Agreement to Convert Debt into Equity
This
Agreement
to Convert Debt into Equity (“Agreement”) is made
as of December 24, 2008, by and between the NIVS IntelliMedia Technology Group,
Inc., a Delaware corporation (“NIVS USA”), Niveous
Holding Company Limited, a British Virgin Islands corporation (“NIVS BVI”), NIVS (HZ)
Audio & Video Tech Company Limited (“NIVS PRC”), NIVS
International (H.K.) Limited (“NIVS HK,” and
collectively with NIVS USA, NIVS BVI and NIVS PRC, the “Company”), on the one
hand, and Tianfu Li, an individual residing in the People’s Republic of China
(“PRC”) and
holder of PRC identity card no. 000000000000000000 (“Xx. Xx” and
collectively with the Company, the “Parties”), on the
other hand.
WHEREAS, Xx. Xx is the founder
and principal shareholder of the Company;
WHEREAS, Xx. Xx has lent funds
to the Company and the Company, as of the date of this Agreement, has an
outstanding loan balance equal to US$7,841,726 owed to Xx. Xx (the “Debt”);
WHEREAS, NIVS USA is the
direct and/or indirect parent corporation of NIVS BVI, NIVS PRC, and NIVS
HK;
WHEREAS, NIVS USA intends to
conduct a public offering of shares of common stock of the NIVS USA, par value
$0.0001 (“Common
Stock”) and effect an initial listing of the Common Stock on the NYSE
Alternext US (the “Offering”);
WHEREAS, NIVS USA intends to
conduct the Offering of the Common Stock at an offering price that has yet to be
determined but is expected to be in the range from $3.25 to $4.00 per shares of
Common Stock (the “Offering
Price”);
WHEREAS, each of the Parties
desire that, upon the closing of the Offering, the Debt be converted into a
number of shares of Common Stock (the “Conversion”) that is
equal to the Debt divided by the Offering Price, rounded down to the nearest
whole (the “Shares”), and the
Debt will no longer be outstanding after giving effect to the Conversion;
and
WHEREAS, the Shares will be
restricted securities under the U.S. Securities Act of 1933, as amended (the
“Securities
Act”), and the Shares may not be sold, transferred, or otherwise disposed
of without registration under the Securities Act or an exemption
therefrom.
NOW THEREFORE, in
consideration of the covenants and agreements, including the subscription
agreement, hereafter set forth, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties agree
as follows:
1. Conversion of the Debt into
the Shares. Xx. Xx and the Company hereby agree that, upon the
closing of the Offering, the Debt shall be converted into a number of Shares
determined by dividing the Debt by the Offering Price, and rounding down to the
nearest whole number. No fractional shares will be issued in the
Conversion. After the Conversion, the Debt shall no longer be
outstanding and extinguished in its entirety.
2. Representations, Warranties
and Covenants by Xx. Xx. Xx. Xx hereby makes the following
representations, warranties, and covenants as to the transactions contemplated
by this Agreement as of the date of this Agreement and as of the date of the
issuance of the Shares.
a. Xx.
Xx has the power and authority to execute and deliver this Agreement, and to
consummate the transactions contemplated hereby and thereby.
b. Xx.
Xx is acquiring the Shares for investment for his own account and not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and Xx. Xx has no present intention of selling, granting any
participation in, or otherwise distributing the same. Xx. Xx further
represents that he does not 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.
c. Xx.
Xx understands that the Shares are not and will not be registered under the
Securities Act on the ground that the sale and the issuance of securities
hereunder is exempt from registration under the Securities Act pursuant to
Section 4(2) thereof, and that the Company’s reliance on such exemption is
predicated on the Xx. Xx’x representations set forth herein.
d. Xx.
Xx acknowledges that he can bear the economic risk of his investment, and has
such knowledge and experience in financial and business matters that he is
capable of evaluating the merits and risks of the investment in the
Shares.
e. Xx.
Xx has carefully reviewed such information as such he deemed necessary to
evaluate an investment in the Shares. To the full satisfaction of Xx.
Xx, he has been furnished all materials that he has requested relating to the
Company and the issuance of the Shares hereunder, and Xx. Xx has been afforded
the opportunity to ask questions of representatives of the Company to obtain any
information necessary to verify the accuracy of any representations or
information made or given to him, her or it. Notwithstanding the
foregoing, nothing herein shall derogate from or otherwise modify the
representations and warranties of the Company set forth in this Agreement, on
which Xx. Xx has relied in receiving the Shares.
f. Xx.
