--------------------------------------------------------------------------------

Exhibit 10.1
 
 
 
 
[logo.jpg]
 
 
SECOND AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
 
 
BETWEEN
 
 
CHINA TEL GROUP, INC.
 
 
AND
 
 
ISAAC ORGANIZATION, INC.
  
 
 

--------------------------------------------------------------------------------

 
  
SECOND AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
 
This Second Amended and Restated Stock Purchase Agreement (“Second A&R Isaac
SPA” or “Agreement”) is made as of the 10th day of May, 2011 (“Effective Date”)
by and between China Tel Group, Inc., a Nevada corporation (“Company”), and
Isaac Organization, Inc., a Canadian corporation organized under the laws of
Ontario (“Isaac”).  The Company and Isaac are each sometimes referred to
individually in this Agreement as a “Party” and together as “Parties.”
 
RECITALS
 
A.   The Parties originally entered into a stock purchase agreement on February
9, 2010.  The terms of that stock purchase agreement have been amended several
times, as more fully set forth in recitals to the most recent previous operative
version of the Parties’ agreement titled “Amended and Restated Stock Purchase
Agreement” and dated May 9, 2010 (“A&R Isaac SPA”).  The Parties now mutually
desire to renegotiate certain terms of the A&R Isaac SPA; accordingly, all terms
of the A&R Isaac SPA are superceded by the terms of this Second A&R Isaac SPA.
  
B.   The material changes between the A&R Isaac SPA and this Second A&R Isaac
SPA are summarized in paragraphs B.1 through B.9 below.  The consideration each
Party gives and receives in amending the A&R Isaac SPA in accordance with the
terms of this Second A&R Isaac SPA includes, but is not limited to, paragraphs
B.1 through B.11 below:
 
1.   Isaac’s price per Share is reduced both prospectively and retroactively.
 
2.   The number of Warrants Isaac is entitled to receive is increased, and the
Warrant exercise price is reduced, both prospectively and retroactively.
 
3.   The time period during which Isaac has the right to exercise a Warrant is
reduced prospectively and in part retroactively.
 
4.   The Company’s obligations to periodically issue Isaac additional Shares
pursuant to a fully diluted calculation whenever the Company issues shares,
options or warrants to others is eliminated.
 
5.   Isaac’s right to purchase a minimum of $205,000,000 worth of Shares, which
would constitute 27.9% of the total equity of the Company, is eliminated.
 
6.   Isaac’s maximum investment is reduced from $360,000,000 to $75,109,659
(each amount is exclusive of Isaac’s exercise of Warrants).
 
7.   The time period during which the Company is entitled to make Funding
Requests to receive Installments is extended from December 31, 2011 to June 30,
2012.
 
8.   The Company’s obligation to use the proceeds of the Purchase Price solely
towards deployment of broadband telecommunications networks or sales, general
and administrative expense is eliminated.
 
9.   The foregoing amendments may enhance the Company’s ability to obtain
financing from other equity and debt sources upon terms more advantageous to the
Company than the terms of either the A&R Isaac SPA or this Second A&R Isaac SPA.
 
10.   Adjusting the Share and Warrant price to more closely reflect market
conditions may enhance Isaac’s incentive to continue funding the Company’s
equity financing requirements.
  
 
2

--------------------------------------------------------------------------------

 
  
C.   Prior to the Effective Date and pursuant to the terms of the A&R Isaac SPA,
Isaac has paid $25,109,659 towards the A&R Isaac SPA Purchase Price, has been
issued 29,166,110 Shares, and is entitled to issuance of 4,465,782 Shares that
have not been issued.  Also pursuant to the terms of the A&R Isaac SPA, Isaac is
entitled to issuance of 25,109,659 Warrants, none of which have been issued.
 
NOW, THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, the Parties to this Agreement agree as follows:
 
AGREEMENT

1.   Purchase of Shares and Warrants.  The securities that are the subject of
this Second A&R Isaac SPA are shares of the Company’s Series A Common Stock
(“Shares”) and warrants granting the holder a right to purchase Shares, in the
general form attached hereto as Exhibit 1 (“Warrants”), as described in Sections
1.1, 1.2, 1.3 and 1.4.  Shares do not include any interest in the Company’s
Series B common stock or any preferred stock issued by the Company.
 
1.1.   Sale and Issuance of Series A Common Stock.  Subject to the terms and
conditions of this Second A&R Isaac SPA, the Company shall issue, sell and
deliver to Isaac, and Isaac shall purchase from the Company, that number of
Shares having a total aggregate price of $50,000,000 (“the Isaac Investment
Commitment”) at a price per Share set forth in Section 1.2 for all Shares
purchased by Isaac from the Effective Date through June 1, 2012 (“the New
Purchase Period”), plus that number of Additional Shares to which Isaac is
entitled pursuant to Section 1.4(a).
 
1.2.   New Purchase Price.  The purchase price for Shares Isaac purchases from
the Company during the New Purchase Period shall be calculated at a price per
Share equal to the volume-weighted average of the closing price of Shares being
purchased on the quotation system of OTC Markets Group, Inc., or other
nationally recognized public stock exchange, such as the NYSE, NASDAQ or AMEX,
upon which the Company’s Series A common stock is listed from time to time, for
the ten-day trading period immediately preceding the date the Company receives
payment pursuant to a Funding Request (each such calculation a “New Purchase
Price”).  The Company shall have the right (but not the obligation) to make
Funding Requests in such amounts and at such times as designated by the Board ,
for Isaac to purchase Shares during the New Purchase Period (each payment an
“Installment”).  Every Installment shall be payable following a Funding Request
from the Company (as defined in Section 1.8 below) and shall be subject to a
Grace Period (as also defined in Section 1.8 below).  Notwithstanding the
foregoing, the New Purchase Price for any Installment shall not be less than
$0.18 per Share.
 
1.3.   Warrants.  Upon receipt by the Company of any Installment Isaac makes
pursuant to a Funding Request during the New Purchase Period, the Company shall
issue and deliver to Isaac one Warrant for each Share purchased, at an exercise
price equal to the same New Purchase Price applicable to the Installment to
which each Warrant relates.  Each such Warrant shall have a period of exercise
for three years from the date of the Installment to which it relates, and shall
not be subject to a cashless exercise, unless both the holder of the Warrant and
the Company mutually agree in writing.  If such Warrant is not exercised during
this three-year period, the Warrant shall expire.
 
1.4.   Purchases of Shares and Issuance of Warrants Prior to the New Purchase
Period.
 
(a)   For all Shares Isaac purchased between February 8, 2010 through November
30, 2010, the price per Share shall be adjusted to $0.2637, which is equal to
the volume-weighted average of the closing price of Shares for the time period
June 1, 2010 through November 30, 2010.  For all Shares Isaac purchased between
December 1, 2010 through December 31, 2010, the price per Share shall be
$0.1707, which is equal to the volume-weighted average of the closing price of
Shares during that time period.  For all Shares Isaac purchased between January
1, 2011 through the Effective Date, the price per Share shall be adjusted and
shall be equal to the New Purchase Price in effect as of each date during that
time period the Company received each Installment.  The total aggregate number
of additional Shares to which Isaac is entitled based on these adjustments to
the Purchase Price is 71,519,975 Shares (“Additional Shares”).
  
 
3

--------------------------------------------------------------------------------

 
  
(b)   The Company shall issue and deliver to Isaac one Warrant (i) for each
Share previously issued to Isaac pursuant to the A&R Isaac SPA, and (ii) for
each Additional Share to which Isaac is entitled pursuant to this Second A&R
Isaac SPA (“Adjusted Warrants”).  The total aggregate number of Adjusted
Warrants to which Isaac is entitled is 105,151,867, inclusive of 25,109,659
Warrants earned by Isaac pursuant to the A&R Isaac SPA that have not been
issued.
 
(c)   Adjusted Warrants shall have the following adjusted exercise prices: (i)
for Installments between February 8 and November 30, 2010, the exercise price
shall be $0.211, which is equal to 80% of the volume weighted average of the
closing price of Shares for the time period June 1, 2010 through November 30,
2010; (ii) for Installments between December 1 and December 31, 2010, the
exercise price shall be $0.137, which is equal to 80% of the volume weighted
average of the closing price of Shares during that time period; and (iii) for
Installments between January 1, 2011 and the Effective Date, the exercise price
shall be equal to the New Purchase Price as of the date of each Installment.
 
(d)   Each of the Adjusted Warrants described in subparts 1.4(c)(i) and
1.4(c)(ii) shall have a period of exercise for five (5) years and shall not be
subject to a cashless exercise, unless both the holder of the Warrant and the
Company mutually agree in writing..  Each of the Adjusted Warrants described in
subpart 1.4(c)(iii) shall have a period of exercise for three (3) years, and
shall not be subject to a cashless exercise unless both the holder of the
Warrant and the Company mutually agree in writing.  Each Adjusted Warrant shall
be dated as of and/or its exercise period shall relate back to the date of the
Company’s receipt of the Installment to which the right to issuance of each
Adjusted Warrant relates.  If an Adjusted Warrant is not exercised during its
exercise period, the Adjusted Warrant shall expire.
 
