CONVERSION/SETTLEMENT AGREEMENT
Exhibit
10.11
This
Conversion/Settlement Agreement (this “Agreement”) is made effective as of
February 2, 2007 (the “Effective Date”), by and among the Debenture holders (as
defined below) listed on Schedule “A”, attached hereto and made a part hereof
(collectively, referred to as the “Debenture holders”), and China Mobility
Solutions, Inc., a Florida corporation (the “Company”).
RECITALS
WHEREAS,
Company and the Debenture holders entered into certain Debenture Purchase and
Warrant Agreements, dated June 30, 2005 (the “Purchase Agreement”), whereby
Company issued and delivered to Debenture holders that certain Senior
Convertible Debenture, dated August 15, 2005, in the aggregate original
principal amount of $3,500,000 (“Debenture”). Contemporaneously therewith
Company and Debenture holders entered into that certain Registration Rights
Agreement (the “Registration Agreement”), whereby Company agreed to file a
registration statement with the Securities and Exchange Commission (“SEC”), to
register the shares of Company’s common stock issuable upon conversion of the
Debenture;
WHEREAS,
the Purchase Agreement, the Debenture, the Registration Agreement and all other
related agreements or instruments evidencing or securing the foregoing are
hereinafter sometimes collectively referred to as the “Debenture
Documents”;
WHEREAS,
the parties hereto desire to reduce the conversion price of the Debentures
in
accordance with the terms and conditions of this Agreement;
WHEREAS,
in consideration for the Company reducing the conversion price of the
Debentures, the Debentureholders have agreed to enter into this Agreement in
settlement of any current or potential litigation between the parties.
NOW
THEREFORE, in exchange for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound,
the Debentureholders and the Company agree as follows:
AGREEMENT:
1. Adjustment
to Conversion Price. The conversion price of the Debentures, as set forth in
Section 7(d) of the Debentures, is currently $.30 per share (“Current Conversion
Price”), pursuant to a reduction under that certain Waiver/Settlement Agreement,
dated May 4, 2006. Upon meeting the Closing Conditions in Section 5 below,
the
Current Conversion Price shall be further reduced to $.05 per share (the
“Reduced Conversion Price”).
2. Conversion.
Upon satisfaction of the Closing Conditions required by Section 5 herein
(a) The
undersigned Debentureholder hereby irrevocably agrees to convert the principal
amount of Debentures held by the Debentureholders as set forth on the signature
page hereof into that certain number of shares of common stock, $.001 par value
of the Company (the "Common Stock"), as determined under the Debenture using
the
Reduced Conversion Price.
(b) The
Company shall elect to convert all accrued but unpaid penalties and interest
owed by the Company relating to those Debentures for which Debentureholders
have
consented to the conversion of the Debentures into Common Stock (“Interest
Shares”) at the Reduced Conversion Price, as evidenced by their execution of
this Agreement (collectively, the “Conversion/Settlement
Agreements”).
3. Exchange
of Debentures. On the Closing Date, subject to the terms and conditions hereof,
the Company will issue, convey, transfer and assign to each Debentureholder
and
each Debentureholder shall accept from the Company all right, title and interest
in and to that number of Common Stock shares issuable upon the conversion of
the
Debentures, as mentioned above, in exchange for such Debentureholder’s
Debentures, and each Debentureholder will convey, transfer and assign to the
Company all right, title and interest in and to the Debentures and any Debenture
Documents held by such Debentureholder.
4. Representations,
Warranties and Covenants:
(a) Of
the
Company. The Company hereby makes the following representations, warranties
and
covenants in favor of the Debentureholders who are a party to the
Agreement:
(i) Authorized
and Validly Issued Shares. Upon the Closing and the exchange of Debentures,
such
shares of the Common Stock shall constitute duly authorized shares of the
capital stock of the Company, duly authorized by the board of directors of
the
Company, and shall be deemed validly issued and outstanding, fully paid,
nonassessable and free and clear of all liens and encumbrances arising through
the actions of the Company or its directors, officers, employees or
agents.
