NOTE CONVERSION AGREEMENT
Exhibit 10.2
This Note
Conversion Agreement (“Agreement”) is made
effective as of April 1, 2010, (the “Effective Date”) by
and between Home System Group, a Nevada corporation (the “Company”) and Victory
High Investments Limited (the “Investor”).
RECITALS
WHEREAS, the Investor advanced
loans to the Company in the amount of two million dollars
($2,000,000.00) as of April 1, 2010 (the “Loan”);
WHEREAS, the Loan is evidenced
by an unsecured non-interesting bearing promissory note in the form attached
hereto as Exhibit
A (the “Note”);
and
WHEREAS, the Company desires
that the Investor exchange two million dollars ($2,000,000.00) of the Loan
for common stock of the Company (the “Loan
Conversion”).
NOW THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Investor hereby agree as follows:
AGREEMENT
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1.
THE LOAN
CONVERSION.
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1.1 Conversion of the Note into
Common Stock. Upon the terms and subject to the conditions of this
Agreement, upon the Effective Date, the Investor shall surrender the Note to the
Company for cancellation and promptly after receipt of such Note, the Company
shall issue to the Investor two million dollars worth of shares of the common
stock of the Company calculated as set forth in Section 1.3 below (the
“Conversion
Stock”).
1.2 Authorization and Issuance
of the Common Stock. The Company has authorized the issuance of the
Conversion Stock
1.3 Conversion Rate for the
Conversion Stock. The number of shares of Conversion Stock issued
pursuant to the Loan Conversion shall be calculated by dividing two million
dollars ($2,000,000.00) by three dollar and fifty cents ($3.50) (the “Conversion Rate”). No
fractional shares of the Company’s common stock will be issued upon the Loan
Conversion. In lieu of any fractional share to which the Investor would
otherwise be entitled, the Company will pay to the Investor in cash the amount
of that would otherwise be converted into such fractional share.
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2. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Investor that, except as set forth in the
SEC documents (as defined below), as of the Effective
Date:
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2.1 Organization. The
Company is duly organized, validly existing and in good standing under the laws
of the State of Nevada. The Company has full power and authority to own or lease
its properties and to carry on its business as presently conducted and as
described in the documents filed by the Company under the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder (the
“Securities
Act”) (such documents, the “Securities Act
Documents”) and the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (the “Exchange Act”), since
the end of its most recently completed fiscal year through the date hereof (the
“Exchange Act
Documents,” and together with the Securities Act Documents, the “SEC
Documents”).
2.2 Due Authorization and Valid
Issuance. The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement. This
Agreement has been duly authorized and validly executed and delivered by the
Company and constitutes the legal, valid and binding agreement of the Company
enforceable against the Company in accordance with its terms, except as
(a) rights to indemnity and contribution may be limited by state or federal
securities laws or the public policy underlying such laws,
(b) enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and (c) enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
2.3 No Registration
Rights. No person will have the right, which right has not been waived,
to require the Company to register any securities for sale under the Securities
Act by reason of the issuance Conversion Stock.
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3. REPRESENTATIONS
AND WARRANTIES OF THE INVESTOR. The Investor hereby
represents and warrants to the Company, as of the date hereof, as
follows:
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3.1 Authorization. The
Investor has the requisite legal power and authority to enter into this
Agreement and this Agreement shall constitute a valid and legally binding
obligation of the Investor, except as the same may be limited by bankruptcy,
insolvency, moratorium or other laws of general application affecting the
enforcement of creditors’ rights.
3.2 Accredited Investor.
The Investor is an “accredited investor” within the meaning of the SEC Rule 501
of Regulation D, as presently in effect.
3.3 Restricted
Securities. The Investor understands that the Conversion Stock are
restricted securities under applicable securities laws and may not be resold or
transferred unless they are first registered or qualified under the applicable
securities laws or unless an exemption from such registration or qualification
is available. Accordingly, the Investor hereby acknowledges that he is prepared
to hold the Conversion Stock for an indefinite period of time, until their
maturity or until resale is permitted under the applicable securities laws.
Without limitation to the foregoing, the Investor understands that if the
Company does not (i) register its common shares with the SEC pursuant to
Section 12 of Exchange Act, (ii) become subject to Section 15(d)
of the Exchange Act, (iii) supply information pursuant to Rule 15c2-11
thereunder, or (iv) have a registration statement covering the Conversion
Stock (or a filing pursuant to the exemption from registration under Regulation
A of the Securities Act covering the Converted Stock) under the Securities Act
in effect when it desires to sell the Conversion Stock, the Investor may be
required to hold the Conversion Stock for an indeterminate period.