1.5.   Termination of Purchase Rights.
 
(a)   Termination for Monetary Default.  Upon Isaac’s failure to pay any
Installment following receipt of a Funding Request and after expiration of the
Grace Period, the Company shall have the right, in addition to all other legal
and equitable rights, to deliver to Isaac a Notice of Monetary Default.  Upon
delivery of a Notice of Monetary Default, the Company shall cancel on its books
and records, and Isaac shall surrender for cancellation, certificates in the
name of the Isaac representing ten percent of: (i) the aggregate number of all
Shares previously issued  to Isaac or for which Isaac is entitled to issuance
based on a prior Installment; (ii) the aggregate number of all Warrant Shares
previously issued to Isaac; and (iii) the aggregate number of all Warrants
issued to Isaac that have not been exercised, or for which Isaac is entitled to
issuance based on a prior Installment.  Isaac shall deliver the certificates
representing said Shares, Warrant Shares and Warrants within five days of the
delivery of a Notice of Monetary Default.  The books and records of the Company
and its transfer agent shall be modified to reflect the foregoing cancellations,
whether or not Isaac duly surrenders such certificates for cancellation in
accordance with this Section 1.5(a).  Any certificates held by Isaac that should
have been surrendered for cancellation, but were not, shall be null and void
effective upon delivery of the Notice of Monetary Default.
 
(b)   Restrictions on Transfer.  In addition to any restrictions that may apply
generally to the Shares as described in Section 3.3, in order to protect the
Company’s right to cancel certificates previously issued to Isaac upon the
Company’s delivery of a Notice of Monetary Default, Isaac shall not, prior to
payment in full of the Isaac Investment Commitment, sell, transfer, distribute
or otherwise convey more than ninety percent of the sum of: (x) the aggregate
number of Shares previously issued to Isaac; (y) the aggregate number of Warrant
Shares previously issued to Isaac; and (z) the aggregate number of Warrants
previously issued to Isaac that have not been exercised.  The Company shall have
the right to issue certificates for up to ten percent of the aggregate number of
Shares, Warrant Shares and Warrants delivered to Isaac which bear a special
restrictive legend alerting potential transferees of this restriction.  Isaac
shall be entitled to have the special restrictive legend removed from any
certificates by issuance of replacement certificates, provided other
certificates issued to Isaac totaling ten percent of the aggregate number of
Isaac’s Shares, Warrant Shares and Warrants issued at all times bear the special
restrictive legend.  The special restrictive legend shall be removed from all
certificates upon: (i) payment in full of the New Investment Commitment; or (ii)
a written agreement between the Parties to do so.
  
 
4

--------------------------------------------------------------------------------

 
  
1.6.   Registration Rights Agreement.  The Parties shall enter into a
registration rights agreement (“Registration Rights Agreement”) pursuant to
which the Company shall provide Isaac with piggyback registration rights if and
when it elects, at its sole discretion, to register any of its Series A common
stock to be traded publically on a nationally recognized trading exchange, such
as the NYSE, NASDAQ or AMEX.
 
1.7.   Defined Terms Used in this Agreement.  In addition to the terms defined
elsewhere in this Agreement, the following terms used in this Agreement shall be
construed to have the meanings set forth or referenced below.
 
“Affiliate” means, with respect to any specified Person, any other Person who,
directly or indirectly, controls, is controlled by, or is under common control
with such Person, including, without limitation, any general partner, managing
member, officer or director of such Person or any venture capital fund now or
hereafter existing that is controlled by one or more general partners or
managing members of, or shares the same management company with, such Person.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Company Intellectual Property” means all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
trade secrets, licenses, domain names, mask works, information and proprietary
rights and processes as are necessary to the conduct of the Company’s business
as now conducted and as presently proposed to be conducted.
 
“Dollar” or “Dollars” means the currency of the United States.
 
“Exchange Act” means the Securities Exchange of 1934, as amended, and the rules
and regulations promulgated pursuant thereto.
 
“Funding Request” means a Notice made by the Company and delivered to Isaac in
accordance with Section 6.5 requesting Isaac to pay the next Installment
described in Section 1.2.  Each Funding Request shall include: (i) the amount of
the funding request; and (ii) the account information, including wire transfer
instructions, for the particular account of the Company or any subsidiary of the
Company to which payment should be made.  Isaac’s failure to pay timely any
amount set forth in a Funding Request and before expiration of the Grace Period
shall give the Company the right to send Isaac a Notice of Monetary Default.
 
“Grace Period” means thirty calendar days after a Funding Request has been
delivered to Isaac.
 
“Key Employee” means any executive-level employee (including all vice
president-level positions) as well as any employee or consultant who either
alone or in concert with others develops, invents, programs or designs any
Company Intellectual Property.
 
“Knowledge,” including the phrase “to the Company’s knowledge,” shall mean the
actual knowledge, after reasonable investigation, of the following officers of
the Company: (i) George Alvarez; (ii) Tay Yong Lee; and (iii) Mario Alvarez.
  
 
5

--------------------------------------------------------------------------------

 
  
“Material Adverse Effect” means a material adverse effect on the business,
assets (including intangible assets), liabilities, financial condition,
property, or results of operations of the Company.
 
“Person” means any individual, corporation, partnership, trust, limited
liability company, association or other entity.
 
“Securities” mean the Shares purchased by Isaac pursuant to this Second A&R
Isaac SPA, the Warrants and the Warrant Shares.
 
“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated pursuant thereto.
 
“Share” means one share of the Series A common stock of the Company and any and
all securities of any kind whatsoever of the Company or any successor thereof
which may be issued on or after the Effective Date in respect of, in exchange
for, or upon conversion of such Series A common stock of the Company pursuant to
a merger, consolidation, stock split, reverse split, stock dividend, or
recapitalization of the Company.  Share does not include the Company’s Series B
common stock or preferred stock the Company may issue.
 
“Transaction Documents” means this Second A&R Isaac SPA, the Registration Rights
Agreement, the Warrants and any agreements or certificates entered into pursuant
to this Agreement.
 
“Warrant Share” means a Share issuable upon the exercise of a Warrant or the
exercise of an Adjusted Warrant.
 
2.   Representations and Warranties of the Company.  The Company hereby
represents and warrants to Isaac that the following representations are true and
complete as of the Effective Date.
 
2.1   Organization, Good Standing, Corporate Power and Qualification.  The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Nevada and has all requisite corporate power and
authority to carry on its business as presently conducted and as proposed to be
conducted.  The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
Material Adverse Effect.
 
2.2   Subsidiaries. Each of the Company’s subsidiaries (“Subsidiaries”) is duly
organized and existing under the laws of its jurisdiction of organization and is
in good standing under such laws.  None of the Company’s Subsidiaries owns or
leases property or engages in any activity in any United States jurisdiction
that might require its qualification to do business as a foreign corporation and
in which the failure so to qualify would have a Material Adverse Effect.
 
2.3   Authorization.  All corporate actions required to be taken by the Board
and shareholders in order to authorize the Company to enter into the Transaction
Documents and to issue the Securities have been taken.  All actions on the part
of the officers of the Company necessary for the execution and delivery of the
Transaction Documents, the performance of all obligations of the Company under
the Transaction Documents to be performed, and the issuance and delivery of the
Securities has been taken in accordance with this Agreement.  The Transaction
Documents, when executed and delivered by the Company, shall constitute valid
and legally binding obligations of the Company, enforceable against the Company
in accordance with their respective terms except: (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or
other laws of general application relating to or affecting the enforcement of
creditors’ rights generally; or (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.
  
 
6

--------------------------------------------------------------------------------

 
  
2.4   Valid Issuance of Securities.  The Securities, when issued, sold and
delivered in accordance with the terms and for the consideration set forth in
this Agreement, will be validly issued, fully paid and non assessable and free
of restrictions on transfer other than restrictions on transfer under this
Agreement and applicable state and federal securities laws.  Assuming the
accuracy of the representations of Isaac in Section 3 of this Agreement, and
subject to the restrictions described in Section 3.4 of this Agreement, the
Securities will be issued in compliance with all applicable federal and state
securities laws.
 
2.5   Litigation.  Except as set forth in the Company’s public filings with the
United States Securities and Exchange Commission (“SEC”), there is no claim,
action, lawsuit, proceeding, arbitration, complaint, or charge pending or, to
the Company’s knowledge, currently threatened in writing: (i) against the
Company or any officer, director or Key Employee of the Company arising out of
their employment or Board relationship with the Company; or (ii) to the
Company’s knowledge, that questions the validity of the Agreement or the right
of the Company to enter into or to consummate the transactions contemplated by
the Agreement.  Neither the Company nor, to the Company’s knowledge, any of its
officers, directors or Key Employees is a party or is named as subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality (in the case of officers, directors or Key
Employees, such as would affect the Company).  Except as identified in the
Company public filings with the SEC, there is no action, lawsuit, proceeding or
investigation by the Company pending or which the Company intends to
initiate.  The foregoing includes, without limitation, actions, lawsuits,
proceedings or investigations pending or threatened in writing (or any basis
therefore known to the Company) involving the prior employment of any of the
Company’s employees, their services provided in connection with the Company’s
business, or any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers.
 
