WAIVER/SETTLEMENT AGREEMENT
Exhibit
10.1
This
Waiver/Settlement Agreement (this “Agreement”)
is
made effective as of May 4, 2006 (the “Effective
Date”),
by
and between Southridge
Partners, LP, a
Delaware limited partnership (“Lender”),
and
China
Mobility Solutions, Inc.,
a
Florida corporation (the “Borrower”).
RECITALS
A. Borrower
and Lender entered into that certain Debenture Purchase and Warrant Agreement,
dated June 30, 2005 (the “Purchase Agreement”), whereby Borrower issued and
delivered to Lender that certain Senior Convertible Debenture, dated August
15,
2005, in the original principal amount of $500,000 (“Debenture”).
Contemporaneously therewith Borrower and Lender entered into that certain
Registration Rights Agreement (the “Registration Agreement?, whereby Borrower
agreed to file a registration statement with the Securities and Exchange
Commission, to register the shares of Borrower’s common stock issuable upon
conversion of the Debenture.
B. 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 “Loan
Documents.”
C. On
January 17, 2006, Lender sent a default notice (“Notice”) received by Borrower
on January 18, 2006 (a copy of which is attached hereto as Exhibit A) based
on
the filing of an S-8 Registration Statement (as more particularly described
in
the notice and hereinafter referred to as the “S-8 Default”), accelerated the
principal and interest due under the Loan Documents and made a demand on
the
amounts due and owing thereunder.
D. By
letter
agreement dated April 24, 2006 (“Letter Agreement”), the Lender agreed to
withdraw the Notice conditioned upon the parties’ entry into this definitive
agreement.
NOW,
THEREFORE, in consideration of the mutual duties and obligations herein,
and
intending to be legally bound, the parties hereto agree as follows:
AGREEMENT:
1. Acknowledgments
by Borrower.
Borrower hereby acknowledges the following:
(a) The
recitals set forth in paragraphs
A through D
above
are true and correct;
(b) While
Borrower disputes that the S-8 Default specified in the Notice existed and
continue to exist under the Debenture and other Loan Documents, by entering
into this Agreement (or otherwise), Lender hereby waives the S-8 Default
set
forth in the Notice concerning the Borrower’s previous filing of a Form S-8
Registration Statement prior to the effectiveness of registration of the
Borrower’s securities held by Lender; however, Lender is not waiving and has not
waived in any respect its rights and remedies with respect to any other matter,
including but not limited to all liabilities and obligations on the part
of
Borrower under the Loan Documents, or
any
defaults relating to the filing of a Form S-8 Registration Statement by Borrower
after the date hereof;
(c) That
on
and as of May 1, 2006, (i) Borrower was indebted to Lender for the
following amounts (collectively, the “Indebtedness”):
(A) principal under the Debenture in the amount of $500,000.00,
(B) interest under the Debenture in the amount of $10,156.25, and (C) zero
late registration fees under the Registration Agreement; (ii) all such
amounts remain outstanding and unpaid; and (iii) all such amounts remain
due and payable in full, without offset, deduction or counterclaim of any
kind
or character whatsoever, in accordance with the terms of the Loan
Documents;
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(d) That
the
Debenture and all other liabilities and obligations of Borrower to Lender
under
the Loan Documents shall, except as expressly modified hereby, remain in
full
force and effect, and shall not be released, impaired, diminished or in any
other way modified or amended as a result of the execution and delivery of
this
Agreement or by the agreements and undertakings of the parties contained
herein.
2. Additional
Payments.
Borrower shall continue to make monthly interest payments to Lender at the
non-default rate set forth in the Debenture. Borrower has paid all liquidated
damages to Lender pursuant to the terms of the Registration Agreement through
April 15, 2006 and shall continue to accrue and pay such liquidated
damages.
▇-▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ / ▇▇-▇ Registration Statement.
Borrower further agrees that it
shall
not file any additional S-8 Registration Statements prior to 45-days after
the
Registration Statement relating to the Lender’s securities is declared
effective. Borrower further agrees to file the Form SB-2 registration statement,
as amended, (file #333-128323) registering the Lender’s securities as soon as
possible but no later than May 8, 2006.