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4.
RESTRICTED
SECURITIES.
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4.1 Restrictive
Legends.
(a)
Unless and until otherwise permitted by this Section, each certificate for
Conversion Stock issued to the Investor or any subsequent transferee shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY OTHER APPLICABLE FEDERAL OR STATE SECURITIES LAWS,
AND THUS MAY NOT BE TRANSFERRED UNLESS REGISTERED UNDER THE SECURITIES ACT OF
1933 AND SUCH OTHER LAWS OR UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.”
(b) In
addition to the legend required by this Section 4.1, each certificate for
Company shares issued under or pursuant to this Agreement to the Investor or any
subsequent transferee shall be stamped or otherwise imprinted with any legend
required pursuant to applicable state corporation and securities
laws.
4.2 Transfer. The Company
may decline to acknowledge or register a transfer of any Company shares bearing
any legend pursuant to Section 4.1, and may instruct any transfer agent for
its Company shares to decline the same, unless the Company is reasonably
satisfied that the Company shares being transferred have been registered or are
exempt from registration under applicable securities laws.
4.3 Removal of Legends.
Whenever the legend described in Section 4.1 shall no longer be required by
law, the holder of any particular Company shares bearing such legends shall be
entitled to receive from the Company, without expense to such holder, one or
more new certificates for such particular Company shares not bearing restrictive
legends pursuant to Section 4.1 hereof.
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5.
INDEMNIFICATION.
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5.1
Notwithstanding any termination of this Agreement, the Investor agrees to
indemnify, defend and hold harmless the Company and its affiliates and
controlling persons (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and each of its officers, managers,
members, partners, directors, stockholders, employees, representatives and
agents (all such persons and entities being collectively referred to as the
“Indemnified
Parties”) to the fullest extent permitted by applicable law from and
against any and all claims, losses (including any diminution in value of the
Conversion Stock acquired by the Investor), demands, actions, causes of action,
assessments, damages, liabilities, costs or expenses, including without
limitation interest, penalties, fines, fees, deficiencies, claims of damage,
court and arbitration costs and fees and disbursements of attorneys,
accountants, consultants and other experts as and when incurred or sustained by
any Indemnified Party (collectively, “Loss”) as a result of
or arising from (i) any inaccuracy or breach of any representation,
warranty or covenant made by the Investor in or pursuant to this Agreement or
(ii) any actions or proceedings by a third party against the Company in
connection with or as a result of the transactions contemplated by this
Agreement. The rights accorded to Indemnified Parties under this
Section 5.1 shall be in addition to any rights and remedies that any
Indemnified Party may have at law or in equity, by separate agreement or
otherwise. Payment of amounts due under this indemnity provision shall be made
promptly upon demand by the Indemnified Party, as and when incurred, by wire
transfer of immediately available funds to an account designated in writing by
the Indemnified Party.
5.2 Conduct of Indemnification
Proceedings.
(a) If
any proceeding shall be brought or asserted against an Indemnified Party with
respect to any proceeding in connection with any matter subject to
indemnification under Section 5.1, such Indemnified Party shall promptly
notify the person from whom indemnity is sought (the “Indemnifying Party”)
in writing, and the Indemnifying Party shall assume the defense thereof (with
such assumption being an acknowledgement that such proceeding is indemnifiable
pursuant to Section 5.1), including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses
incurred in connection with defense thereof; provided, that the failure of any
Indemnified Party to give such notice shall not relieve the Indemnifying Party
of its obligations or liabilities pursuant to this Agreement, except (and only)
to the extent that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal or further review)
that such failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.
(b) An
Indemnified Party shall have the right to employ separate counsel in any such
proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees
and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such proceeding; or (iii) the
named parties to any such proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such proceeding effected without its written consent, which
consent shall not be unreasonably withheld or delayed. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such proceeding.
(c) All
fees and expenses of the Indemnified Party (including reasonable fees and
expenses to the extent incurred in connection with investigating or preparing to
defend such proceeding in a manner not inconsistent with this Section 5)
shall be paid to the Indemnified Party, as incurred, within ten
(10) business days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified Party is
not entitled to indemnification hereunder; provided, that the Indemnifying Party
may require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such Indemnified
Party is not entitled to indemnification hereunder).
