CONVERTIBLE NOTE CONVERSION AGREEMENT
THIS
CONVERTIBLE NOTE CONVERSION AGREEMENT (this “Agreement”) is made as of March 7,
2007 by and among EQUICAP, INC., a Nevada corporation (the "Company”) and
FOUNTAINHEAD CAPITAL PARTNERS LIMITED, an entity registered in Jersey, the
holder of the Company's Convertible Note due December 31, 2007 (the “Note”)
(“Holder”).
A.
WHEREAS,
the Company has previously issued the Note which has a current outstanding
principal balance together with accrued interest of approximately
$100,000.
B.
WHEREAS,
the Holder has acquired the Note as a result of loans and advances it had made
to the Company for purposes of working capital.
C.
WHEREAS,
the Company and Usunco Automotive Limited (“Usunco”) and the stockholders of
Usunco, have entered into a Share Exchange Agreement, dated as of March 7,
2007
(the "Share Exchange Agreement") pursuant to which the stockholders of Usunco
will become stockholders of the Company (the "Share Exchange").
D.
WHEREAS,
as a condition to the closing of the Share Exchange (the "Closing") and the
other transactions contemplated by the Share Exchange Agreement, Usunco and
the
Company have required that the Holder shall have executed and delivered this
Agreement, pursuant to which the Note shall be cancelled and converted into
an
aggregate of no more than 702,132 shares of Common Stock, $0.001 par value,
of
the Company (the "Common Stock") immediately after the Closing of the Share
Exchange (as defined in the Share Exchange Agreement).
E.
WHEREAS,
the Holder wishes to convert all outstanding unpaid principal and interest
owed
pursuant to the Note into shares of Common Stock in accordance with the terms
of
this Agreement.
NOW,
THEREFORE, in consideration of the premises and of the covenants and agreements
hereinafter set forth and for other good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, the parties hereby covenant
and
agree as follows:
1. Agreement
to Convert Note into Shares.
1.1 Conversion;
Cancellation of Note.
(a)
Conversion.
The
Holder hereby agrees that at the Closing of the Share Exchange, the amount
of
outstanding principal and/or accrued but unpaid interest owed to Holder pursuant
to the Note shall be automatically converted into the right to receive 702,132
of shares of Common Stock ("Shares").
(b) Irrevocable
Election.
Holder
agrees that the decision to convert the Note pursuant to this Agreement is
irrevocable and is contingent solely upon Closing of the Share Exchange. Holder
agrees that, without the prior written consent of the Company, following the
date of this Agreement until the earlier of (i) Closing of the Share Exchange
or
(ii) termination of the Share Exchange Agreement in accordance with its terms
for reasons other than a breach by the Company, such Holder shall not directly
or indirectly sell, assign, hypothecate or otherwise transfer or purport to
transfer all or any portion of the Note or the Shares issuable upon conversion
thereof.
(c)
Cancellation
of the Note.
Holder
agrees that, as of the Closing, Holder shall have no further rights under the
Note and such Note shall be deemed cancelled and of no further force and effect.
Prior to the Closing, Holder shall deliver the original Note to the Company
(or
its designee) duly endorsed for transfer to the Company. Promptly following
the
Closing, the Company shall deliver or cause its transfer agent to deliver to
Holder, the number of Shares designated in accordance with Section 1.1(a) above;
provided, however, that to the extent that Holder does not deliver the original
Note prior to Closing, upon surrender of the duly endorsed original Note to
the
Company (or its designee), the Holder shall be entitled to receive (and the
Company shall promptly issue or cause to be issued) in exchange therefor the
number of Shares issuable pursuant to Section 1(a) above. From and after the
Closing, Holder shall have no rights with respect to the Note other than to
surrender the original Note and receive Shares in exchange
therefor.
(d) Lost
Note.
In the
event that the Note has been lost or destroyed, the Holder of such Note shall,
as a condition to receipt of any Shares in exchange therefore, execute and
deliver to the Company an indemnity agreement, in such customary form as is
reasonably acceptable to the Company, indemnifying the Company for any loss
or
damages resulting from or arising out of the loss of such original
Note.
2. Representations
and Warranties of Holder.
Holder
hereby represents, warrants and agrees with the Company that:
2.1 Authorization;
Outstanding Notes.
Holder
has full power and authority to enter into the Agreement. The Agreement, when
executed and delivered by Holder, will constitute a valid and legally binding
obligation of Holder, enforceable in accordance with its terms.
Holder
is the only person with a direct or indirect interest in the Note being
converted into Shares under this Agreement. Neither the Note nor any interest
therein has been sold, assigned, transferred or hypothecated by Holder and
Holder has not entered into any agreement or arrangement to sell, assign,
transfer or hypothecate all or any portion of the Note. The Note is owned by
Holder free and clear of any claims, liens or encumbrances. To the best
knowledge of Holder, the aggregate principal amount of the Note is as set forth
in Recital A to this Agreement.
2.2 Accredited
Investor.
Holder
is an “accredited investor” as that term is defined in Rule 501(a) of Regulation
D promulgated under the Securities Act of 1933, as amended (the “Securities
Act”). Holder is experienced in evaluating and investing in securities of
companies in a similar stage of development and is able to fend for itself
and
can bear the economic risk of an investment in the Shares.
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2.3 Acquisition
Entirely for Own Account.
This
Agreement is made with Holder in reliance upon Holder's representation to the
Company, which by Holder’s execution of this Agreement Holder hereby confirms,
that the Shares to be acquired by Holder will be acquired for investment for
Holder's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof (other than sales in accordance
with
applicable state and federal securities laws). By executing this Agreement,
Holder further represents that Holder does not presently have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or
grant
participation to such person or to any third person, with respect to any of
the
Shares and Holder has not been formed for the specific purpose of acquiring
the
Shares.
