Document:

Unassociated Document

     

    EXHIBIT
10.1

     

    Agreement
to Convert Debt into Equity

     

    This Agreement to Convert Debt into
Equity (“Agreement”) is made
as of February 2, 2010, by and between the China Electric Motor, Inc., a
Delaware corporation (the “Company”) and
Jianrong Li, an individual (“Ms. Li” and
collectively with the Company, the “Parties”).

     

    WHEREAS, Jianrong Li has
previously agreed to convert an outstanding debt of $1,281,794 owed to her by
Luck Loyal International Investment Limited, a company organized under the laws
of Hong Kong and an indirect wholly-owned subsidiary of the Company (the “Debt”), into shares
of the Company’s common stock, $0.0001 per share (the “Common Stock”), at a
conversion price equal to the per share price of the shares sold in the
Company’s proposed public offering (the “Li
Conversion”);

     

    WHEREAS, the shares sold in
the public offering will be sold at $4.50 per share (the “Public Offering
Price”);

     

    WHEREAS, pursuant to the Li
Conversion, upon the closing of the public offering Ms. Li will receive 284,843
shares of Common Stock (the “Conversion Shares”)
based on the amount of the Debt divided by the Public Offering Price, rounded
down to the nearest whole share.

     

    NOW THEREFORE, in
consideration of the covenants and agreements 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.  Ms. Li and the Company hereby agree that, upon the
closing of the public offering, the Debt shall be converted into 284,843 shares
of Common Stock.  No fractional shares will be issued in the Li
Conversion.  After the Li Conversion, the Debt shall no longer be
outstanding and extinguished in its entirety.

    

    2.           Representations, Warranties
and Covenants by Ms. Li.  Ms. Li 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 Converstion Shares.

    

    a.           Ms.
Li has the power and authority to execute and deliver this Agreement, and to
consummate the transactions contemplated hereby and thereby.

    

    b.           Ms.
Li is acquiring the Shares for investment for her own account and not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and Ms. Li has no present intention of selling, granting any
participation in, or otherwise distributing the same.  Ms. Li further
represents that she 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.           Ms.
Li understands that the Shares are not and will not be registered under the
Securities Act of 1933, as amended (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 Ms. Li’s
representations set forth herein.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    d.           Ms.
Li acknowledges that she can bear the economic risk of her investment, and has
such knowledge and experience in financial and business matters that she is
capable of evaluating the merits and risks of the investment in the Converstion
Shares.

    

    e.           Ms.
Li has carefully reviewed such information as such she deemed necessary to
evaluate an investment in the Conversion Shares.  To the full
satisfaction of Ms. Li, she has been furnished all materials that she has
requested relating to the Company and the issuance of the Conversion Shares
hereunder, and Ms. Li 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
her.  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 Ms. Li has relied in receiving the Conversion
Shares.

    

    f.           Ms.
Li understands that the Conversion 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 Conversion Shares or any available exemption from
registration under the Securities Act, the Conversion Shares must be held
indefinitely.  Ms. Li is aware that the Conversion 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.           Ms.
Li acknowledges that she must assure the Company that the offer and sale of the
Conversion Shares to her 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.  Ms. Li agrees that she meets the
criteria established in the subsections set forth below.

    

    h.           Ms.
Li is not a U.S. Person, as defined in Rule 901 of Regulation S, promulgated
under the Securities Act, and Ms. Li represents and warrants to the Company
that:

    

    (i)           Ms.
Li is not acquiring the Shares as a result of, and Ms. Li covenants that she
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 Conversion
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 Conversion Shares;

    

    (ii)           Ms.
Li is not acquiring the Conversion Shares for the account or benefit of,
directly or indirectly, any U.S. Person;

    

    (iii)           Ms.
Li is a resident of the PRC;

     

    
      
         

      

      
        - 2
-

        
          

        

      

      
         

      

    

    

    (iv)           the
offer and the sale of the Conversion Shares to Ms. Li as contemplated in this
Agreement complies with or is exempt from the applicable securities legislation
of the PRC;

    

    (v)           Ms.
Li is outside the United States when receiving and executing this Agreement and
that Ms. Li will be outside the United States when acquiring the Conversion
Shares,

    

    (vi)           and
Ms. Li covenants with Company that:

    

    
      	
               
      

            	
              (1)

            	
              offers
      and sales of any of the Conversion 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)

            	
              Ms.
      Li 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.  The Company 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 Conversion Shares.