(ii) Restrictions
on Issuance of Securities. Upon the Closing, the Company shall promptly instruct
its transfer agent to issue the requisite shares of Common Stock pursuant to
the
conversion of the Debentures in accordance with this Agreement. All shares
of
Common Stock issued by the transfer agent shall constitute restricted securities
at the time of issuance and shall be endorsed with the legends substantially
in
the form set forth below in Section 4(b)(viii), subject to the
following:
(A) Provided
the Company remains current with its reporting requirements under the Securities
Exchange Act of 1934 at the time of issuance by the transfer agent, the Company
shall approve the removal of restrictive legends from those shares of Common
Stock transferred or issued pursuant to this Agreement under Rule 144.
(B) The
Company shall make whatever filings are necessary with the SEC, whether by
way
of supplement or post-effective amendment to its current Amendment No. 4 to
the
Form SB-2 registration statement, filed with the SEC on July 25, 2006 (the
“Current Registration Statement”) concerning the Underlying Common Stock, to
permit the issue of common stock at the Reduced Conversion Price of $.05 per
share; and
(C) The
Company shall use its commercial best efforts to file, at its cost, a second
registration statement (“Second Registration Statement”) covering the Common
Stock that is not registered under the Current Registration Statement and the
registration of Interest Shares, and shall seek to make it declared effective
by
the SEC on a timely basis not to exceed 75 days from the Closing (180 days
if
reviewed by the SEC).
(iii) “Most
Favored Nation”; Piggyback Rights. If at any time within 18 months of the
Closing Date, the Company shall offer, issue or agree to issue any Common Stock
or Interest Shares to any person or entity at a price per share or conversion
or
exercise price per share which shall be less than the Reduced Conversion Price,
the Company shall lower the Reduced Conversion Price to the per share price
of
any equity offering made by the Company and shall issue such number of Common
Stock and/or Interest Shares to the Debentureholders to reduce the Reduced
Conversion Price to that of such subsequent offering. In the event of any such
equity offering, the Company shall promptly give written notice to
Debentureholders of the proposed registration of those additional shares under
the Securities Act and shall offer such Debentureholders the right to request
inclusion of the Common Stock held by such Debentureholders in the Second
Registration Statement.
(iv) Authorization.
Company has full right, power and authority to enter into, execute, deliver
and
perform its obligations under this Agreement without the necessity of obtaining
any consents or approvals of, or the taking of any other action with respect
to,
any third parties (or if such consents, approvals or other actions are required,
the same have been accomplished prior to the date hereof).
(v) Binding
Agreement. This Agreement constitutes the valid, binding and enforceable
agreement of Company in accordance with its terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditor’s or secured party’s
rights generally and except as enforceability may be subject to general
principles of equity, whether applied in a proceeding at law or in
equity.
(vi) No
Conflict. The execution, delivery, and performance of this Agreement by the
Company will not conflict with, or result in the breach or termination of,
of
constitute a default under, any lease, agreement, commitment, or other
instrument to which it is a party. The transactions, or any part thereof,
contemplated by this Agreement are not restrained or prohibited by any
injunction, stay, order or judgment rendered by any court or other governmental
agency, and, to the best of the Company’s knowledge no proceeding has been
instituted or is pending in which any person or entity seeks to restrain such
transactions, or any part thereof, and no threat has been made by any person
or
entity to seek any such restraint, attachment, sequester or other
remedy.
(b) Of
the
Debentureholders:
(i) Litigation.
Upon the Closing (as defined), each Debentureholder shall terminate any and
all
current, pending, or threatened litigation with the Company to which they are
or
may become a party, without prejudice to reinstatement if and only if the
Company defaults in its obligations under this Agreement. For any such matters,
the Debentureholder shall procure a stipulation of discontinuance (the
“Stipulation”) along with the execution and delivery of this Agreement. The
Stipulation shall be without prejudice solely with respect to the item
enumerated above.
(ii) Voting.