2.4 No
Public Market.
Holder
understands that there can be no assurance that a liquid public market for
the
Shares will ever exist.
2.5 Restricted
Securities.
Holder
understands that the Shares have not been registered under the Securities Act
by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature
of
the investment intent and the accuracy of Holder’s representations as expressed
herein. Holder understands that the Shares will be “restricted securities” under
applicable U.S. federal and state securities laws and regulations, and that
pursuant to these laws, Holder may only resell the Shares if they are registered
with the Securities and Exchange Commission and qualified by state authorities
or an exemption from such registration and qualification requirements is
available. Holder 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 Shares, and requirements relating to the Company which are outside
of
Holder’s control and which the Company is under no obligation, and may not be
able, to satisfy.
2.6 Legends.
It is
understood and agreed that the Shares, and any securities issued in respect
thereof or exchange therefor, may bear a legend substantially the same as the
following legend as well as any legend required by the Blue Sky laws of any
state of the United States to the extent such laws are applicable to the Shares
represented by the certificate so legended:
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR
OTHERWISE DISTRIBUTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE ISSUER
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND
LAWS."
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3. Representations
and Warranties of the Company.
The
Company hereby represents, warrants and agrees with each Holder
that:
3.1.
Authorization
of Shares.
The
Shares upon issuance in accordance with the terms of this Agreement shall be
duly authorized, validly issued, fully paid and nonassessable.
3.2 Authority.
The
Company has the power and authority to deliver and perform this Agreement and
to
make the representations and warranties contained herein.
3.3 Noncontravention.
Neither
the execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby or compliance with the terms and conditions
hereof by the Company will violate or result in a breach of any term or
provision of any material agreement to which the Company is bound or is a party,
or the Company’s Certificate of Incorporation or By-Laws, or be in conflict with
or constitute a default under, or cause the acceleration of the maturity of
any
obligation of the Company under any existing agreement or violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its properties or assets, the effect of which would be to impair
the
performance by the Company of its obligations hereunder or the receipt by the
Holders of the Shares.
3.4 Enforceability.
This
Agreement has been duly and validly executed by the Company and constitutes
the
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting creditors' rights generally
or by
limitations on the availability of equitable remedies.
4. Resale
of Shares.
4.1 Registration
Rights.
As a
material inducement to Holder to enter into this Agreement, the Company shall
have entered into a registration rights agreement with the Holder and the form
and substance of such registration rights agreement shall be reasonably
satisfactory to the Holder.
4.2 144
Sales.
The
Company shall use its best efforts to timely file all documents and reports
required under the Exchange Act to meet the “Current Public Information”
requirements of subsection (c) of Rule 144 under the Securities Act (“Rule
144”). Further, the Company will use its best efforts to cooperate with Holders,
and its respective agents, in order to facilitate sales by the Holder of Shares
pursuant to Rule 144.
4.3 Legal
Opinion re: Transfers of Certain Holder Shares.
Any
legal opinion required to be rendered in connection with any transfer of the
Holder’s shares issuable on the conversion of the Convertible Note shall be
rendered by Xxxxxx X. X. Xxxxxx or his duly-appointed designee.
5. Indemnification
of Company.
Holder
agrees to indemnify and hold harmless the Company and each of its respective
officers, directors, agents, attorneys, accountants and affiliates from and
against all damages, losses, costs and expenses (including reasonable attorneys'
fees) that they may incur by reason of the failure of Holder to fulfill any
of
the terms or conditions of this Agreement, or by reason of any breach of the
representations and warranties made by Holder herein or in any other document
provided by Holder to the Company in connection with the transactions
contemplated hereby.
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6. Indemnification
of the Holder.
The
Company agrees to indemnify and hold harmless Holder and each of its respective
successors and assigns from and against all damages, losses, costs and expenses
(including reasonable attorneys' fees) that they may incur by reason of the
failure of the Company to fulfill any of the terms or conditions of this
Agreement, or by reason of any breach of the representations and warranties
made
by the Company herein or in any other document provided by the Company to such
Holder in connection with the transactions contemplated hereby.
7. Nontransferability
of Agreement.
This
Agreement is not transferable or assignable by Holder without the written
consent of the Company.
8. Successors
and Assigns.
The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
permitted transferees of any of the Note or Shares). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto 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.
9. Governing
Law.
This
Agreement shall be construed in accordance with and governed in all respects
by
the laws of the State of New York.
10. Amendments;
Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which together shall constitute one and the same
instrument. This Agreement may only be amended by written agreement of Holder
and the Company.
11. Entire
Agreement; No Reliance on Other Information.
This
Agreement, and the documents referred to herein or contemplated hereby
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof, and any and all other written or oral agreements relating
to the subject matter hereof existing between the parties hereto are expressly
canceled. Holder acknowledges and agrees that, other than as specifically
contained or referenced in or specifically contemplated by this Agreement,
Holder has not relied on and no person (including, but not limited to, Usunco)
has provided any information (whether written or oral) to, or made any
representation, warranty or promise relating to, the Shares, the Share Exchange,
or Holder’s decision to enter into this Agreement.
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IN
WITNESS WHEREOF, the undersigned have signed this Agreement as of the date
set
forth above.
| EQUICAP, INC., a Nevada corporation | ||
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| By: | ||
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Xxxxxx X. Xxxxxxxx, President |
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FOUNTAINHEAD
CAPITAL PARTNERS
LIMITED,
an entity registered in Jersey
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|
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| By: | ||
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Xxxxxx X. X. Xxxxxx
Attorney-in-fact
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