    

    a.           The
Company 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 Ms. Li within ten (10) days of the closing of the
public offering a stock certificate that represents the Conversion
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.

     

    
      
         

      

      
        - 3
-

        
          

        

      

      
         

      

    

    

    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.

    

    IN WITNESS WHEREOF, the
Parties have entered into this Agreement as of the date first set forth
above.

     

    China
Electric Motor, Inc.

     

     

    By: 
/s/ Yue Wang

      
        

      

    

    Name: 
Yue Wang

    Title: 
Chief Executive Officer

     

     

    Jianrong
Li

     

    /s/
Jianrong Li

      
        

      

    

    Jianrong
Li

    

    

     

    
- 4 -TheStreet.com

      CEO Term
Sheet for Daryl Otte 

        
          

        

      

       

    

    
      	
              ·

            	
              Base
      Salary: $425,000 annualized rate, with potential annual increases
      at the discretion of the Compensation
Committee

            

    

     

    
      	
              ·

            	
              Target
      Bonus: $320,000/year, contingent on achieving performance goals
      established by TSCM’s Compensation Committee (with input from Daryl) for
      each performance year, with potential annual increases to the targeted
      amount at the discretion of the Compensation
  Committee.

            

    

     

    
      	
              ·

            	
              Long-Term
      Incentive Opportunity:  One-time grant of 650,000
      restricted stock units (RSUs) (payable in full-value TSCM shares in
      accordance with the terms of the annual vesting schedule described below,
      unless the payment date is accelerated or the RSUs are forfeited, as
      provided below). Daryl will have the option to elect to have his tax
      withholding obligation in connection with the RSUs satisfied through the
      withholding of shares underlying the RSU
award.

            

    

     

    
      	
               
      

            	
              o

            	
              Grant of RSUs: Granted
      as soon as practicable after assumption of full CEO
  role

            

    

     

    
      	
               
      

            	
              o

            	
              Vesting of
      RSUs:

            

    

     

    
      	
               
      

            	
              §

            	
              Annual Vesting: Unless
      vesting is accelerated pursuant to an event described herein, or the RSUs
      are forfeited prior to vesting, RSUs shall vest according to the following
      schedule:

            

    

     

    
      	
               
      

            	
              ·

            	
              65,000
      RSUs shall vest on the 1st
      anniversary of the RSU grant date;

            

    

     

    
      	
               
      

            	
              ·

            	
              An
      additional 65,000 RSUs shall vest on the 2nd anniversary of the RSU grant
      date;

            

    

     

    
      	
               
      

            	
              ·

            	
              An
      additional 65,000 RSUs shall vest on the 3rd anniversary of the RSU grant
      date;

            

    

     

    
      	
               
      

            	
              ·

            	
              An
      additional 65,000 RSUs shall vest on the 4th anniversary of the RSU grant
      date;

            

    

     

    
      	
               
      

            	
              ·

            	
              The
      remaining 390,000 RSUs shall vest on the 5th anniversary of the RSU grant
      date.

            

    

     

    Shares of
TSCM stock underlying RSUs that vest according to the above schedule shall be
distributed to Daryl free and clear of all vesting restrictions (net of shares
withheld to pay taxes, if so elected by Daryl) within 30 days following the
applicable vesting date of such RSUs.

     

    
      	
               
      

            	
              §

            	
              Accelerated Vesting:
      Unvested RSUs that have not been forfeited shall have their vesting
      accelerated upon the occurrence of any one of the following
      events:

            

    

     

    
      	
               
      

            	
              ·

            	
              A
      change-in-control (CIC) event (for purposes of this Term Sheet, having the
      same definition as provided in the 2007 Performance Incentive Plan);
      or

            

    

     

    
      	
               
      

            	
              ·

            	
              An
      involuntary termination of Daryl’s employment as CEO without Cause
      (“Cause” generally defined as egregious acts such as fraud, commission of
      a felony, etc., determined in the good faith judgment of TSCM’s
      Compensation Committee); or

            

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              ·

            	
              A
      voluntary termination by Daryl for Good Reason (with “Good Reason” having
      the definition ascribed to such term under the “Good Reason” safe harbor
      provisions of Section 409A of the Internal Revenue Code and the Treasury
      Regulations promulgated thereunder (“Section 409A”), all as determined in
      good faith by TSCM’s Compensation
Committee).