In any vote required or requested of Debentureholders under the Company’s
By-laws, Certificate of Incorporation, or applicable law, each Debentureholder
shall refrain from (a) voting against any nominee to the Board of Directors
of
the Company, and (b) any proposal designated by the current management of the
Company that does not affect the Conversion.
(iii) Cooperation.
Each Debentureholder shall provide the Company with any and all information
needed to register the shares of Common Stock and the Interest Shares with
the
SEC.
(iv) Title
to
Debentures. Each Debentureholder represents and warrants that it is the owner
of
record of the Debentures.
(v) Authorization.
Debentureholder has the full power and authority to enter into this Agreement,
and this Agreement, when executed and delivered, will constitute a valid and
legally binding obligation of the Debentureholder. All organizational action
required to be taken to authorize (a) the execution and delivery of this
Agreement by the Debentureholder and (b) the performance by such Debentureholder
of the Debentureholder's obligations hereunder has been taken.
(vi) Binding
Agreement. This Agreement constitutes the valid, binding and enforceable
agreement of the Debentureholders in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor’s or secured party’s rights generally and except as enforceability may
be subject to general principles of equity, whether applied in a proceeding
at
law or in equity.
(vii) No
Conflict. The execution, delivery, and performance of this Agreement by
Debentureholders will not conflict with, or result in the breach or termination
of, of constitute a default under, any lease, agreement, commitment, or other
instrument to which it is a party. The transactions, or any part thereof,
contemplated by this Agreement are not restrained or prohibited by any
injunction, stay, order or judgment rendered by any court or other governmental
agency, and, to the best of the Debentureholders knowledge no proceeding has
been instituted or is pending in which any person or entity seeks to restrain
such transactions, or any part thereof, and no threat has been made by any
person or entity to seek any such restraint, attachment, sequester or other
remedy.
(viii) Legends.
Notwithstanding the Company’s obligation to register the Shares of Common Stock
as Interest Shares with the SEC, upon conversion of the Debentures, each
certificate or other document evidencing any of the Common Stock or Interest
Shares shall be endorsed with the legends substantially in the form set forth
below:
THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT
OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SUCH ACT, OR UNLESS CHINA
MOBILITY SOLUTIONS, INC. (THE “COMPANY") HAS RECEIVED AN OPINION OF COUNSEL OR
OTHER EVIDENCE, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.
5. Closing
Condition; Minimum Conversion. The closing of the Conversion (the “Closing”)
shall occur at such time as the Company has received executed
Conversion/Settlement Agreements for at least fifty (50%) percent in principal
amount (or $1,675,000) of the initial $3,350,000 of Debentures including all
conversions to date (the “Minimum Conversion”). The date upon which the Minimum
Conversion occurs shall be deemed the closing date (“Closing Date”). The
Debentures being converted do not need to be tendered to the Company for
Conversion until the Conversion/Settlement Agreements for the Minimum Conversion
are received.
6. Escrow.
Prior to Closing, Debentureholders shall submit (a) the Debentures; (b) the
Debenture Documents; and (c) the executed Conversion/Settlement Agreements
to
Xxxxxxxx Xxxxx LLP, as escrow agent (the “Escrow Agent”) pursuant to an escrow
agreement (the “Escrow Agreement”) in the form to attached hereto as Schedule
“B” and made a part hereof. The Company shall be solely responsible for the fees
and expenses of the Escrow Agent. In the event the Closing Conditions in Section
5 are not met or the Agreement is terminated under Section 8, the Escrow Agent
shall be instructed to return the Conversion/Settlment Agreements promptly
to
their original sources.