3. Amended
Securities.
In
consideration of Lender entering into this Agreement, Borrower has agreed
to
amend the following securities:
Debentures
The
initial conversion price of the Debenture of $.35 per share shall be reduced
to
$.30 per share upon execution of this Agreement, and subject to further
adjustment as set forth in Section 8 of the Debentures.
Warrants
The
initial exercise price of a Class A Warrant equal to 125% of the Conversion
Price of the Debenture shall be reduced from $.44 per share to $.38 per
share.
The
initial exercise price of Class B Warrant equal to 150% of the Conversion
Price
of the Debenture shall be reduced from $.52 per share to $.45 per
share.
The
redemption trigger price of a Class A and Class B Warrant equal to 175% of
the
respective exercise prices of $.38 and $.45 per share, shall be adjusted
to $.67
and $.79, respectively.
Debenture
Purchase and Warrant Agreement
Pursuant
to the terms of the Debenture Purchase and Warrant Agreement each Unit consisted
of $25,000 principal amount of Debentures and a number of Warrant Shares
issuable upon exercise of both the Class A Warrants and the Class B Warrants
determined by dividing the purchase price per Unit of $25,000 by the Conversion
Price of the Debentures.
Pursuant
to Section 2.6 of both the Class A Warrants and Class B Warrants the Board
of
Directors of CHMS has agreed to adjust the number of Shares issuable upon
exercise of the Class A Warrants and Class B Warrants so as to protect the
public rights of the investors. Accordingly, the number of Warrant Shares
issuable upon exercise of the Class A Warrants and the Class B Warrants shall
be
adjusted by dividing the purchase price per Unit of $25,000 by $.30 per share.
By way of example, a $25,000 Unit which previously contained 71,429 shares
of
Common Stock issuable upon conversion of the Debenture, 71,429 shares of
Common
Stock issuable upon exercise of a Class A Warrant and 71,429 shares of Common
Stock issuable upon exercise of a Class B Warrant shall now consist of 83,333
shares of Common Stock issuable upon conversion or exercise of each of the
Debentures, Class A Warrants and Class B Warrants or an aggregate of 250,000
Shares of Common Stock.
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4. Covenants,
Representations and Warranties of Borrower.
Borrower represents and warrants to Lender that:
(a) Borrower
has full right, power and authority to 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);
(b) This
Agreement constitutes the valid, binding and enforceable agreement of Borrower
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;
(c) 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 Borrower’s knowledge
no proceeding has been instituted or is pending in which any creditor of
Borrower, or any other 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; and
(d) To
the
best of Borrower’s knowledge, there is no action, suit or proceeding before any
court, governmental authority or arbitrator pending or threatened in writing
against or affecting the Borrower that would, if adversely determined, have
a
material adverse effect on the transactions described in this
Agreement.
Borrower
hereby agrees that the truthfulness of each of the foregoing representations
and
warranties is a condition precedent to the performance by Lender of its
obligations hereunder.
5. Breach
or Default.
(a) Borrower
will be, and is, in default of this Agreement if for any reason:
(i) Borrower
breaches or fails to comply with this Agreement or if any representation
made by
Borrower in this Agreement is inaccurate;
(ii) Borrower
files bankruptcy or seeks approval of a plan of reorganization prior to Maturity
to which Lender has not consented in writing;
(iii) Borrower
fails to make the cash payments called for under Section 2
hereof;
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(iv) Borrower
undertakes any action inconsistent with this Agreement;
(v) Borrower
breaches any other covenant contained in the Loan Documents other than the
failure to make monthly payments as set forth herein;
(vi) Borrower
pays (or agrees to pay by adding to principal or otherwise) any other holder
of
a Senior Convertible Debenture (issued in the same offering by which Lender
was
issued the Debenture) consideration for the defaults referred to in the Notice
any amount is excess of the amount paid to Lender hereunder.
