AMENDMENT AND EXCHANGE
AGREEMENT
AMENDMENT AND EXCHANGE
AGREEMENT (this "
Agreement "), dated as of December 8, 2008, by and among
China VoIP & Digital Telecom Inc., a Nevada corporation, with
headquarters located at No.786 Xinluo Street, High-tech Industrial
Development Zone, Jinan, China 250101 (the "
Company "), and Castlerigg Master Investments Ltd. (the "
Investor ").
WHEREAS:
A.
The Company and the Investor are parties
to that certain Securities Purchase Agreement, dated as of December
21, 2007 (the " Existing Securities Purchase Agreement "),
pursuant to which, among other things, the Investor purchased from
the Company (i) a senior secured convertible note (the "
Existing Note "), which is convertible into shares of the
Company's common stock, par value $0.001 per share (the " Common
Stock ") (the Existing Note as converted, the " Existing
Conversion Shares "), in accordance with the terms thereof,
(ii) a Series A Warrant (the " Existing Series A Warrant "),
which is exercisable into shares of Common Stock (the " Existing
Series A Warrant Shares "); (iii) a Series B Warrant (the "
Existing Series B Warrant "), which is exercisable into
shares of Common Stock (the " Existing Series B Warrant
Shares "); and (iv) a Series C Warrants (the " Existing
Series C Warrants ", and together with the Existing Series A
Warrants and Existing Series B Warrants, the " Existing
Warrants "), which are exercisable into shares of Common Stock
(the " Existing Series C Warrant Shares ", and together with
the Existing Series A Warrant Shares and the Existing Series B
Warrant Shares, the " Existing Warrant Shares ").
B.
Contemporaneously with the consummation
of the transactions contemplated by the Existing Securities
Purchase Agreement, the Existing Note was secured by a first
priority perfected security interest in all of the assets of the
Company and the stock, equity interests and assets of each of the
Company's subsidiaries, as evidenced by (i) a Pledge Agreement,
dated as of December 21, 2007 (the " Existing Pledge
Agreement "), by and between the Company and the Investor, (ii)
a Security Agreement, dated as of December 21, 2007 (the "
Existing Security Agreement "), by and among the Company,
certain Subsidiaries of the Company and the Investor (the "
Existing Security Agreement "), and (iii) the guaranties of
the subsidiaries of the Company in favor of the Investor, dated as
of December 21, 2007 (collectively, the " Existing
Guaranties ", and together with the Existing Pledge
Agreement, the Existing Security Agreement, the " Existing
Security Documents ").
C.
In connection with the execution and
delivery of the Existing Securities Purchase Agreement, the Company
entered into that certain Registration Rights Agreement, dated
December 21, 2007 (the " Existing Registration Rights
Agreement "), by and between the Company and the Investor,
pursuant to which the Company agreed to provide certain
registration rights with respect to the Registrable Securities (as
defined in the Existing Registration Rights Agreement) under the
Securities Act of 1933, as amended (the " 1933 Act "), and
the rules and regulations promulgated thereunder, and applicable
state securities laws.
D.
The Company and the Investor desire to
enter into this Agreement, pursuant to which, among other things,
the Company and the Investor shall exchange the
Existing Note and Existing Warrants of
the Investor for (i) a senior secured convertible note in the form
attached hereto as Exhibit A-1 in the principal amount of
$5,000,000 (the " Exchanged Note "), which shall be
convertible into Common Stock (the " Exchanged Conversion
Shares "), (ii) a warrant in the form attached hereto as
Exhibit B-1 (the " Exchanged Series A Warrant "),
which shall be exercisable into 23,062,731 shares of Common Stock
(the " Exchanged Series A Warrant Shares "), (iii) a warrant
in the form attached hereto as Exhibit B-2 (the "
Exchanged Series B Warrant "), which shall be exercisable
into 16,143,911 shares of Common Stock (the " Exchanged Series B
Warrant Shares "), (iv) a warrant in the form attached hereto
as Exhibit B-3 (the " Exchanged Series C Warrant "),
which shall be exercisable to 16,489,852 shares of Common Stock
(the " Exchanged Series C Warrant Shares ") and (iv) a
warrant in the form attached hereto as Exhibit B-3 (the "
Exchanged Series D Warrant ", and together with the
Exchanged Series A Warrant, the Exchanged Series B Warrant and the
Exchanged Series C Warrant, the " Exchanged Warrants "),
which shall be exercisable into 7,500,000 shares of Common Stock
(the " Exchanged Series D Warrant Shares ", and together
with the Exchanged Series A Warrant Shares, the Exchanged Series B
Warrant Shares and the Exchanged Series B Warrant Shares, the "
Exchanged Warrant Shares ").
E.