2.6   Intellectual Property.  To the Company’s knowledge, the Company owns or
possesses sufficient legal rights to all Company Intellectual Property without
any known conflict with, or infringement of, the rights of others.  To the
Company’s knowledge, no product or service marketed or sold (or proposed to be
marketed or sold) by the Company violates or will violate any license or
infringes or will infringe any intellectual property rights of any other party.
 
(a)   Other than with respect to commercially available software products under
standard end-user object code license agreements, there are no outstanding
options, licenses, agreements, claims, encumbrances or shared ownership
interests of any kind relating to the Company Intellectual Property, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other Person.
 
(b)   The Company has not received any communications alleging that the Company
has violated or, by conducting its business, would violate any of the patents,
trademarks, service marks, trade names, copyrights, trade secrets, mask works or
other proprietary rights or processes of any other Person.
 
(c)   The Company has obtained and possesses valid licenses to use all of the
software programs present on the computers and other software-enabled electronic
devices that it owns or leases, if any, or that it has otherwise provided to its
employees for their use in connection with the Company’s business.
  
 
7

--------------------------------------------------------------------------------

 
  
(d)   To the Company’s knowledge, it will not be necessary to use any inventions
of any of its employees or consultants (or Persons it currently intends to hire)
made prior to their employment by the Company.
 
2.7   Compliance with Other Instruments.  The Company is not in violation or
default (which has not been waived): (i) of any provisions of its Articles of
Incorporation or Bylaws; (ii) of any instrument, judgment, order, writ or
decree; (iii) under any mortgage; or (iv) under any lease, agreement, contract
(except for certain Convertible Note Purchase Agreements or certain Amended and
Restated Convertible Note Purchase Agreements) or purchase order to which it is
a party or by which it is bound, or, to the Company’s knowledge, of any
provision of federal or state statute, rule or regulation applicable to the
Company, the violation of which would have a Material Adverse Effect.  The
execution, delivery and performance of the Transaction Documents and the
consummation of the transactions contemplated by the Transaction Documents will
not result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either: (x) a default under
any such provision, instrument, judgment, order, writ, decree, contract or
agreement or (y) an event which results in the creation of any lien, charge or
encumbrance upon any assets of the Company or the suspension, revocation,
forfeiture, or non-renewal of any material permit or license applicable to the
Company.
 
2.8   Agreements; Actions.  Except for this Agreement and as set forth in the
Company’s public filings with the SEC, there are no agreements, understandings,
instruments, contracts or proposed transactions to which the Company is a party
or by which it is bound that involve: (i) obligations (contingent or otherwise)
of, or payments to, the Company in excess of $1,000,000.00; (ii) the license of
any patent, copyright, trademark, trade secret or other proprietary right to or
from the Company; (iii) the grant of rights to manufacture, produce, assemble,
license, market, or sell its products to any other Person that limit the
Company’s exclusive right to develop, manufacture, assemble, distribute, market
or sell its products; or (iv) indemnification by the Company with respect to
infringements of proprietary rights.
 
(a)   Except as set forth in the Company’s public filings with the SEC, the
Company has not: (i) declared or paid any dividends, or authorized or made any
distribution upon or with respect to any class or series of its capital stock;
(ii) incurred any indebtedness for money borrowed or incurred any other
liabilities individually in excess of $200,000.00 or in excess of $500,000.00 in
the aggregate; (iii) made any loans or advances to any Person, other than
ordinary advances for travel expenses; or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.  For the purposes of subsections (ii) and (iii)
of this Section 2.8(b), all indebtedness, liabilities, agreements,
understandings, instruments, contracts and proposed transactions involving the
same Person (including Persons the Company has reason to believe are affiliated
with each other) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsection.
 
(b)   The Company is not a guarantor or indemnitor of any indebtedness of any
other Person.
 
2.9   Related Party Transactions.  Other than: (i) standard employee benefits
generally made available to all employees of the Company; (ii) standard director
and officer indemnification agreements approved by the Board; and (iii) the
issuance of options to purchase Shares, in each instance, approved in writing by
the Board, there are no agreements, understandings or proposed transactions
between the Company and any of its officers, directors, consultants or Key
Employees or any Affiliate thereof.
  
(a)   Except as set forth in the Company’s public filings with the SEC, the
Company is not indebted, directly or indirectly, to any of its directors,
officers or employees or to their respective spouses or children or to any
Affiliate of any of the foregoing, other than in connection with expenses or
advances of expenses incurred in the ordinary course of business or employee
relocation expenses and for other customary employee benefits made generally
available to all employees.  None of the Company’s directors, officers or
employees, or any members of their immediate families, or any Affiliate of the
foregoing are, directly or indirectly, indebted to the Company.
  
 
8

--------------------------------------------------------------------------------

 
  
2.10   Absence of Liens.  Except as reflected in the Financial Statements (as
defined below), the property and assets that the Company owns are free and clear
of all mortgages, deeds of trust, liens, loans and encumbrances, except for
statutory liens for the payment of current taxes that are not yet delinquent and
encumbrances and liens that arise in the ordinary course of business and do not
materially impair the Company’s ownership or use of such property or
assets.  With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the Company’s knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances other than those of
the lessors of such property or assets.
 
2.11   Real and Personal Property.
 
(a)   Real Property.  The Company does not own any real property.  As to all of
the real property leased by the Company, neither the Company nor any other party
thereto is in default under any of said leases, nor has any event occurred
which, with the giving of notice or the passage of time or both, would give rise
to a default.
 
(b)   Personal Property.   The Company has good and marketable title to all of
its personal property and assets and all such personal property and assets are
in good working condition.  None of such personal property or assets is subject
to any mortgage, pledge, lien, conditional sale agreement, security agreement,
encumbrance or other charge.  The Financial Statements reflect all personal
property and assets of the Company (other than assets disposed of in the
ordinary course of business subsequent to December 31, 2010), and such
properties and assets are sufficient for the Company to conduct the business of
the Company as currently conducted and as proposed to be conducted.
 
2.12   Financial Statements; Liabilities.  The Company has delivered to Isaac
its audited financial statements for the fiscal year ended December 31, 2010
(“Financial Statements”).  The Financial Statements have been prepared in
accordance with United States generally accepted accounting principles (“GAAP”)
applied on a consistent basis throughout the periods indicated (except for
footnote disclosures in the case of the unaudited financial statements).  The
Financial Statements fairly present in all material respects the financial
condition and operating results of the Company as of the dates, and for the
periods, indicated therein, subject in the case of the unaudited Financial
Statements to normal year-end audit adjustments.  Except as set forth in the
Financial Statements, the Company has no material liabilities or obligations,
contingent or otherwise, other than: (i) liabilities incurred in the ordinary
course of business subsequent to December 31, 2010; (ii) obligations under
contracts and commitments incurred in the ordinary course of business; and (iii)
liabilities and obligations of a type or nature not required under GAAP to be
reflected in the Financial Statements, which, in all such cases, individually
and in the aggregate would not have a Material Adverse Effect.  The Company
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP.
 
2.13   Changes.  Since the date of the Company’s most recent Financial
Statements, to the Company’s knowledge there has not been:
 
(a)   any change in the assets, liabilities, financial condition or operating
results of the Company from that reflected in the Financial Statements, except
changes in the ordinary course of business that have not caused, in the
aggregate, a Material Adverse Effect;
 
(b)   any damage, destruction or loss of property that would have a Material
Adverse Effect;
  
 
9

--------------------------------------------------------------------------------

 
  
(c)   any waiver or compromise by the Company of a valuable right or of a
material debt owed to it;
 
(d)   any satisfaction or discharge of any lien, claim, or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and the satisfaction or discharge of which would not have a Material
Adverse Effect;
 
(e)   any material change to a material contract or agreement by which the
Company or any of its assets is bound or subject;
 
(f)   any resignation or termination of employment of any officer or Key
Employee of the Company;
 
(g)   any mortgage, pledge, transfer of a security interest in, or lien, created
by the Company, with respect to any of its material properties or assets, except
liens for taxes not yet due or payable and liens that arise in the ordinary
course of business and do not materially impair the Company’s ownership or use
of such property or assets;
 
(h)   any loans or guarantees made by the Company to or for the benefit of its
employees, officers or directors, or any members of their immediate families,
other than travel advances and other advances made in the ordinary course of its
business;
 
(i)   any declaration, setting aside or payment or other distribution in respect
of any of the Company’s capital stock, or any direct or indirect redemption,
purchase, or other acquisition of any of such stock by the Company;
 
(j)   any sale, assignment or transfer of any Company Intellectual Property that
could reasonably be expected to result in a Material Adverse Effect;
 
(k)   receipt of notice that there has been a loss of, or material order
cancellation by, any major customer of the Company;
 
(l) any other event or condition of any character, other than events affecting
the economy or the Company’s industry generally, that could reasonably be
expected to result in a Material Adverse Effect; or
 
(m) any arrangement or commitment by the Company to do any of the things
described in this Section 2.13.
 