7. Release.
To all whom these presents shall come or may concern, know that the
Debentureholders on behalf of themselves and their heirs, executors,
administrators, successors, assigns, attorneys, agents, and affiliates, and
all
of their respective officers, directors, members, managers, partners, employees,
shareholders, heirs, executors, administrators, successors and assigns and
agents (collectively, the “Releasor”) hereby releases and forever discharges the
Company and all of its officers, directors, members, managers, partners,
employees, shareholders, heirs, executors, administrators, successors and
assigns and agents, including, but not limited to, placement agents and
financial advisors, from any and all claims, counterclaims, demands, actions,
causes of actions, suits, debts, costs, dues, sums of money, accounts, bonds,
bills, specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, executions, expenses and liabilities
whatsoever, known or unknown, at law or in equity (“Claims”), irrespective of
whether such Claims arise out of contract, tort, violation of laws or
regulations or otherwise, including any derivative suits on behalf of the
Company, which Releasors, individually or collectively, ever had, now has or
hereafter can, shall or may have against the Company, upon, or by reason of
any
matter, cause or thing whatsoever from the beginning of the world to and
including the date of this Release. Without limiting the generality of the
foregoing, the term “Claims” shall include, without limitation, any loss,
liability, expense and/or detriment, of any kind or character, in any way
arising out of, connected with, or resulting from the acts or omissions of
the
Company or any of them, including, without limitation, the contracting for,
charging, taking, reserving, collecting or receiving interest in excess of
the
highest lawful rate, any breach of fiduciary duty, breach of any duty of fair
dealing, breach of confidence, cause of action or defenses based on the
negligence of the Company or the Company’s predecessors, breach of funding
commitment, undue influence, duress, economic coercion, conflict of interest,
negligence, bad faith, malpractice, violations of the Racketeer Influenced
and
Corrupt Organizations Act, intentional or negligent infliction of mental
distress, tortious interference with contractual relations, tortious
interference with corporate governance or prospective business advantage, breach
of contract, fraud, mistake, deceptive trade practices, libel, slander,
conspiracy, or any claim for wrongfully taking any action in connection with
the
Debentures and the Debenture Documents.
(a) This
Release is accepted by the Company as a condition to Debentureholders executing
this Agreement and Releasor expressly agrees that this Release survives the
termination of this Agreement.
(b) Releasor
hereby represents and warrants to the Company that it has not assigned, pledged,
or contracted to assign or pledge or otherwise disposed of any of the
Claims.
(c) This
Release shall be binding upon Releasor and its legal representatives, successors
and assigns and shall inure to the benefit of the Company and its successors
and
assigns.
(d) This
Release includes a release of, and shall inure to the benefit of, all the
Company and its respective legal representatives, successors, assigns,
directors, trustees, officers, agents, servants, employees and attorneys, past,
present and future.
(e) TO
THE
EXTENT PERMITTED BY APPLICABLE LAW, RELEASOR DOES HEREBY INTENTIONALLY,
KNOWINGLY, VOLUNTARILY, UNCONDITIONALLY AND IRREVOCABLY WAIVE ITS RIGHT TO
A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS RELEASE (INCLUDING, WITHOUT LIMITATION, ANY
ACTION TO RESCIND OR CANCEL THIS RELEASE OR ANY CLAIMS OR DEFENSES ASSERTING
THAT THIS RELEASE WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE).
THE FOREGOING WAIVER BY RELEASOR IS A MATERIAL INDUCEMENT FOR THE COMPANY TO
ACCEPT THIS RELEASE AND ENTER INTO THIS AGREEMENT.
(f) Releasor
hereby agrees, represents and warrants that it has had advice of counsel of
its
own choosing in negotiations for and the preparation of this Release, that
it
has read the provisions of this Release, and that it is fully aware of its
contents and legal effect.
(g) Releasor
hereby acknowledges that it has not relied upon any representation of any kind
made by the Company in making the foregoing release.
8. Termination.
If the Closing has not occurred on or before February 15, 2007, this Agreement
may be terminated by the Company or the Debentureholder at any time thereafter
by giving written notice to the other parties.
9. Waiver.
Each of the parties hereby waives any breach or non-compliance with the
Debenture or Debenture Documents, as applicable, by any of the parties hereto
prior to the date of this Agreement.