Concurrently herewith, (i) the
Subsidiaries of the Company party to that certain Guaranty dated as
of December 21, 2007, are entering into that certain Guarantor
Acknowledgement and Ratification in the form attached hereto as
Exhibit C and (ii) the shareholders of the Company are
entering into that certain Pledgor Acknowledgement and Ratification
in the form attached hereto as Exhibit D (the "
Ratification Agreements ").
F.
The exchange of the Existing Note and
Existing Warrants of the Investor for the Exchanged Note and the
Exchanged Warrants is being made in reliance upon the exemption
from registration provided by Section 3(a)(9) of the 1933
Act.
G.
Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings
ascribed to them in the Existing Securities Purchase Agreement as
amended hereby.
NOW, THEREFORE , in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the Company and the Investor
hereby agree as follows:
1.
EXCHANGE OF EXISTING NOTE AND EXISTING
WARRANTS; REGISTRATION DELAY PAYMENTS .
(a)
Exchange . Subject to satisfaction (or waiver) of the
conditions set forth in Sections 5 and 6 below, on the Closing Date
(as defined below), the Investor shall surrender to the Company the
Existing Note and the Existing Warrants and the Company shall issue
and deliver to the Investor the Exchanged Notes and the Exchanged
Warrants (the " Closing ").
(b)
Closing Date . The date and time of the Closing (the "
Closing Date ") shall be 10:00 a.m., New York City time, on
the date hereof, subject to notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 5
and 6 below (or such earlier or later date as is mutually agreed to
by the Company and the Investor). The Closing
shall occur on the Closing Date at the
offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New
York, New York 10022.
(c)
Delivery . On the Closing Date, the Company shall
deliver to the Investor (A) the Exchanged Note and (B) the
Exchanged Warrants. All of the foregoing securities shall be
delivered in each case duly executed on behalf of the Company and
registered in the name of the Investor or its designee (so long as
any such designee is an "accredited investor" as that term is
defined in Rule 501(d) of Regulation D as promulgated by the SEC
under the 1933 Act (" Regulation D ")).
(d)
Purchase Price . The Exchanged Note and the Exchanged Warrants
shall be issued to the Investor in exchange for the Existing Note
and the Existing Warrants and without the payment of any additional
consideration.
2.
AMENDMENTS TO TRANSACTION
DOCUMENTS .
(a)
Ratifications . Except as otherwise expressly provided
herein, the Existing Securities Purchase Agreement and each other
Transaction Document, including without limitation, each of the
Security Documents, is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects, except
that on and after the Closing Date (i) all references in the
Existing Securities Purchase Agreement to "this Agreement",
"hereto", "hereof", "hereunder" or words of like import referring
to the Securities Purchase Agreement shall mean the Existing
Securities Purchase Agreement as amended by this Agreement,
(ii) all references in the other Transaction Documents,
including without limitation, the Security Documents, to the
"Securities Purchase Agreement", "thereto", "thereof", "thereunder"
or words of like import referring to the Securities Purchase
Agreement shall mean the Existing Securities Purchase Agreement as
amended by this Agreement, (iii) the Company hereby confirms and
agrees that to the extent that any of the Existing Security
Documents or other Transaction Documents purports to assign or
pledge to the Investor, or to grant to the Investor a security
interest in or lien on, any collateral as security for the
obligations of the Company from time to time existing in respect of
the Existing Note and any other Transaction Document, such pledge,
assignment and/or grant of the security interest or lien is hereby
ratified and confirmed in all respects, and shall apply with
respect to the obligations under the Exchanged Note and (v) the
Company hereby ratifies and confirms its obligations under each of
the Existing Security Documents to which it is a party.
(b)
Each of the Transaction Documents are
hereby amended as follows:
(i)
The defined term "Notes" is hereby
amended to include the "Exchanged Note (as defined in that certain
Amendment and Exchange Agreement, by any between the Company and
the Buyer, dated as of December 8, 2008 (the " Amendment and
Exchange Agreement ")".
(ii)
The defined term "Conversion Shares" is
hereby amended to include the "Exchanged Conversion Shares (as
defined in the Amendment and Exchange Agreement)".
(iii)
The defined term "Warrants" is hereby
amended to include the "Exchanged Warrants (as defined in the
Amendment and Exchange Agreement) ".
(iv)
The defined term "Warrant Shares" is
hereby amended to include the "Exchanged Warrant Shares (as defined
in the Amendment and Exchange Agreement)".
(v)
The defined term "Security Documents" is
hereby amended to include the "Ratification Agreements (as defined
in the Amendment and Exchange Agreement)".
(vi)
The defined term "Transaction Documents"
is hereby amended to include the Amendment and Exchange
Agreement.
3.
REPRESENTATIONS AND
WARRANTIES .