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6.
MISCELLANEOUS.
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6.1 Further Instruments and
Actions. The parties agree to execute such further instruments and to
take such further action as may reasonably be necessary to carry out the intent
of this Agreement.
6.2 Finder’s
Fees.
(a) The
Company (i) represents and warrants that no agent, broker, investment
banker, person or firm acting on behalf of or under the authority of the Company
is or will be entitled to any broker’s or finder’s fee or any other commission
directly or indirectly in connection with the transactions contemplated herein
except as disclosed hereunder, and (ii) hereby agrees to indemnify and hold
the Investor harmless from and against any liability for any commission or
compensation in the nature of a finder’s fee to any broker or other person or
firm (and the costs and expenses of defending against such liability or asserted
liability) for which the Company is responsible.
(b) The
Investor (i) represents and warrants that it has retained no finder or
broker in connection with the transactions contemplated by this Agreement, and
(ii) hereby agrees to indemnify and hold the Company harmless from and
against any liability for any commission or compensation in the nature of a
finder’s fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) for which the
Investor is responsible.
6.3 Expenses. Each party
hereto agrees to pay its expenses incurred in connection with this Agreement and
the documents and transactions contemplated herein.
6.4 Notices. All notices
and other communications required or permitted hereunder shall be given in
writing and shall be delivered by personal delivery, facsimile, overnight
delivery service, or U.S. mail service, addressed as follows:
The
Company:
Yu
Lei
Chief
Executive Officer
Oceanic
Industry Park
Sha Gang
highway, Gang Kou Town
Zhongshan
City, Guangdong
People’x
Xxxxxxxx xx Xxxxx 000000
T:
000-000-0000
With a copy
to:
The Xxxxx
Law Group
000
Xxxxxxxxxx Xx., Xxxxx 0000
Xxx
Xxxxxxxxx, XX 00000
Attn:
Xxxx X. Xxxxx
T: (000)
000-0000
F: (000)
000-0000
The
Investor:
Fang
Zaozhen
President
Victory
High Investments Limited
X.X.Xxx
957, Offshore Incorporations Centre,
Road
Town,Tortola,
British
Virgin Islands
Any
notice or other communication delivered in accordance with this Section 6.4
shall be deemed to have been given upon actual receipt or refusal of such
delivery.
6.5 Governing Law. This
Agreement shall be governed in all respects by the laws of the State of Nevada
without giving effect to the conflicts of laws principles thereof.
6.6 Successors and Assigns;
Assignment. No party may assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party,
which consent may not be unreasonably withheld, including by merger or
consolidation. Subject to the preceding, this Agreement shall be binding upon,
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns.
6.7 Amendments and
Waivers. This Agreement may only be amended with the written consent of
the Company and the Investor, or the successors or permitted assigns of the
foregoing, and no oral waiver or amendment shall be effective under any
circumstances whatsoever.
6.8 Counterparts. This
Agreement may be signed in two or more counterparts. Signatures and delivery may
be transmitted via facsimile.
6.9 Entire Agreement.
This Agreement, the attached exhibits and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof and they supersede, merge
and render void every other prior written and/or oral understanding or agreement
among or between the parties hereto relating to the Notes to be purchased
pursuant to this Agreement.
6.10
Severability.
The invalidity or unenforceability of any provision hereof in any jurisdiction
shall not affect the validity, legality or enforceability of the remainder
hereof in such jurisdiction or the validity, legality or enforceability hereof,
including any such provision, in any other jurisdiction, it being intended that
all rights and obligations of the parties hereunder shall be enforceable to the
fullest extent permitted by law.
6.11
Titles and
Subtitles. The titles of the sections and subsections of this Agreement
are for convenience of reference only and are not to be considered in construing
this Agreement.
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[Signature
Page Follows]
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day
and year written above.
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COMPANY:
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Home System Group, a
Nevada corporation
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By:
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/s/
Yu Lei
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Name:
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Yu
Lei
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Title:
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Chief
Executive Officer
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THE
INVESTOR:
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Victory
High Investments Limited
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By:
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/s/
Fang Zaozhen
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Name:
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Fang
Zaozhen
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Title:
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President
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Exhibit
A
Non-Interest
Bearing Promissory Note