10. Non-disclosure.
Neither party shall disclose, announce or otherwise inform any third parties
that are not a party to this transaction, including but not limited to the
media, any material non-public information regarding the parties hereto or
the
fact that this Agreement was entered into, including the terms and conditions
thereof, except as required in order to consummate the Conversion, without
the
other party’s written consent, and the Debentureholders shall execute a
Registration FD Disclosure Agreement, attached hereto as Schedule “C” and made a
part hereof, until the Closing is executed between the parties.
11. Remedies.
In the event of a breach of this Agreement by Company or the Debentureholders,
the parties agree that the Debentureholders shall be entitled to terminate
this
Agreement without notice to Company and proceed with any and all remedies
available to them under the Debenture Documents and this Agreement.
12. Miscellaneous.
(a) Notices.
Any notice, demand, request, statement or consent made hereunder shall be
delivered hereunder shall be made in accordance with and governed by the notice
provision contained in the Debenture Documents.
(b) Modifications,
Waivers, Etc. No waiver, and no modification, amendment, discharge, or change
of
the Agreement, except as otherwise provided herein, shall be valid unless the
same is in writing and signed by the party against which the enforcement of
such
modification, waiver, amendment, discharge, or change is sought.
(c) Successors
or Assigns. This Agreement shall inure to the benefit of and shall be binding
upon all successors and assigns of the parties hereto.
(d) Further
Assurances. All parties to this Agreement agree to execute any additional
documents as necessary to fulfill the intent of this Agreement.
(e) Judicial
Interpretation. Should any provision of this Agreement require judicial
interpretation, it is agreed that a court interpreting or construing the same
shall not apply a presumption that the terms hereof shall be more strictly
construed against any party by reason of the rule of construction that a
document is to be construed more strictly against the party who itself or
through its agent prepared the same.
(f) Entire
Agreement. This Agreement and the Schedules hereto reflect the entire
understanding of the parties with respect to the subject matter herein,
contained and supersedes any prior agreements, whether written or oral, in
regard thereto.
(g) Full
Force and Effect. Except as expressly modified herein, all terms of the
Debenture Documents shall be and shall remain in full force and effect and
shall
constitute the legal, valid, binding and enforceable obligations of the Company
and the Debentureholders.
(h) Severability.
In the event that any of the provisions of this Agreement are held to be
unenforceable under applicable law or are so held by court decision of a court
having competent jurisdiction, the remaining portions of this Agreement will
remain in full force and effect.
(i) Governing
Law. This Agreement shall be governed by, and shall be construed in accordance
with, the laws of the State of New York without regard to principles of
conflicts of law. The parties hereto agree that the exclusive forum for the
resolution of disputes hereunder shall be the state or federal courts located
in
New York County, New York, and hereby waive any objection thereto on the basis
of personal jurisdiction and venue.
(j) Counterparts.
This Agreement may be executed in multiple counterparts, each of which shall
be
an original and all of which, taken together, shall constitute but one and
the
same agreement among the parties.
(k) Binding
Nature. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
(l) Captions.
The captions to the Sections and paragraphs of the Agreement are for the
convenience of the parties only, and are not a part of this
Agreement.
(m) Attorneys’
Fees. If any party shall breach this Agreement, the non-breaching party shall
be
entitled to recover all costs, changes, and expenses of enforcing this Agreement
including reasonable attorneys’ fees, paralegals’ fees, and costs, which
reasonable fees shall include any such fees incurred in any trial or appellate
proceedings.
(n) Survival
of Representations, Warranties and Covenants. All representations, warranties,
covenants, the release in Section 7, and other agreements contained herein
and
in all documents delivered hereunder shall survive any termination of this
Agreement and continue in full force and effect.
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
DEBENTUREHOLDER:
$____________________________
Principal
amount of Debenture to be
Converted
at Reduced Conversion Price
______________________________
Number
of
Shares of Common Stock issuable upon conversion
_____________________________
Number
of
Interest Shares
By:
By:
Name:
Title:
COMPANY:
China
Mobility Solutions, Inc., a Florida corporation
By:
Name:
Xiao-qing Du
Title:
Chief Executive Officer
