforce the Final Award subject to Borqs’ satisfaction of all of its obligations under this Agreement. In consideration of Samsung’s agreement to stay its rights to bring any action or proceeding to confirm, recognize or enforce the Final Award, Borqs agrees that the statute of limitations for confirming, recognizing or enforcing the Final Award shall be tolled for twenty-four (24) months (the “ Tolling Period ”), and waives any statute of limitations defense in relation to the Tolling Period.
10. CONFIDENTIALITY. The fact of the settlement represented by this Agreement, the terms of this Agreement, and the claims, allegations, defenses, and written and oral submissions asserted or made by the Parties in the Proceedings (except as otherwise publicly available), and any other personal, proprietary or confidential documents or information obtained during the Proceedings shall be kept in strict confidence by the Parties and their employees, managers, directors, agents, parents, subsidiaries and affiliates and their legal counsel, and shall not be disclosed or made available to any other person or entity except with the express written consent of the Parties, except as required by law or regulatory process or as reasonably necessary for legal, administrative, accounting, insurance or tax purposes. If at any time a Party is served with a subpoena or similar court or governmental process that seeks to discover the substance or contents of this Agreement, the claims, allegations, or defenses asserted by the Parties during the above-captioned arbitration proceeding, or any other personal, proprietary, or confidential documents or information obtained during the above-captioned arbitration proceeding, the Party served with such process will, unless prohibited by law, within five (5) business days notify the other Party and its respective counsel, and will not oppose any legal action taken by the latter Party that attempts to prevent disclosure of the requested information.
11. REPRESENTATION BY COUNSEL. The Parties represent that they have determined that this settlement is fair and reasonable under all the circumstances and that this determination has been based upon their independent judgment after having the opportunity to consult with legal counsel of their own choosing, and that, in making this determination, they have had an adequate opportunity to discuss and assess the merits of all their claims, potential claims and defenses. The Parties further agree that no fact, event, evidence, circumstance or transaction relating directly or indirectly to the disputes, or which could have been asserted in connection with the above-captioned arbitration proceeding, or which may thereafter be discovered, shall in any manner affect the final and unconditional nature of the settlement and covenant not to sue set forth herein. The Parties represent that they have read the foregoing Agreement, know its contents and understand its terms and provisions and they have signed this Agreement of their own volition.
12. GOVERNING LAW. This Agreement, and any other documents executed by the Parties hereto in furtherance of the purposes of this Agreement, shall be governed by, interpreted and enforced in accordance with the laws of the State of New York.
13. AGREEMENT TO ARBITRATE DISPUTES HEREUNDER. All disputes arising out of or in connection with this Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by a sole arbitrator appointed in accordance with the said Rules. The arbitration shall take place in New York, New York. The language to be used in the arbitral proceedings shall be English. The award rendered by the arbitrator (“ New Award ”) shall be final and binding upon all Parties concerned. Samsung, in its sole discretion, may elect to consolidate into a single arbitration proceeding any arbitration proceedings initiated pursuant to this Agreement with any arbitration proceedings initiated pursuant to any of the Guaranties.
14. CONFIRMATION OR ENFORCEMENT OF ARBITRATION AWARDS. In any action to confirm or enforce the Final Award or any New Award, and to the extent permitted by law, Borqs hereby irrevocably ( i ) consents and agrees to submit to the jurisdiction of any court selected by Samsung, in its sole discretion, and waives trial by jury and any objection to such proceeding on the basis of venue or convenience of forum; ( ii ) waives any defenses (other than as provided hereunder), and stipulates and consents to confirmation of the Final Award and/or any New Award, entry of judgment and order of enforcement for the full amount of ( a ) the Final Award, subject only to setoff of the aggregate amount of any payments already received by Samsung pursuant to the terms of this Agreement; and/or ( b ) any New Award, including recovery of all damages, interest and attorneys’ fees awarded in the Final Award or any New Award; and ( iii ) waives any basis under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitration Awards (New York, June 10, 1958), or under any applicable national law, for opposing the confirmation, entry of judgment or enforcement of the Final Award and/or any New Award, or for seeking to vacate or annul the Final Award and/or any New Award.
15. MERGER. This Agreement contains all the terms and conditions agreed upon by the Parties hereto, and no oral agreement entered into at any time nor any written agreement entered into prior to the execution of this Agreement shall be deemed to exist, or to bind the Parties hereto, or to vary the terms and conditions contained herein.
16. AMENDMENT. This Agreement may not be modified or amended, nor may any of its provisions be waived, except by a writing signed by each of the Parties or their successors-in-interest.
17. EXECUTION IN COUNTERPARTS. This Agreement may be executed in one or more counterparts with such execution having the same force and effect as if a single original Agreement had been executed by all the Parties. All executed counterparts and each of them shall be deemed to be one and the same instrument provided that counsel for the Parties to this Agreement shall exchange among themselves electronic copies of original signed counterparts.
18. BINDING EFFECT. This Agreement is binding upon and shall inure to the benefit of the Parties and their respective agents, successors, executors, heirs and assigns.
19. ENFORCEABILITY. In the event that any provision of this Agreement should be held to be void, voidable, unlawful or for any reason unenforceable, the remaining portions of this Agreement shall remain in full force and effect and to that end provisions of this Agreement are declared to be severable.
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IT IS FURTHER STIPULATED AND AGREED that this Agreement may be signed in counterparts and a facsimile or electronic copy of this Agreement may be used in lieu of an original.
|SAMSUNG ELECTRONICS CO., LTD.||BORQS HONG KONG LIMITED|
|By:||/s/ OK SHIN WOO||By:||/s/ Pat Sek Yuen Chan|
|Name:||OK SHIN WOO||Name:||Pat Sek Yuen Chan|
|Date:||April 30, 2019||Date:||April 26, 2019|
|BORQS TECHNOLOGIES, INC.|
|By:||/s/ Pat Sek Yuen Chan|
|Name:||Pat Sek Yuen Chan|
|Date:||April 26, 2019|
|BORQS INTERNATIONAL HOLDING CORP.|
|By:||/s/ Pat Sek Yuen Chan|
|Name:||Pat Sek Yuen Chan|
|Date:||April 26, 2019|
|BORQS BEIJING LTD.|
|By:||/s/ Pat Sek Yuen Chan|
|Name:||Pat Sek Yuen Chan|
|Date:||April 26, 2019|