2.14   Employee Matters.
 
(a)   To the Company’s knowledge, none of its officers is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would materially interfere with such officer’s
ability to promote the interest of the Company or that would conflict with the
Company’s business.  Neither the execution or delivery of the Agreement, nor the
carrying on of the Company’s business by the employees of the Company, nor the
conduct of the Company’s business as now conducted and as presently proposed to
be conducted, will, to the Company’s knowledge, conflict with or result in a
breach of the terms, conditions, or provisions of, or constitute a default
under, any contract, covenant or instrument under which any such officer is now
obligated.
 
(b)   To the Company’s knowledge, the Company is not delinquent in payments to
any of its employees, consultants, or independent contractors for any
compensation for any service performed for it to the Effective Date or amounts
required to be reimbursed to such employees, consultants or independent
contractors.
  
 
10

--------------------------------------------------------------------------------

 
 
(c)   To the Company’s knowledge, no Key Employee intends to terminate his or
her relationship with the Company or is otherwise likely to become unavailable
to continue as a Key Employee, nor does the Company have a present intention to
terminate the services of any of the foregoing.
 
(d)   The Company has no employee benefit plans within the meaning of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
 
(e)   The Company is not bound by or subject to (and none of its assets or
properties is bound by or subject to) any written or oral, express or implied,
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the knowledge of the Company, has sought to represent any of
the employees, representatives or agents of the Company.  There is no strike or
other labor dispute involving the Company pending, or to the Company’s
knowledge, threatened, which could have a Material Adverse Effect its
operations.
 
2.15   Tax Returns and Payments.  Except as set forth in the SEC Reports and
Financial Statements, there are no federal, state, county, local or foreign
taxes dues and payable by the Company which have not been paid timely, nor
accrued and unpaid federal, state, country, local or foreign taxes of the
Company which are due, whether or not assessed or disputed.  There have been no
examinations or audits of any tax returns or reports by any applicable federal,
state, local or foreign governmental agency.  Except as set forth in the SEC
Reports, the Company has duly and timely filed all federal, state, county, local
and foreign tax returns required to have been filed by it, and there are in
effect no waivers of applicable statutes of limitations with respect to taxes
for any year.
 
2.16   Permits.  To the Company’s knowledge, the Company has all the permits,
licenses and any similar authority necessary to conduct its business, the lack
of which could reasonably be expected to have a Material Adverse Effect.  To the
Company’s knowledge, the Company is not in default in any material respect under
any of such permits, licenses or other similar authority.
 
2.17   Corporate Documents.  The Articles of Incorporation and Bylaws of the
Company are in the form provided to Isaac.  The copy of the minute books of the
Company provided to Isaac contains all actions taken by written consent without
a meeting by the Board and shareholders since the date of incorporation and
accurately reflects in all material respects all actions by the Board and
shareholders with respect to all transactions referred to in the minute book.
 
2.18   Environmental and Safety Laws.  Except as could not reasonably be
expected to have a Material Adverse Effect, to the best of the Company’s
knowledge: (i) the Company is and has been in compliance with all Environmental
Laws; (ii) there has been no release or threatened release of any pollutant,
contaminant or toxic or hazardous material, substance or waste, or petroleum or
any fraction thereof, (each a “Hazardous Substance”) on, upon, into or from any
site currently or heretofore owned, leased or otherwise used by the Company;
(iii) there have been no Hazardous Substances generated by the Company that have
been disposed of or come to rest at any site that has been included in any
published United States federal, state or local “superfund” site list or any
other similar list of hazardous or toxic waste sites published by any
governmental authority in the United States; and (iv) there are no underground
storage tanks located on, no polychlorinated biphenyls (“PCBs”) or
PCB-containing equipment used or stored on, and no hazardous waste as defined by
the Resource Conservation and Recovery Act, as amended, stored on, any site
owned or operated by the Company, except for the storage of hazardous waste in
compliance with Environmental Laws.  For purposes of this Section 2.18,
“Environmental Laws” means any law, regulation, or other applicable requirement
relating to: (x) releases or threatened release of Hazardous Substance; (y)
pollution or protection of employee health or safety, public health or the
environment; or (z) the manufacture, handling, transport, use, treatment,
storage, or disposal of Hazardous Substances.
  
 
11

--------------------------------------------------------------------------------

 
  
2.19   Disclosure.  The Company has made available to Isaac all the information
reasonably available to the Company that Isaac has requested for deciding
whether to acquire the Shares, including the SEC Reports.  No representation or
warranty of the Company contained in this Agreement contains any untrue
statement of a material fact or, to the Company’s knowledge, omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading in light of the circumstances under which they were
made.  The Company has not delivered to Isaac and has not been requested to
deliver to Isaac a private placement or similar memorandum or any written
disclosure of the types of information customarily furnished to purchasers of
securities.  Isaac acknowledges that it is relying on the SEC Reports, its own
investigation, the documents it has asked for from the Company and been provided
and any and all information it has been made aware of by the Company or
otherwise in making its investment decision pursuant to this Agreement.
 
2.20   Net Operating Loss Carry-Forward.  The information contained in the SEC
Reports regarding the application of Section 382 of the Code to the Company’s
federal net operating loss carry-forward is true and correct to the Company’s
knowledge.
 
2.21   Foreign Corrupt Practices Act.  To the Company’s knowledge, neither the
Company nor any of the Company’s directors, officers or employees have made,
directly or indirectly, any payment or promise to pay, or gift or promise to
give or authorized such a promise or gift, of any money or anything of value,
directly or indirectly, to: (i) any foreign official (as such term is defined in
the United States Foreign Corrupt Practices Act) for the purpose of influencing
any official act or decision of such official or inducing him or her to use his
or her influence to affect any act or decision of a governmental authority; or
(ii) any foreign political party or official thereof or candidate for foreign
political office for the purpose of influencing any official act or decision of
such party, official or candidate or inducing such party, official or candidate
to use his, her or its influence to affect any act or decision of a foreign
governmental authority, in the case of both (i) and (ii) above, in order to
assist the Company or any of its Affiliates to obtain or retain business for, or
direct business to, the Company or any of its Affiliates, as
applicable.  Neither the Company, nor any of its directors, officers or
employees, has made any bribe, rebate, payoff, influence payment, kickback or
other unlawful payment of funds, or received or retained any funds, in violation
of any law, rule or regulation.
 
2.22   Compliance with Office of Foreign Assets Control.  To the Company’s
knowledge, neither the Company nor any of the Company’s directors, officers or
employees is an OFAC Sanctioned Person (as defined below).  The Company and the
Company’s directors, officers or employees are in compliance with, and have not
previously violated, the United States of America Patriot Act of 2001, as
amended through the Effective Date, to the extent applicable to the Company and
all other applicable anti-money laundering laws and regulations.  To the
Company’s knowledge, none of: (i) the sale of the Securities to Isaac; (ii) the
use of funds received by the Company pursuant to a Funding Request; (iii) the
execution, delivery and performance of this Agreement; or (iv) the consummation
of any transaction contemplated hereby or thereby, or the fulfillment of the
terms hereof or thereof, will result in a violation of any of the OFAC Sanctions
(as defined below) or of any anti-money laundering laws of the United States or
any other applicable jurisdiction.
 
(a)   For the purposes of Section 2.22(a) of this Agreement:
 
(b)   “OFAC Sanctions” means any sanctions program administered by the Office of
Foreign Assets Control of the United States Department of the Treasury (“OFAC”)
under authority delegated to the Secretary of the Treasury (“Secretary”) by the
President of the United States or provided to the Secretary by statute, and any
order or license issued by, or under authority delegated by, the President or
provided to the Secretary by statute in connection with a sanctions program thus
administered by OFAC.  For ease of reference, and not by way of limitation, OFAC
Sanctions programs are described on OFAC’s website at www.treas.gov/ofac;
  
 
12

--------------------------------------------------------------------------------

 
  
(i)   “OFAC Sanctioned Person” means any government, country, corporation or
other entity, group or individual with whom or which the OFAC Sanctions prohibit
a U.S. Person from engaging in transactions and includes, without limitation,
any individual or corporation or other entity that appears on the current OFAC
list of Specially Designated Nationals and Blocked Persons (“SDN List”).  For
ease of reference, and not by way of limitation, OFAC Sanctioned Persons other
than governments and countries can be found on the SDN List on OFAC’s website at
www.treas.gov/offices/enforcement/ofac/sdn; and
 
(ii)   “U.S. Person” means any U.S. citizen, permanent resident alien, entity
organized under the laws of the United States (including foreign branches), or
any person (individual or entity) in the United States and, with respect to the
Cuban Assets Control Regulations, also includes any corporation or other entity
that is owned or controlled by one of the foregoing, without regard to where it
is organized or doing business.
 