(vii) On
or
before the 45th
day
after the effectiveness of the registration of the Lender’s securities issued
pursuant to the Loan Documents (or upon conversion or exercise thereof),
Borrower registers any additional shares under S-8 by filing a new registration
statement or modifying an existing one.
(b) If
any of
the defaults identified in Section
6(a)(i) through (a)(vii)
of this
Agreement occur, Lender, at its sole option, may exercise its rights and
remedies under this Agreement, the Loan Documents and applicable law, without
providing any notice and opportunity to cure to Borrower. Lender may, at
its
sole discretion, but is not required to, give notice of any such
default.
6. Default
Remedies.
In the
event of a default by Borrower under this Agreement, Borrower agrees as
follows:
(a) the
Release (as defined in Section 9)
and all
acknowledgements, agreements, waivers and representations of Borrower
nonetheless remain in full force and effect; and
(b) Lender
shall be entitled to terminate this Agreement without notice to Borrower
and
proceed with any and all remedies available to Lender under the Loan Documents
and this Agreement.
7. Usury
Savings Clause.
Notwithstanding anything to the contrary contained elsewhere in this Agreement,
Borrower and Lender hereby agree that all agreements between them under this
Agreement and with respect to the Debenture and the Loan Documents, whether
now
existing or hereafter arising and whether written or oral, are expressly
limited
so that in no contingency or event whatsoever shall the amount paid, or agreed
to be paid, to Lender for the use, forbearance, or detention of the money
loaned
to Borrower, or for the performance or payment of any covenant or obligation
contained herein or therein, exceed the maximum rate of interest under
applicable law (the “Maximum
Rate”).
If
from any circumstance whatsoever, fulfillment of any provisions of this
Agreement at the time performance of such provisions shall be due shall involve
transcending the limit of validity prescribed by law, then, automatically,
the
obligation to be fulfilled shall be reduced to the limit of such validity,
and
if from any such circumstance Lender should ever receive anything of value
deemed interest by applicable law which would exceed the Maximum Rate, such
excessive interest shall be applied to the reduction of the principal amount
owing with respect to the Debenture or Loan Documents or on account of the
other
indebtedness secured by the Loan Documents and not to the payment of interest,
or if such excessive interest exceeds the unpaid principal balance of the
Debenture and such other indebtedness, such excess shall be refunded to
Borrower. All sums paid or agreed to be paid to Lender for the use, forbearance,
or detention of the Debenture and other indebtedness of Borrower to Lender
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until
payment
in full so that the actual rate of interest on account of all such indebtedness
is uniform throughout the actual term (as extended by amendments, forbearance
agreements and/or otherwise) of the Debenture or does not exceed the Maximum
Rate throughout the entire term of the Debenture. The terms and provisions
of
this paragraph 8
shall
control every other provision of this Agreement and all other agreements
between
Borrower and Lender.
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8. Releases.
As used
in this Release, the following terms shall have the meanings set forth
below:
“Claims”
shall
mean 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, irrespective of whether such claims
arise
out of contract, tort, violation of laws or regulations or otherwise, which
Borrower or Lender (hereafter the “Releasor”) ever had, now has or hereafter
can, shall or may have against the Released Parties or any of them for, 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 relating
solely to the S-8 Default and not to any other act or omission on the part
of a
Released Party.
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 Released Parties 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 Lender or Lender’s predecessors in
interest of any “lender liability” theories, 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 Loan.
“Released
Parties”
shall
mean Lender and Borrower, as the case may be, any subsidiary or affiliate
of
Lender, and Borrower, and any successors, or assigns of any of the foregoing,
and the respective agents, trustees, beneficiaries, officers, directors,
shareholders, attorneys, employees, independent contractors, partners, members,
manager and representatives of any of the foregoing.
(a) Lender,
on the one hand, and Borrower on the other hand (each a “Releasor”) hereby
irrevocably and unconditionally REMISES, RELEASES, ACQUITS, SATISFIES, WAIVES,
and FOREVER DISCHARGES the Released Parties and their respective heirs, personal
representatives, successors and assigns from all Claims.
