CONVERSION/SETTLEMENT AGREEMENT
Exhibit
10.11
This
Conversion/Settlement Agreement (this “Agreement”) is made effective as of
February 12, 2007 (the “Effective Date”), by and among the Debentureholders (as
defined below) listed on Schedule “A”, attached hereto and made a part hereof
(collectively, referred to as the “Debentureholders”), and China Mobility
Solutions, Inc., a Florida corporation (the “Company”).
RECITALS
WHEREAS,
Company and the Debentureholders entered into certain Debenture Purchase and
Warrant Agreements, dated June 30, 2005 (the “Purchase Agreement”), whereby
Company issued and delivered to Debentureholders that certain Senior Convertible
Debenture, dated August 15, 2005, in the aggregate original principal amount
of
$3,350,000 (“Debenture”). Contemporaneously therewith Company and
Debentureholders 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 has previously converted $150,000 principal amount
of Debentures (the “Prior Conversion”) held by the Debentureholders into 500,000
shares of common stock, $.001 par value of the Company (the "Common Stock")
at
the Current Conversion Price. The Debentureholder shall receive an additional
2,500,000 shares of Common Stock for such Prior Conversion, as determined under
the Debenture using the Reduced Conversion Price, subject to the provisions
of
Section 11, below.
(b)
The
Company shall elect to convert all accrued but unpaid penalties and interest
owed by the Company relating to all Debentures held by the Debentureholder
into
1,420,000 shares of Common Stock (“Interest Shares”) at the Reduced Conversion
Price, as evidenced by their execution of this Agreement (collectively, the
“Conversion/Settlement Agreements”), of which 380,000 Interest Shares shall be
issuable upon Closing and the remaining 1,040,000 Interest Shares shall remain
unissued following the Closing and shall only be issued, in full or in part,
upon sixty-one (61) days prior written notice by the Debentureholder to the
Company. With respect to the Interest Shares, the holding period under Rule
144
commenced on August 15, 2005, date upon which the Debentures where acquired
from
the Company with the full purchase price paid by Debentureholder.
(c)
No
further penalties and interest shall be owed by the Company to the
Debentureholder for any defaults prior to the Effective Date of this Agreement.
The undersigned Debentureholder shall have the right to make subsequent
conversions at any time of the remaining principal amount of the Debentures
not
previously converted (“Supplemental Conversion Amount”), into that certain
number of shares of Common Stock, as determined under the Debenture using the
Reduced Conversion Price.
(d)
On or
after the Closing Date, subject to the terms and conditions of this Agreement,
the Company will issue, convey, transfer and assign to the Debentureholder
and
Debentureholder shall accept from the Company all right, title and interest
in
and to that certain number of Common Stock shares issuable upon the conversion
of the Supplemental Conversion Amount, or any unconverted portions thereof
at
such time, or from time to time, as the Debentureholder elects to convert that
specific Supplement Conversion Amount detailed in the Notice(s) of Conversion
submitted to the Company’s transfer agent. The Debentureholder shall not be
required to convey, transfer and assign to the Company all right, title and
interest in and to the Debentures and any Debenture Documents held by
Debentureholder unless and until it elects to convert one hundred percent (100%)
of the principal amount of the Debentures under the Supplemental Conversion
Amount, in which case the Debentureholder shall exchange the Debentures and
any
Debenture Document to the Company (without the need to submit the Notice(s)
of
Conversion).
3.
Indemnification. The Company shall indemnify and hold harmless the
Debentureholder (and its respective officers, directors, members, managers,
partners, employees, agents, and representatives (the “Representatives”))
against any and all claims, actions, losses, costs, damages, lawsuits,
deficiencies, demands, taxes, expenses, injuries, controversies, judgments,
and
liabilities whatsoever, known or unknown, at law or in equity (each, a “Claim”)
incurred or suffered by any of the aforementioned solely in connection with
matters arising under, or directly relating to, the Conversion/Settlement
Agreement and the Debenture Purchase and Warrant Agreement, dated June 30,
2005,
between the Company and Debentureholder. For the avoidance of doubt, such
indemnification shall not extend to special, indirect, incidental, punitive,
or
consequential damages, including loss of profits, that may be incurred or
suffered by the Debentureholder and/or its respective
Representatives.
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 (i) the exchange
of
Debentures, or (ii) the receipt of the Notice of Conversion in accordance with
Section 2(d) 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; Conversion. The closing of the Conversion (the “Closing”)
shall occur at such time as the Company has executed this Agreement and
delivered the number of shares of Common Stock set forth on the signature page
hereof. The date upon which the Conversion occurs shall be deemed the closing
date (“Closing Date”).
6.
Escrow. Prior to Closing, Debentureholders shall submit the Debenture Documents
and the executed Conversion/Settlement Agreements to ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ LLP, as
escrow agent (the “Escrow Agent”). 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, the Escrow Agent shall
be instructed to return the Conversion/Settlement 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”) effective upon the satisfaction by the
Company of all obligations under the Debenture and/or upon final conversion
of
the Debenture by the undersigned Debentureholder shall release and forever
discharge 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 solely in connection with matters arising
under, or directly relating to, the Conversion/Settlement Agreement and/or
the
Debenture Purchase and Warrant Agreement, dated June 30, 2005, between the
Company and Debentureholder. For the avoidance of doubt, such indemnification
shall not extend to special, indirect, incidental, punitive, or consequential
damages, including loss of profits, that may be incurred or suffered by the
Debentureholder and/or its respective Representatives. 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.
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.
9.
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 until the Closing is executed
between the parties.
10.
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.
11.
Maximum Exercise. Upon conversion of the Debentures and Closing hereunder,
the
Debentureholder shall receive 1,927,670 number of shares of Common Stock and,
subsequently, may request any additional shares of Common Stock issuable to
the
Debentureholder hereunder, provided that all issuances hereunder do not result
in beneficial ownership by the Debentureholder and its affiliates of more than
4.99% of the outstanding Common Stock at any time. For the purposes of the
immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder. The restriction described in this paragraph
may be waived, in whole or in part, upon sixty-one (61) days prior notice from
the Debentureholder to the Company.
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.
1,547,670
Number
of Shares
of Common Stock issuable upon conversion under Section
2(a)
380,000
Number
of
Interest Shares issuable under Section 2(b)
By:___________________________
By:___________________________
Name:_________________________
Title:_________________________
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China
Mobility Solutions, Inc.
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| By: | /s/ Xiao-qing Du | |
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Xiao-qing Du |
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| Title Chief Executive Officer | ||