2.23   SEC Reports; Financial Statements.  The Company has filed all reports,
schedules, forms, statements and other documents required to be filed by the
Company under the Securities Act and the Exchange Act, including pursuant to
Section 13(a) or 15(d) thereof, for the two years preceding the Effective Date
(or such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein being collectively referred to in
this Agreement as “the SEC Reports”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension.  As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as applicable, and none of the SEC Reports, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading
 
2.24   Sarbanes-Oxley; Internal Accounting Controls.  To the Company’s knowledge
and if required to do so by the Sarbanes-Oxley Act of 2002 (“SOX”), the Company
is exercising good faith efforts to be in material compliance with all
provisions of SOX which are applicable to it as of the Effective Date.  The
Company and the Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that: (i) transactions are executed
in accordance with management’s general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii)
access to assets is permitted only in accordance with management’s general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.  Except for the accounting restatement
of the non-recourse TCP Note with TCP as an “option to purchase”, as restated in
the Company’s SEC Form 10-Qs for the periods ended March 31, June 30 and
September 30, 2009, the Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosure controls and procedures to ensure that
information required to be disclosed by the Company in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SEC’s rules and forms.  The Company’s
certifying officers have evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by the Company’s
most recently filed periodic report under the Exchange Act (such date, the
“Evaluation Date”).  The Company presented in its most recently filed periodic
report under the Exchange Act the conclusions of the certifying officers about
the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date.  Since the Evaluation Date, there have
been no changes in the Company’s internal control over financial reporting (as
such term is defined in the Exchange Act) that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
  
 
13

--------------------------------------------------------------------------------

 
  
2.25   Investment Company.  The Company is not, and is not an Affiliate of, and
immediately after receipt of payment for the Securities, will not be or be an
Affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.  The Company shall conduct its business in a
manner so that it will not become an “investment company” subject to
registration under the Investment Company Act of 1940, as amended.
 
2.26   Registration Rights.  Except as may be provided in the Registration
Rights Agreement, no Person has any right to cause the Company to effect the
registration under the Securities Act of any Securities of the Company.
 
2.27   Application of Takeover Protections. The Company and the Board have taken
all necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution under
a rights agreement) or other similar anti takeover provision under the Company’s
certificate of incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to Isaac as a result
of Isaac and the Company fulfilling their obligations or exercising their rights
under the Transaction Documents, including without limitation as a result of the
Company’s issuance of the Securities and Isaac’s ownership of the Securities.
 
2.28   No Integrated Offering.  Neither the Company, nor any of its Affiliates,
nor any Person acting on its or their behalf has, directly or indirectly, made
any offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of securities to be
integrated with prior offerings by the Company.
 
2.29   Solvency.  Based on the consolidated financial condition of the Company
as of the Effective Date, after giving effect to the receipt by the Company of
the entirety of the payments from the sale of the Securities to Isaac pursuant
to this Agreement: (i) the fair saleable value of the Company’s assets exceeds
the amount that will be required to be paid on or in respect of the Company’s
existing debts and other liabilities (including known contingent liabilities) as
they mature; (ii) the Company’s assets do not constitute unreasonably small
capital to carry on its business as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its
liabilities when such amounts are required to be paid.  The Company does not
intend to incur debts beyond its ability to pay such debts as they mature
(taking into account the timing and amounts of cash to be payable on or in
respect of its debt).  The Company has no knowledge of any facts or
circumstances which lead it to believe that it will file for reorganization or
liquidation under the bankruptcy or reorganization laws of any jurisdiction
within one year from the Effective Date.  The Financial Statements set forth as
of their date all outstanding secured and unsecured Indebtedness of the Company
or any Subsidiary, or for which the Company or any Subsidiary has
commitments.  For the purposes of this Agreement, “Indebtedness” means (x) any
liabilities for borrowed money or amounts owed in excess of $200,000 (other than
trade accounts payable incurred in the ordinary course of business), (y) all
guaranties, endorsements and other contingent obligations in respect of
indebtedness of others, whether or not the same are or should be reflected in
the Company’s balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (z) the present value of
any lease payments in excess of $200,000 due under leases required to be
capitalized in accordance with GAAP.  Except as set forth in the SEC Reports and
Financial Statements, neither the Company nor any Subsidiary is in default with
respect to any Indebtedness.
  
 
14

--------------------------------------------------------------------------------

 
  
2.30   Acknowledgment Regarding Isaac’s Purchase of Securities.  The Company
acknowledges and agrees that Isaac 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 Isaac is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to the Transaction Documents and the transactions contemplated
thereby, and any advice given by Isaac or any of its respective representatives
or agents in connection with the Transaction Documents and the transactions
contemplated thereby is merely incidental to Isaac’s purchase of the
Securities.  The Company further represents to Isaac that the Company’s decision
to enter into this Agreement and the other Transaction Documents has been based
solely on the independent evaluation of the transactions contemplated hereby by
the Company and its representatives, and in consultation with its attorneys.
 
3.   Representations and Warranties of Isaac.  Isaac hereby represents and
warrants to the Company that:
 
3.1   Authorization.  Isaac has full power and authority to enter into the
Agreement.  The Agreement, when executed and delivered by Isaac, will constitute
valid and legally binding obligations of Isaac, enforceable in accordance with
their terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and any other laws of general
application affecting enforcement of creditors’ rights generally, and as limited
by laws relating to the availability of specific performance, injunctive relief,
or other equitable remedies.
 
3.2   Disclosure of Information; Investment Experience.  Isaac has had an
opportunity to discuss the Company’s business, management, financial affairs and
the terms and conditions of the offering of the Securities with the Company’s
management and has had an opportunity to review the Company’s facilities.  Isaac
has reviewed the Company’s filings with the SEC, including the Risk Factors set
forth therein, and has not relied upon any other written material, except for
the representations and warranties made by the Company in this Agreement.  The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of Isaac to rely
thereon.  Isaac represents that it is experienced in evaluating and investing in
transactions involving securities of companies in a similar stage of development
and acknowledges that Isaac is able to fend for itself, can bear the economic
risk of Isaac’s investment and has such knowledge and experience in financial
and business matters and is capable of evaluating the merits and risks of the
investment contemplated by this Agreement.
 
3.3   Restricted Securities.  Isaac understands that the Securities to which
Isaac is entitled to own pursuant to this Agreement are “restricted securities”
under applicable United States federal and state securities laws and that,
pursuant to these laws, Isaac must hold the Securities indefinitely, unless they
are registered with the SEC and qualified by state authorities, or an exemption
from such registration and qualification requirements is available to make them
free trading.  Except as may be set forth in the Registration Agreement, Isaac
acknowledges that the Company has no obligation to register or qualify any of
the Securities to which Isaac is entitled to own pursuant to this
Agreement.  Isaac further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Securities, and on requirements relating to the Company which are
outside of Isaac’s control, and which the Company is under no obligation and may
not be able to satisfy.  Isaac acknowledges that it has no present intention to
engage in a distribution of the Securities it is purchasing pursuant to this
Agreement and that it is purchasing such Securities for its own account.
 
3.4   Accredited Investor.  Isaac is an accredited investor as defined in Rule
501(a) of Regulation D promulgated under the Securities Act, as amended.
 
3.5   Foreign Investors.  If Isaac is not a United States Person (as defined by
Section 7701(a)(30) of the Code), Isaac hereby represents that it has satisfied
itself as to the full observance of the laws of its jurisdiction in connection
with any invitation to subscribe to the Securities it is purchasing pursuant to
this Agreement, including: (i) the legal requirements within its jurisdiction
for the purchase of the Securities; (ii) any foreign exchange restrictions
applicable to such purchase; (iii) any governmental or other consents that may
need to be obtained for such Securities; and (iv) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale, or transfer of the such Securities.  Isaac’s subscription and payment for,
and continued beneficial ownership of, the Securities it is purchasing pursuant
to this Agreement will not violate any applicable securities or other laws of
Isaac’s jurisdiction.
  
 
15

--------------------------------------------------------------------------------

 
  
3.6   Acknowledgment Regarding the Company’s Sale of Securities.  Isaac
acknowledges and agrees that the Company is acting solely in the capacity of an
arm’s length company with respect to the Transaction Documents and the
transactions contemplated thereby.  Isaac further acknowledges that the Company
is not acting as a financial advisor or fiduciary of Isaac (or in any similar
capacity) with respect to the Transaction Documents and the transactions
contemplated thereby and any advice given by the Company or any of its
respective representatives or agents in connection with the Transaction
Documents and the transactions contemplated thereby is merely incidental to the
Company’s sale of the Securities.  Isaac further represents to the Company that
Isaac’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 Isaac and its representatives and in
consultation with its attorneys.
 
3.7   Acknowledgement Regarding Isaac’s Relinquishment of Board Seats.  Under
the A&R Isaac SPA, the Company agreed to expand the composition of its Board to
nine members, of which Isaac had the right to appoint two.  Isaac has
subsequently relinquished that right prior to appointing any directors, and
acknowledges no right of appointment is granted under this Agreement.
 
4.   Conditions to Isaac’s Obligations under this Agreement.  The obligations of
Isaac to purchase the Shares pursuant to this Agreement are subject to the
fulfillment of each of the following conditions, unless otherwise waived in a
writing between the Parties:
 
4.1   Representations and Warranties.  The representations and warranties of the
Company contained in Section 2 shall be true and correct in all respects as of
the Effective Date.
 
4.2   Performance.  The Company shall have performed and complied with all
covenants, agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by the Company pursuant to
this Agreement.
 
4.3   Qualifications.  All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the Shares
pursuant to this Agreement shall be obtained and effective as of the Effective
Date.
 