Xx understands that the Shares may not be sold, transferred, or otherwise
disposed of without registration under the Securities Act or an exemption there
from, and that in the absence of an effective registration statement covering
the Shares or any available exemption from registration under the Securities
Act, the Shares must be held indefinitely. Xx. Xx is aware that the
Shares may not be sold pursuant to Rule 144 promulgated under the Securities Act
unless all of the conditions of that Rule are met. Among the
conditions for use of Rule 144 may be the availability of current information to
the public about the Company.
g. Xx.
Xx acknowledges that he must assure the Company that the offer and sale of the
Shares to him qualifies for an exemption from the registration requirements
imposed by the Securities Act and from applicable securities laws of any state
of the United States. Xx. Xx agrees that he meets the criteria
established in the subsections set forth below.
h. Xx.
Xx is not a U.S. Person, as defined in Rule 901 of Regulation S, promulgated
under the Securities Act, and Xx. Xx represents and warrants to the Company
that:
(i) Xx.
Xx is not acquiring the Shares as a result of, and Xx. Xx covenants that he will
not engage in any “directed selling efforts” (as defined in Regulation S under
the Securities Act) in the United States in respect of the Shares which would
include any activities undertaken for the purpose of, or that could reasonably
be expected to have the effect of, conditioning the market in the United States
for the resale of any of the Shares;
(ii) Xx.
Xx is not acquiring the Shares for the account or benefit of, directly or
indirectly, any U.S. Person;
(iii) Xx.
Xx is a resident of the PRC;
(iv) the
offer and the sale of the Shares to Xx. Xx as contemplated in this Agreement
complies with or is exempt from the applicable securities legislation of the
PRC;
(v) Xx.
Xx is outside the United States when receiving and executing this Agreement and
that Xx. Xx will be outside the United States when acquiring the
Shares,
(vi) and
Xx. Xx covenants with Company that:
|
|
(1)
|
offers
and sales of any of the Shares prior to the expiration of a period of one
year after the date of original issuance of the Shares (the six (6)-month
period hereinafter referred to as the “Distribution
Compliance Period”) shall only be made in compliance with the safe
harbor provisions set forth in Regulation S, pursuant to the registration
provisions of the Securities Act or an exemption therefrom, and that all
offers and sales after the Distribution Compliance Period shall be made
only in compliance with the registration provisions of the Securities Act
or an exemption therefrom and in each case only in accordance with
applicable state securities laws;
and
|
|
|
(2)
|
Xx.
Xx will not engage in hedging transactions with respect to the Shares
until after the expiration of the Distribution Compliance
Period.
|
3. Representations, Warranties
and Covenants by the Company. Xx. Xx hereby makes the
following representations, warranties, and covenants as to the transactions
contemplated by this Agreement as of the date of this Agreement and as of the
date of the issuance of the Shares.
a. NIVS
USA is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, with full corporate power and authority
to execute and deliver this Agreement, and to consummate the transactions
contemplated hereby and thereby.
b. The
Company shall deliver to Xx. Xx within ten (10) days of the closing of the
Offering a stock certificate that represents the Shares.
4. Further
Assurances. Each of the Parties shall use its reasonable
commercial efforts to proceed promptly with the transactions contemplated herein
and to execute such further documents and other papers and perform such further
acts as may be reasonably required or desirable to carry out the provisions of
this Agreement and to consummate the transactions contemplated
herein.
5. Miscellaneous. This
Agreement may be executed in any number of facsimile counterparts, all of which
shall be but a single original. This Agreement will be binding upon
and inure to the benefit of the Parties hereto and their respective successors
and assigns. The Parties shall execute and deliver from time to time
hereafter, upon written request, all such further documents and instruments and
shall do and perform all such acts as may be reasonably necessary to give full
effect to the intent of this Agreement.
6. Governing
Law. This Agreement and all actions arising out of or in
connection with it shall be governed by and construed in accordance with the
laws of the State of Delaware, without regard to the conflicts of law provisions
of the State of Delaware, or of any other state.
[SIGNATURE
PAGE TO FOLLOW]
IN WITNESS WHEREOF, the
Parties have entered into this Agreement as of the date first set forth
above.
By: /s/ [ILLEGIBLE]
Name: ________________________
Title: ________________________
Niveous
Holding Company Limited
By: /s/ [ILLEGIBLE]
Name: ________________________
Title: ________________________
NIVS
(HZ) Audio & Video Tech Company Limited
By: /s/ [ILLEGIBLE]
Name: ________________________
Title: ________________________
NIVS
International (H.K.) Limited
By: /s/ [ILLEGIBLE]
Name: ________________________
Title: ________________________
Tianfu
Li
/s/
Tianfu
Li
Tianfu
Li