(a)
Investor Bring Down
. The Investor hereby represents
and warrants to the Company with respect to itself only as set
forth in Section 2 of the Existing Securities Purchase Agreement as
to this Agreement as if such representations and warranties were
made as of the date hereof and set forth in their entirety in this
Agreement. Such representations and warranties to the
transactions thereunder and the securities issued thereby are
hereby deemed for purposes of this Agreement to be references to
the transactions hereunder and the issuance of the securities
hereby.
(b)
Company Bring Down
. Except as set forth on
Schedule 3(b) attached hereto, the Company represents and
warrants to the Investor as set forth in Section 3 of the
Securities Purchase Agreement as if such representations and
warranties were made as of the date hereof and set forth in their
entirety in this Agreement. Such representations and
warranties to the transactions thereunder and the securities issued
thereby are hereby deemed for purposes of this Agreement to be
references to the transactions hereunder and the issuance of the
securities hereby, references therein to "Closing Date" being
deemed references to the Closing Date as defined in Section 1(b)
above, and references to "the date hereof" being deemed references
to the date of this Agreement.
(c)
Shell Company Status
. The Company is not, and has never been,
an issuer identified in Rule 144(i)(1).
(d)
No Event of Default
. The Company represents and
warrants to the Investor that after giving effect to the terms of
this Agreement, no default or Event of Default (as defined in the
Existing Notes) shall have occurred and be continuing as of the
date hereof.
4.
CERTAIN COVENANTS AND
AGREEMENTS .
(a)
Best Efforts . Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided
in Sections 5 and 6 of this Agreement.
(b)
Form D and Blue Sky
. The Company agrees to file a Form
D with respect to the Securities (as defined in the Securities
Purchase Agreement) as required under Regulation D and to provide a
copy thereof to the Investor reasonably promptly after such filing.
The Company shall, reasonably promptly (and in no event later
than 15 days) after the Closing Date, take such action as the
Company shall reasonably determine is necessary (taking into
account The National Securities Markets Improvement Act of 1996, as
amended), in order to obtain an exemption for or to qualify the
Securities for sale to the Investor at the Closing pursuant to this
Agreement under applicable securities or "Blue Sky" laws of the
states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so
taken to the Investor reasonably promptly after such filing.
The Company shall make all filings and reports relating to
the offer and sale of the Securities required under applicable
securities or "Blue Sky" laws of the states of the United States
following the Closing Date. The Company shall have no obligations
with respect to the securities laws of any jurisdiction outside of
the United States, regardless of the foreign residence of the
Investor.
(c)
Disclosure of Transactions and Other
Material Information .
On or before 8:30 a.m., New York City time, on the first
Business Day following the date of this Agreement, the Company
shall issue a press release and file a Current Report on Form 8-K
describing the terms of the transactions contemplated by the
Transaction Documents in the form required by the 1934 Act and
attaching the material Transaction Documents (including, without
limitation, this Agreement, the form of the Exchanged Notes, the
form of Exchange Warrants and the form of the Ratification
Agreements as exhibits to such filing (including all attachments,
the " 8-K Filing "). From and after the filing of the
8-K Filing with the SEC, the Investor shall not be in possession of
any material, nonpublic information received from the Company, any
of its Subsidiaries or any of their respective officers, directors,
employees or agents, that is not disclosed in the 8-K Filing.
The Company shall not, and shall cause each of its
Subsidiaries and its and each of their respective officers,
directors, employees and agents, not to, provide the Investor with
any material, nonpublic information regarding the Company or any of
its Subsidiaries from and after the filing of the 8-K Filing with
the SEC without the express written consent of the Investor.
If the Investor has, or believes it has, received any such
material, nonpublic information regarding the Company or any of its
Subsidiaries, it shall provide the Company with written notice
thereof. The Company shall, within two (2) Trading Days (as
defined in the Exchanged Notes) of receipt of such notice, make
public disclosure of such material, nonpublic information. In
the event of a breach of the foregoing covenant by the Company, any
of its Subsidiaries, or any of its or their respective officers,
directors, employees and agents, in addition to any other remedy
provided herein or in the Transaction Documents, the Investor shall
have the right to make a public disclosure, in the form of a press
release, public advertisement or otherwise, of such material,
nonpublic information without the prior approval by the Company,
its Subsidiaries, or any of its or their respective officers,
directors, employees or agents. The Investor shall not have
any liability to the Company, its Subsidiaries, or any of its or
their respective officers, directors, employees, stockholders or
agents for any such disclosure. Subject to the foregoing,
neither the Company, its Subsidiaries nor the Investor shall issue
any press releases or any other public statements with respect to
the transactions contemplated hereby; provided, however, that the
Company shall be entitled, without the prior approval of the
Investor, to make any press release or other public
disclos