4.4   Approvals.  The Secretary of the Company shall deliver to Isaac,
concurrently with the execution of this Agreement, a copy of the Unanimous
Written Consent of the Board, approving the Agreement and the transactions
contemplated under the Agreement.
 
4.5   Proceedings and Documents.  All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents incidental thereto shall be reasonably satisfactory in form and
substance to Isaac, and Isaac or its counsel shall have received all such
counterpart original and certified or other copies of such documents as
reasonably requested.
 
4.6   Board of Directors.  Notwithstanding that Purchase has previously
relinquished the right granted it under the A&R Isaac SPA, Purchaser shall be
entitled to nominate two (2) Board members (together with any successors that
may be designated by the Purchaser from time to time, collectively, the
“Purchaser Designees”).
  
 
16

--------------------------------------------------------------------------------

 
  
With respect to each shareholder election of directors thereafter, including at
each annual or special meeting of shareholders of the Company at which directors
are elected, the Company shall cause the Board and management to: (i) include
the Purchaser Designees in the slate of nominees recommended by the Board to the
Company’s shareholders for election as directors; (ii) recommend to its
shareholders that they vote for the Purchaser Designees as directors of the
Company; (iii) vote all proxies it may hold in favor of the election of the
Purchaser Designees, except as otherwise directed by any shareholder who submits
such proxy; and (iv) use its best efforts to cause the Purchaser Designees to be
elected as directors.  The Company shall take no action that would cause the
Board to exceed nine (9) in number, without the consent of the Purchaser.
 
5.   Conditions of the Company’s Obligations under this Agreement.  The
obligations of the Company to sell Shares to Isaac pursuant to this Agreement
are subject to the fulfillment of each of the following conditions, unless
otherwise waived in a writing between the Parties:
 
5.1   Representations and Warranties.  The representations and warranties of the
Purchaser contained in Section 3 shall be true and correct in all respects as of
the Effective Date.
 
5.2   Performance.  Isaac shall have performed and complied with all covenants,
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by Isaac as of the Effective Date.
 
5.3   Qualifications.  All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the Shares
and Warrants pursuant to this Agreement shall be obtained and effective as of
the Effective Date.
 
6.   Miscellaneous.
 
6.1   Survival of Warranties.  The representations and warranties of the Company
and Isaac contained in or made pursuant to this Agreement shall survive the
execution and delivery of this Agreement.
 
6.2   Assignment.  This Agreement shall be binding upon and inure to the benefit
of, and be enforceable by the Parties to this Agreement and any of their
respective successors, personal representatives and permitted assigns who agree
in writing to be bound by the terms of this Agreement.  Neither the Company nor
Isaac may assign its rights under this Agreement, in whole or in part, without
the prior written consent of the other Party, which consent shall not be
unreasonably withheld.  Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the Parties to this Agreement, or
their respective successors and assigns, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
 
6.3   Governing Law.  This Agreement and any controversy arising out of or
relating to this Agreement shall be governed by and construed in accordance with
the laws of the State of California, without regard to conflict of law
principles that would result in the application of any law other than the laws
of the State of California.
 
6.4   Titles and Subtitles.  The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

6.5   Notices.  All notices and other communications given or made pursuant to
this Agreement (“Notice”) shall be in writing and shall be deemed effectively
given upon the earlier of actual receipt or: (i) personal delivery to the Party
to be notified; (ii) when sent, if sent by electronic mail or facsimile during
normal business hours of the recipient, and if not sent during normal business
hours, then on the recipient’s next business day; (iii) five days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid; or (iv) one (1) business day after deposit with a nationally recognized
overnight courier, freight prepaid, specifying next business day delivery, with
written verification of receipt.  All communications shall be sent to the
respective Parties at their address as set forth on the signature page, or to
such email address, facsimile number or address as subsequently modified by
Notice given in accordance with this Section 6.5.  If Notice is given to the
Company, Notice shall also be given to the counsel for the Company delivered in
the same manner as to the Company at the address, facsimile number or e-mail
address immediately below:
  
 
17

--------------------------------------------------------------------------------

 
  
Kenneth L. Waggoner
Executive Vice President Legal, General Counsel and Secretary
China Tel Group, Inc.
12526 High Bluff Drive
Suite 155
San Diego, California 92130
Facsimile:  760.230.8986
Email:         kwaggoner@chinatelgroup.com
 
6.6   Expenses.  The Company shall pay and reimburse all reasonable expenses of
Isaac in connection with the transactions contemplated by this Agreement,
including, but not limited to, expenses related to any necessary securities
filings in connection with Isaac’s ownership of the Securities, from time to
time, and all reasonable legal and accounting fees and costs associated
therewith.
 
6.7   Non-Monetary Default by Isaac or the Company.  Except as to a Monetary
Default by Isaac described in Section 1.5(a) of this Agreement, if either Party
claims the other Party has failed to perform any obligation or condition set
forth in this Agreement, the Party making such claim (“Claiming Party”) shall
deliver to the other Party a Notice setting forth in detail the nature of the
act or omission for which the Party believes is a non-monetary default.  The
Party receiving such notice (“Receiving Party”) shall be considered in
non-monetary default, unless within ten days the Receiving Party delivers notice
to the Claiming Party either: (i) disputing that any failure to perform has
occurred, in which case the Parties shall proceed to Dispute Resolution in
accordance with Section 6.8 of this Agreement; or (ii) acknowledging that the
claimed failure to perform has occurred and providing a date by which the
Receiving Party will cure the past failure to perform exercising reasonable
diligence.  If the Claiming Party delivers Notice objecting to the date by which
the Receiving Party will cure the past failure to perform, the Parties shall
proceed to Dispute Resolution in accordance with Section 6.8 of this
Agreement.  Otherwise, the Receiving Party shall be considered in non-monetary
default only if the failure to perform has not been cured by the date set forth
in the Receiving Party’s Notice, at which time either Party may commence Dispute
Resolution in accordance with Section 6.8 of this Agreement.
 
6.8   Dispute Resolution.  Either Party may deliver to the other Party a dispute
Notice setting forth a brief description of the issues to be resolved through
the dispute resolution mechanism set forth in this Section 6.8 (“Dispute
Notice”).  The Dispute Notice shall specify the provision or provisions of this
Agreement and the facts or circumstances that are the subject matter of the
dispute(s).  Immediately following the receipt of a Dispute Notice, the Parties
shall cause their representatives to meet and seek to resolve the disputed
item(s) cordially through informal negotiations.  If the Parties’
representatives are unable to resolve the dispute(s) within ten days of the
receipt of a Dispute Notice, the dispute(s) shall be referred to a
representative of senior management from each Party, who, acting reasonably and
in good faith, shall seek to resolve the dispute(s) to the mutual satisfaction
of the Parties.  If the representatives of senior management are unable to
resolve the dispute(s) within ten days of the referral of the dispute(s) to
those representatives, then the dispute(s) shall be submitted to binding
arbitration to be conducted by the Judicial Arbitration and Mediation Services,
Inc. (“JAMS”), sitting in San Diego County, California, for resolution by a
single arbitrator acceptable to both Parties.  If the Parties fail to agree to
an arbitrator within ten days of a written demand for arbitration being sent by
one Party to the other Party, then JAMS shall select the arbitrator according to
the JAMS Rules for Commercial Arbitration.  The arbitration shall be conducted
pursuant to the California Code of Civil Procedure and the California Code of
Evidence.  The award of the arbitrator shall be final and binding on the Parties
and may be enforced by any court of competent jurisdiction.
  
 
18

--------------------------------------------------------------------------------

 
  
6.9   Attorneys’ Fees.  If any action at law or in equity (including
arbitration) is necessary to enforce or interpret the terms of any of this
Agreement, the prevailing Party shall be entitled to reasonable attorneys’ fees,
costs and necessary disbursements in addition to any other relief to which such
Party may be entitled.
 
6.10   Severability.  The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.
 
6.11   Delays or Omissions.  No delay or omission to exercise any right, power
or remedy accruing to any Party under this Agreement, upon any breach or default
of any other Party under this Agreement, shall impair any such right, power or
remedy of such non-breaching or non-defaulting Party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring.  Any waiver, permit, consent or
approval of any kind or character on the part of either Party of any breach or
default under this Agreement, or any waiver on the part of either Party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing.  All
remedies, either under this Agreement or by law or otherwise afforded to either
Party, shall be cumulative and not alternative.
 
6.12   Cancellation of Isaac SPA, First Isaac Amendment and A&R Isaac SPA.  This
Agreement cancels and supersedes in their entirety and constitutes a novation of
the Isaac SPA, the Isaac SPA Amendment and the A&R Isaac SPA.
 
6.13   Entire Agreement; Amendments.  This Agreement shall constitute the full
and entire understanding and agreement between the Parties with respect to the
subject matter this Agreement, and any other written or oral agreement relating
to the subject matter of this Agreement existing between the Parties is
expressly canceled.  Any amendment of this Agreement shall be effective only by
a writing signed by both of the Parties.
 
6.14   Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original copy of this
Agreement and all of which, when taken together, shall be deemed to constitute
one and the same Agreement.
 
IN WITNESS WHEREOF, the Parties have executed this Second Amended and Restated
Stock Purchase Agreement as of the Effective Date.
 