            

    

     

    
      	
               
      

            	
              §

            	
              Death or Disability: In
      the event of Daryl’s death or disability (generally defined as a physical
      or mental condition incapacitating Daryl from the ability to effectively
      execute his role as CEO, as determined in good faith by TSCM’s
      Compensation Committee) before the occurrence of any one of the “Full
      Vesting” events described above, Daryl shall vest in a prorated number of
      the RSUs, with the proration determined as a function of the length of
      time served by Daryl as CEO prior to death or disability in relation to
      the two-year period following grant of the RSUs (e.g., a disability at the
      1st
      anniversary of the RSU grant date would result in vesting and accelerated
      delivery of 50% of the RSU award, net of any RSUs that have already vested
      prior to death or disability). As an example, and for the avoidance of
      doubt, if a death or disability happens immediately after the 1st
      anniversary of the RSU grant date, the net number of RSUs that would vest
      under this provision would equal [(650,000/2) – 65,000 (the RSUs that
      vested according to their normal annual schedule)] =
    260,000).

            

    

     

    
      	
               
      

            	
              o

            	
              Payment Acceleration
      Events: Unless sooner forfeited due to a “Forfeiture Event”
      described below, and other than the distribution of shares underlying RSUs
      that have vested according to their regular vesting schedule (i.e., the
      10%, 10%, 10%, 10%, 60% schedule described above in this Term Sheet), all
      outstanding and previously undistributed RSUs shall be paid to Daryl on an
      accelerated basis following any of the employment termination events
      described below, with delivery of the RSU value occurring at the times
      described below:

            

    

     

    
      	
               
      

            	
              §

            	
              Consummation
      of a CIC, with delivery of RSU value occurring within 30 days after the
      effective date of the CIC; or

            

    

     

    
      	
               
      

            	
              §

            	
              An
      involuntary termination of Daryl’s employment without Cause, in which
      case, delivery of RSU value will occur within 30 days after the effective
      date of termination; or

            

    

     

    
      	
               
      

            	
              §

            	
              A
      voluntary termination by Daryl for Good Reason in which case, delivery of
      RSU value will occur within 30 days after the effective date of
      termination; or

            

    

     

    
      	
               
      

            	
              §

            	
              Disability
      (as defined in Section 409A), in which case, delivery of RSU value will
      occur within 30 days after the effective date of Disability;
      or

            

    

     

    
      	
               
      

            	
              §

            	
              Death,
      in which case, delivery of RSU value will occur within 30 days after
      death.

            

    

     

    
      	
               
      

            	
              o

            	
              Forfeiture Events: All
      RSUs that have not been paid to Daryl by delivery of the underlying shares
      (except in the case of voluntary termination without Good Reason, in which
      case the prior clause shall be deemed to refer to RSUs that have not
      vested) prior to the 5th
      anniversary of the date of grant of the RSUs shall be forfeited without
      payment (regardless of the vested status of the RSUs) if any one of the
      following occurs prior to delivery (vesting, in the case of voluntary
      termination without Good Reason) of the TSCM shares underlying the RSU
      awards:

            

    

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              §

            	
              TSCM
      involuntarily terminates Daryl’s employment as CEO or his status as a
      Director for “Cause”; or

            

    

     

    
      	
               
      

            	
              §

            	
              Daryl
      voluntarily terminates his employment as CEO without Good Reason prior to
      the fifth anniversary of his assumption of the full CEO role;
      or

            

    

     

    
      	
               
      

            	
              §

            	
              Daryl
      engages in competitive activity (to be defined in the RSU award agreement)
      with TSCM within two years after his service as CEO and Board membership
      terminates; or

            

    

     

    
      	
               
      

            	
              §

            	
              Daryl
      breaches the provisions to be included within the RSU award agreement
      pertaining to non-solicitation of employees and clients of TSCM (within
      the two-year period following employment termination), confidentiality of
      information, or disparagement of
TSCM.