(b) This
Release is accepted by the Released Parties as a condition to executing this
Agreement and Releasor expressly agrees that this Release survives the
termination of this Agreement.
(c) Releasor
hereby represents and warrants to the Released Parties that it has not assigned,
pledged, or contracted to assign or pledge or otherwise disposed of any of
the
Claims.
(d) This
Release shall be binding upon Releasor and its legal representatives, successors
and assigns and shall inure to the benefit of the Released Parties and their
successors and assigns.
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(e) This
Release includes a release of, and shall inure to the benefit of, all the
Released Parties and their respective heirs, legal representatives, successors,
assigns, directors, trustees, officers, agents, servants, employees and
attorneys, past, present and future.
(f) 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 BORROWER IS A MATERIAL INDUCEMENT FOR THE RELEASED
PARTIES TO ACCEPT THIS RELEASE AND ENTER INTO THIS AGREEMENT.
(g) 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.
(h) Releasor
hereby acknowledges that it has not relied upon any representation of any
kind
made by the Released Parties in making the foregoing release.
9. 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.
10. Modifications,
Waivers, Etc.
Lender
and Borrower, each reserves the right to waive any of the conditions precedent
to its obligations hereunder. No such 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. This Agreement and the exhibits hereto contains the entire
agreement between the parties relating to the transaction contemplated hereby,
and all prior or contemporaneous agreements, understandings, representations,
and statements, oral or written, are merged herein. This Agreement shall
be
construed and enforced in accordance with the laws of the United States of
America and, in the absence of controlling federal law, in accordance with
the
laws of the State of New York. This Agreement shall inure to the benefit
of and
shall be binding upon all successors and assigns of the parties
hereto.
11. Further
Assurances.
All
parties to this Agreement agree to execute any additional documents as necessary
to fulfill the intent of this Agreement.
12. Waiver
of Statute of Limitations.
Borrower hereby waives any applicable statute of limitations under the Loan
Documents and agrees to the tolling of any applicable statute of limitations
which may be running under the Loan Documents during the term of this
Agreement.
13. 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.
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14. Miscellaneous.
(a) Entire
Agreement. This
Agreement reflects 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.
(b) Full
Force and Effect. Except
as expressly modified herein, all terms of the Loan Documents shall be and
shall
remain in full force and effect and shall constitute the legal, valid, binding
and enforceable obligations of Borrower to Lender.
(c) No
Waiver. This
Agreement is not intended to operate as, and shall not be construed as, a
waiver
of any event of default, whether known to Lender or unknown, as to which
all
rights of Lender shall remain reserved.
(d) Governing
Law. This
Agreement shall be governed by, and shall be construed in accordance with,
the
laws of the State of New York and all applicable laws of the United States
of
America. The venue provision of the Debenture shall govern the venue of any
action brought to enforce this Agreement.
(e) 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.
(f) Binding
Nature. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
(g) 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.
(h) Time
of the Essence.
Time is
of the essence under this Agreement.
(i) Free
and Voluntary Act. Borrower
acknowledges and agrees that it is freely and voluntarily entering into this
Agreement and each of the other documents executed in connection herewith
to
which it is a party after full consultation with legal, financial and other
advisors of its choosing.
(j) Attorneys’
Fees. If
any party shall default in the performance of any of the terms and conditions
of
this Agreement, the non-defaulting 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.
(k) Survival
of Representations. Warranties and Covenants.
All
representations, warranties, covenants and other agreements contained herein
and
in all documents delivered hereunder shall survive any termination of this
Agreement or the expiration of the Forbearance Period and continue in full
force
and effect.
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[Signature
Page Follows]
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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
|
LENDER:
|
Southridge
Partners, LP, a
Delaware limited partnership
By:
Name:
Title:
|
|
BORROWER:
|
China
Mobility Solutions, Inc.,
a
Florida corporation
By:
Name:
Xiao-qing
Du
Title:
Chief
Executive Officer
|
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