THE SIGNATURES OF THE PARTIES APPEAR ON THE FOLLOWING PAGE
    
 
19

--------------------------------------------------------------------------------

 
  
COMPANY:
 
ISAAC:
     
China Tel Group, Inc., a Nevada corporation
 
 
Isaac Organization, Inc., a Canadian corporation
 
By:  /s/ George Alvarez                                     
 
By:  /s/ Antonios Isaac                                            
George Alvarez
 
Antonios Isaac
Chief Executive Officer
 
Chief Executive Officer
     
Address of the Company:
 
Address of the Purchaser:
     
12526 High Bluff Drive, Suite 155
San Diego, California  92130
Facsimile:   760.230.7042
Email:          galvarez@chinatelgroup.com
 
105 Schneider Road
Ottawa, Ontario K2K 1Y3 CANADA
Facsimile:   613.254.8912
Email:          tony@isaac.com

 
 
 
 
20

--------------------------------------------------------------------------------

 
  
EXHIBIT 1 TO SECOND AMENDED AND RESTATED STOCK PURCHASE AGREEMENT
BETWEEN CHINA TEL GROUP, INC. AND ISSAC ORGANIZATION, INC.
FORM OF WARRANT
[BRACKETED MATERIAL = ADJUSTED WARRANT]
 
WARRANT
 
CHINA TEL GROUP, INC.
 
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS
AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.  ANY CERTIFICATE
REPRESENTING WARRANT SHARES SHALL BEAR A LEGEND TO SUCH EFFECT.
 
Warrant to Purchase____________ Shares
Exercise Price: __________
Exercise Term: Three (3) Years [Five (5) Years]
Warrant Certificate Number ____
Date of Issuance: xx/xx/xxxx
Date of Expiration: xx/xx/xxxx

 
China Tel Group, Inc., a Nevada corporation (the “Company”), hereby certifies
that, for value received, Isaac Organization, Inc. (the “Warrant Holder,” which
term includes its successors and registered assigns) is entitled to purchase
that number of shares of the Company’s Series A common stock, par value $0.001
per share (the “Series A Common Stock”) shown above, at an exercise price per
share also shown above (the “Exercise Price”), at any time during the Exercise
Term, commencing on the Date of Issuance of this Warrant and expiring on the
Date of Expiration of this Warrant.
  
WHEREAS, the Company and Isaac Organization, Inc. entered into that certain
Second Amended and Restated Stock Purchase Agreement dated May 10, 2011 (the
“Second A&R Isaac SPA”); and
 
WHEREAS, this Warrant is issued pursuant to sections 1.3 and 1.4 of the Second
A&R Isaac SPA;
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and in the A&R Isaac SPA, the Company and the Warrant Holder
hereby agree as follows:
 
1.   Exercise of Warrant.  This Warrant may be exercised as to all or any lesser
number of full shares of Series A Common Stock covered by this Warrant (“Warrant
Shares”) at any time or from time to time during the Exercise Term, upon the
expiration of sixty days following delivery of written notice to the Company, by
presentation and surrender of this Warrant, evidencing the Warrant or portion of
Warrant to be exercised, to the Company at its principal office or at the office
of its stock transfer agent, if any, accompanied by the Exercise Form annexed
hereto duly executed, accompanied by the further requirements of either a Cash
Exercise as described in Section 1(a) or, if the Company and the Warrant Holder
mutually agree in writing, a Cashless Exercise as described in Section 1(b).
   
 
1

--------------------------------------------------------------------------------

 
  
(a) Cash Exercise.  The Warrant Holder shall deliver in accordance with Section
10 a Notice of Cash Exercise by completing page 8 of this Warrant.  Upon the
sixtieth day following the date the Company is deemed to have received the
Notice of Cash Exercise, the Warrant Holder shall pay the Exercise Price in cash
or other immediately collectible funds, and the Company shall issue to the
Warrant Holder the number of Warrant Shares for which the Exercise Price is
paid.  For purposes of Section 1(d), the Settlement Date shall be the date the
Company receives the Exercise Price.
  
(b) Cashless Exercise.  The Warrant Holder shall deliver in accordance with
Section 10 a Notice of Cashless Exercise by completing page 9 of this
Warrant.  Upon the sixtieth day following the date the Company is deemed to have
received the Notice of Cashless Exercise, the Company shall issue to the Warrant
Holder the number of Warrant Shares determined based on the following
formula.  For purposes of Section 1(d), the Settlement Date shall be the
Effective Election Date, as defined below.
  
X = Y*(A-B)/A as of the Effective Election Date
 
where:
 
X means the number of Warrant Shares to be issued to the Warrant Holder.
 
Y means the number of Warrants to be exercised as specified in a Notice of
Cashless Exercise.
 
A means the fair market value of one share of Series A Common Stock as
determined in accordance with the provisions of this Section.
 
B means the Exercise Price.
 
The Effective Election Date means the sixtieth day following the date the
Company is deemed to have received the Notice of Cashless Election.
 
The “fair market value” of one share of Series A Common Stock means the weighted
average closing price of the Series A Common Stock during the 10 trading days
immediately preceding the Effective Election Date as stated under the quotation
system of The OTC Market, Inc., or any nationally securities exchange on which
the Series A Common Stock is listed, and, if there is no active public market
for the Series A Common Stock, the fair market value shall be the price
determined in good faith by the Board of Directors of the Company.

   
(c) If this Warrant should be exercised in part only, the Company shall, upon
surrender of this Warrant for cancellation and presentment of the Exercise Form,
execute and deliver a new Warrant or Warrants, as the case may be, evidencing
the rights of the Warrant Holder thereof to purchase the balance of the shares
purchasable thereunder.
 
(d) As of the Settlement Date, the Warrant Holder shall be deemed to be the
holder of record of the Warrant Shares, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing such
Warrant Shares shall not then be actually delivered to the Warrant
Holder.  Certificates for the Warrant Shares shall be delivered to the Warrant
Holder within a reasonable time following the exercise of this Warrant, in
accordance with the foregoing.
  
 
2

--------------------------------------------------------------------------------

 
  
2.   Reservation and Listing of Shares. The Company hereby agrees that at all
times there shall be reserved for issuance and delivery upon exercise of this
Warrant, such number of shares of its Series A Common Stock as shall be required
for issuance and delivery upon exercise of this Warrant. As long as this Warrant
is outstanding, the Company shall use its best efforts to cause all shares of
its Series A Common Stock issuable upon the exercise of this Warrant to be
quoted on The OTC Markets, Inc. service, or listed on a national securities
exchange.
 
3.   Fractional Shares. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant. Any fraction of a
share called for upon any exercise hereof shall be canceled. The Warrant Holder,
by his acceptance hereof, expressly waives any right to receive any fractional
share of stock or fractional Warrant upon exercise of this Warrant.
 
4.   Exchange, Transfer, Assignment or Loss of Warrant. This Warrant is
exchangeable, without expense, at the option of the Warrant Holder, upon
presentation and surrender of this Warrant evidencing such Warrants to the
Company at its office or at the office of its stock transfer agent, if any, for
other Warrants of different denominations entitling the Warrant Holder thereof
to purchase in the aggregate the same number of shares of Series A Common Stock
as are purchasable thereunder at the same respective Exercise Price. Upon
surrender of this Warrant to the Company at its principal office or at the
office of its stock transfer agent, if any, with a duly executed assignment form
and funds sufficient to pay the applicable transfer tax, if any, the Company
shall, without charge, execute and deliver new Warrant(s) in the name of the
assignee named in such instrument of assignment and the original Warrant shall
promptly be canceled. This Warrant may be divided or combined with other
Warrants which carry the same rights upon presentation of this Warrant at the
office of the Company or at the office of its stock transfer agent, if any,
together with a written notice signed by the Warrant Holder hereof specifying
the names and denominations in which new Warrants are to be issued. Upon receipt
by the Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or destruction, of
reasonably satisfactory indemnification, and upon surrender and cancellation of
this Warrant, if mutilated, the Company will execute and deliver new Warrants of
like tenor and date.
 
5.   Rights of the Warrant Holder. The Warrant Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder of the Company until exercise
of any Warrants.
 
6.   Adjustments of Purchase Price and Number of Shares.
 
(a)   Subdivision and Combination. If the Company shall at any time subdivide or
combine the outstanding shares of Series A Common Stock by way of stock split,
reverse stock split or the like, the Exercise Price shall forthwith be
proportionately increased or decreased.
 
(b)   Adjustment in Number of Shares. Upon each adjustment of the Exercise Price
pursuant to the provisions of paragraph 7(a), the number of shares of Series A
Common Stock issuable upon the exercise of this Warrant shall be adjusted to the
nearest full share of Series A Common Stock by multiplying a number equal to the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Series A Common Stock issuable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
  
 
3

--------------------------------------------------------------------------------

 
  
(c)   Reclassification, Consolidation, Merger, etc. In case of any
reclassification or change of the outstanding shares of Series A Common Stock
(other than a change in par value to no par value, or from no par value to par
value, or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding shares of Common Stock, except a change as a result of
a subdivision or combination of such shares or a change in par value, as
aforesaid), or in the case of a sale or conveyance to another corporation of all
or a substantial part of the property of the Company, the Warrant Holder shall
thereafter have the right to purchase the kind and number of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance as if the Warrant Holder were the
owner of the shares of Series A Common Stock underlying this Warrant immediately
prior to any such events at a price equal to the product of (x) the number of
shares issuable upon exercise of this Warrant and (y) the Exercise Price in
effect immediately prior to the record date for such reclassification, change,
consolidation, merger, sale or conveyance as if such Warrant Holder had
exercised this Warrant.
 