            

    

     

    In
addition, TSCM reserves the right to claw back RSU value delivered if within two
years after delivery of the RSU value Daryl engages in competitive activities
that violate the terms of the non-compete/non-solicit covenants to be included
in the RSU award agreement, or if he violates the non-disparagement or
confidentiality provisions of the RSU award agreement.

     

    
      	
              ·

            	
              General
      Severance: In the event that, prior to the effective date of a CIC,
      Daryl’s employment is involuntarily terminated by TSCM without Cause, then
      subject to the caveat prohibiting payment of both general severance and
      CIC severance (as described below), TSCM shall pay Daryl a general
      severance amount determined according to the following
      formula:

            

    

     

    
      	
               
      

            	
              o

            	
              Four
      weeks of base pay (at the rate in effect immediately prior to termination)
      for each full year of service completed as full-time TSCM CEO;
      plus

            

    

     

    
      	
               
      

            	
              o

            	
              1.33
      weeks of base pay (at the rate in effect immediately prior to termination)
      for each full year of service as a Board member of
  TSCM.

            

    

     

    Subject
to the CIC caveat prohibiting payment of both general severance and CIC
severance (as described below), TSCM shall pay Daryl the general severance
within 30 days following the effective date of termination. In the event that
Daryl qualifies to receive CIC severance, and if prior to the payment of CIC
severance TSCM has already paid Daryl general severance amounts, the full value
of such general severance amounts paid shall be offset against any CIC severance
payable to Daryl.

     

    
      	
              ·

            	
              Change-in-Control
      Severance: Subject to the caveat prohibiting payment of both
      general severance and CIC severance (as described above), if a CIC occurs
      within two-years after assuming full CEO role, Daryl would be paid 2x
      (base pay + target bonus) = $1,490,000 (at 2009 pay
  rates).

            

    

     

    
      	
               
      

            	
              o

            	
              The
      payment will be designed so as to minimize the possibility of parachute
      excise taxes.

            

    

     

    
      	
               
      

            	
              o

            	
              In
      the event parachute excise taxes apply, TSCM will provide gross-up
      protection to neutralize the impact of the excise taxes to
      Daryl.

            

    

     

    
      	
               
      

            	
              o

            	
              For
      all purposes of this Term Sheet, Daryl shall receive the described
      benefits associated with a CIC (i.e., CIC severance and RSU vesting) if
      Daryl is employed as CEO at the time events or efforts are initiated that
      directly lead to consummation of a CIC, provided that such a CIC will only
      so qualify for this provision if the consummation of the CIC occurs within
      six months of Daryl’s last day of
employment.

            

    

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              o

            	
              Payment
      shall be made within 30 days after the effective date of the CIC, unless a
      delay is necessary to avoid imposition of additional taxes under Section
      409A (in which case, the delay shall be for the minimum time frame
      necessary to avoid additional 409A
taxes).

            

    

     

    
      	
              ·

            	
              Perks and
      Health and Welfare Benefits:  Daryl will be eligible to
      receive perquisites and general health and welfare benefit coverage at a
      level at least equal to those provided to any other full-time executive of
      TSCM.

            

    

     

    
      	
              ·

            	
              Internal
      Revenue Code Section 409A Saving Clause: TSCM will make all
      reasonable efforts to deliver the value in connection with RSUs and CIC
      severance in a manner that avoids imposition of additional taxes under
      Internal Revenue Code Section 409A.

            

    

     

    Signed,
this 15th day of
May, 2009

     

    
      
        
          
            
              	
                      /s/ William Gruver

                    	 	
                      /s/ Daryl Otte

                    	 
	
                      William
      Gruver, Compensation Committee Chair

                    	 	
                      Daryl
      Otte

                    	 
	
                      of
      TheStreet.com

                    	 	 
      	 

            

          

        

      

    

     

    
      
         

      

      
        4

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00168-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00168-of-00352.parquet"}]]