(d)   Dividends and Other Distributions with Respect to Outstanding Securities.
In the event that the Company shall at any time prior to the exercise of all
Warrants declare a dividend (other than a dividend consisting solely of shares
of Series A Common Stock or a cash dividend or distribution payable out of
current or retained earnings) or otherwise distribute to the holders of its
Series A Common Stock any monies, assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock), whether issued by
the Company or by another person or entity, or any other thing of value, the
Warrant Holder of the unexercised Warrants shall thereafter be entitled, in
addition to the shares of Series A Common Stock or other securities receivable
upon the exercise thereof, to receive, upon the exercise of such Warrants, the
same monies, property, assets, rights, evidences of indebtedness, securities or
any other thing of value that they would have been entitled to receive at the
time of such dividend or distribution. At the time of any such dividend or
distribution, the Company shall make appropriate reserves to ensure the timely
performance of the provisions of this Subsection 6(d).
 
(e)   Warrant After Adjustment. Irrespective of any change pursuant to this
Section 6 in the Exercise Price or in the number, kind or class of shares or
other securities or other property obtainable upon exercise of this Warrant,
this Warrant may continue to express as the Exercise Price and as the number of
shares obtainable upon exercise, the same price and number of shares as are
stated herein.
 
(f)   Statement of Calculation. Whenever the Exercise Price shall be adjusted
pursuant to the provisions of this Section 6, the Company shall forthwith file
at its principal office, a statement signed by an executive officer of the
Company specifying the adjusted Exercise Price. Such statement shall show in
reasonable detail the method of calculation of such adjustment and the facts
requiring the adjustment and upon which the calculation is based. The Company
shall forthwith cause a notice setting forth the adjusted Exercise Price to be
sent by certified mail, return receipt requested, postage prepaid, to the
Warrant Holder.
 
7.   Registration Rights. The parties intend to enter into a separate
registration rights agreement, under which the Warrant Holder may enjoy certain
“piggyback” registration rights as set forth in such agreement with respect to
the shares of Series A Common Stock underlying this Warrant if the Company
registers any of its Series A Common Stock in the future.
  
 
4

--------------------------------------------------------------------------------

 
  
8.   Definition of “Series A Common Stock”. For the purpose of this Warrant, the
term “Series A Common Stock” shall mean, in addition to the class of stock
designated as the Series A Common Stock, $.001 par value, of the Company on the
date hereof, any class of stock resulting from successive changes or
reclassifications of the Series A Common Stock consisting solely of changes in
par value, or from par value to no par value, or from no par value to par value.
If at any time, as a result of an adjustment made pursuant to one or more of the
provisions of Section 6 hereof, the shares of stock or other securities or
property obtainable upon exercise of this Warrant shall include securities of
the Company other than shares of Series A Common Stock or securities of another
corporation, then thereafter the amount of such other securities so obtainable
shall be subject to adjustment from time to time in a manner and upon terms as
nearly equivalent as practicable to the provisions with respect to Series A
Common Stock contained in Section 7 hereof and all other provisions of this
Warrant with respect to Series A Common Stock shall apply on like terms to any
such other shares or other securities.
 
9.   Representations of Warrant Holder
 
(a)   By accepting this Warrant, the Warrant Holder hereof represents that this
Warrant is acquired for the Holder’s own account for investment purposes and not
with a view to any offering or distribution and that the Warrant Holder has no
present intention of selling or otherwise disposing of the Warrant or any
portion hereof or the underlying shares of Series A Common Stock in violation of
applicable securities laws.
 
(b)   Warrant Holder is an “accredited investor” as defined in Rule 501 of
Regulation D as promulgated under the Securities Act of 1933.
 
10.   Notices.
 
(a)   All communications under this Warrant shall be in writing and shall be
mailed by certified mail, postage prepaid, return receipt requested, or
telecopied with confirmation of receipt or delivered by hand or by overnight
delivery service:
 
If to the Company at:       China Tel Group, Inc.
Attn: Kenneth L. Waggoner,
Executive Vice President and General Counsel
12526 High Bluff Drive, Suite 155
San Diego, California 92130
Facsimile: 1 (760) 359-7042
 
If to the Warrant Holder, to the address of such Warrant Holder as it appears in
the stock or warrant ledger of the Company.
 
(b)   Any notice so addressed, when mailed by registered or certified mail shall
be deemed to be given three days after so mailed, when telecopied shall be
deemed to be given when transmitted, or when delivered by hand or overnight
shall be deemed to be given when hand delivered or on the day following deposit
with the overnight delivery service.
 
11.   Successors. All the covenants and provisions of this Warrant by or for the
benefit of the Warrant Holder shall inure to the benefit of his successors and
assigns hereunder.
 
12.   Termination. This Warrant will terminate on the earlier of (a) the
Expiration Date of this Warrant or (b) the date this Warrant has been exercised.
  
 
5

--------------------------------------------------------------------------------

 
  
13.   Governing Law. This Warrant shall be deemed to be made under the laws of
the State of California and for all purposes shall be construed in accordance
with the laws of said State, excluding choice of law principles thereof.
 
14.   Entire Agreement, Amendment, Waiver. This Warrant and all attachments
hereto and all incorporation by references set forth herein, set forth the
entire agreement and understanding between the parties as to the subject matter
hereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them. This Warrant may be amended,
the Company may take any action herein prohibited or omit to take any action
herein required to be performed by it, and any breach of any covenant,
agreement, warranty or representation may be waived, only if the Company has
obtained the written consent or waiver of the Warrant Holder. No course of
dealing between or among any persons having any interest in this Warrant will be
deemed effective to modify, amend or discharge any part of this Warrant or any
rights or obligations of any person under or by reason of this Warrant.
  
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of this ___ day
of May, 2011.
 
 

  CHINA TEL GROUP, INC.          
 
By:
/s/ George Alvarez       Name: George Alvarez       Title: Chief Executive
Officer          

 
 
  
 
6

--------------------------------------------------------------------------------

 
 
CHINA TEL GROUP, INC.
 
WARRANT ASSIGNMENT FORM
 
(To be signed only upon assignment of Warrant)
 
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

    

--------------------------------------------------------------------------------

 
(Name and address of assignee must be printed or typewritten)
 

 
the rights of the undersigned with respect to the Warrant surrendered herewith
to the extent of ( _________________________ ) shares of Series A Common Stock,
$.001 par value per share, of China Tel Group, Inc. (the “Company”), hereby
irrevocably constituting and appointing ______________________________ ,
attorney to make such transfer on the books of the Company, with full power of
substitution in the premises.
 
 
Dated: ________________________________
 
_______________________________________
Signature of Registered Holder
 
 
Signature Guaranteed:
 
 
 
_______________________________________
 
 
 
 
Name of Registered Holder
 
 
 
_______________________________________
 

 
 
Note:
The above signature must correspond with the name as it appear upon the Warrant
in every particular, without alteration or enlargement or any change whatever.

  
 
7

--------------------------------------------------------------------------------

 
 
CHINA TEL GROUP, INC.
  
NOTICE OF CASH EXERCISE
 
(To be executed upon exercise of Warrant for cash)
 
The undersigned, the record holder of this Warrant, hereby irrevocably elects to
exercise the right, represented by this Warrant, to purchase
__________________________ of the Warrant Shares.
 
The undersigned requests that a certificate for the Warrant Shares being
purchased be registered in the name of ______________________________ and that
such certificate be delivered to
___________________________________________________________________________________________________________.
 
The undersigned shall tender payment of the exercise price due for issuance of
the Warrant Shares requested on the sixtieth day following delivery of this
Notice of Cash Exercise.
 

Dated: ________________________________
 
_______________________________________
Signature of Registered Holder
 
 
 
Name of Registered Holder
 
 
 
_______________________________________
 

 
8

--------------------------------------------------------------------------------

 

CHINA TEL GROUP, INC.
 
NOTICE OF CASHLESS EXERCISE
 
(To be executed upon election to exercise of Warrant without payment of cash)
 
The undersigned, the record holder of this Warrant, hereby irrevocably elects to
exercise the right, represented by this Warrant, to exercise ___________ (state
portion of Warrant Shares represented by this Warrant if less than all).
 
The undersigned requests that a certificate for the Warrant Shares being
purchased be registered in the name of ______________________________ and that
such certificate be delivered to
____________________________________________________________________________________________________________________.
 
The undersigned requests that the Company calculate the number of Warrant Shares
to be issued under the formula described in Section 1(b) of this Warrant as of
the Effective Election Date.
 

Dated: ________________________________
 
_______________________________________
Signature of Registered Holder
 
 
 
Name of Registered Holder
 
 
 
_______________________________________

 
 
 
9

--------------------------------------------------------------------------------