PLACEMENT AGENT AGREEMENT
September
__, 2008
Legend
Merchant Group, Inc.
000
Xxxxxxx 0xx
xxxxx
Xxx
Xxxxxxxxx XX 00000
Dear
Sirs:
The
undersigned, China Agri-Business, Inc. hereby agrees with Legend Merchant Group,
Inc. ("Legend" or "Placement Agent") as follows:
|
1.
|
Securities
Offered. An aggregate of a minimum of $500,000 and
a maximum of $1,500,000 of units (the “Units”) each
Unit consisting of (i) a convertible promissory note (the “Notes”) in the
principal amount of $25,000, and (ii) warrants to purchase
25,000 shares of common stock, par value $0.001 per share
(the “Series C
Warrants”) (the “Offering”). The
Notes are convertible, in part or in full, at a conversion price
of $0.50 per share (the “Conversion
Price”) into shares of common stock of the Company (the “Conversion
Shares”). The
Series C Warrants are exercisable, in part or in full, at an exercise
price of $1.50 per share into shares of common stock of the
Company on a one to one basis (the “Series C Warrant
Shares”). 25,000 Series C Warrant Shares are issuable
for each Unit. In addition, upon exercise of the Series
C Warrant, each Series C Warrant holder shall be issued a
nonregistered series D warrant (collectively with the Series
C
Warrants, the “Warrants”) to
purchase shares of the Company’s common stock in an
amount equal to the number of Series C Warrant Shares issued
upon each exercise. The Series D Warrants shall
be exercisable, at an exercise price of $2.00 per share, into
shares of common stock of the Company on a one to one basis.
The Notes and the Warrants may hereinafter be referred to collectively as
the “Securities.” The
terms and conditions of the Offering shall be substantially as set forth
on the Term Sheet annexed hereto as Exhibit
A.
|
|
2.
|
Capitalization.
The
Company shall have approximately 12,958,574 shares of common stock issued
and outstanding immediately prior to this Offering.
|
|
3.
|
Purchase
Price. $25,000 per Unit (the “Unit Purchase
Price”).
|
|
4.
|
Closing
Date. On one or more dates on or prior to September 30, 2008, or
such other mutually agreed upon
date.
|
|
5.
|
Private
Placement Memorandum. The Company has prepared a Private
Placement Memorandum covering the proposed offering (the “Memorandum”)
which shall meet the anti-fraud and other requirements of the federal and
state securities laws. The Memorandum shall be in form and
substance satisfactory to Legend and its counsel. The Company
agrees that it shall modify or supplement the Memorandum during the course
of the Offering to insure that the Memorandum does not contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were
made.
|
|
6.
|
Compensation;
Accountable Expense Allowance. Legend
will be paid at each closing of the Offering a cash commission of eight
percent (8%) of the aggregate subscription price of the Units to be closed
thereupon that are purchased by investors introduced to the Company by
Legend (the “Legend
Investors”). Legend
shall also receive a $25,000 accountable expense allowance. Legend shall
also receive eight percent (8%) in warrant
coverage, calculated as a percentage of the Conversion Shares.
The Placement
Agent’s warrants shall have an exercise price of $1.00 per share.
Accordingly, if the Minimum Amount of 20 Units is sold, the
Placement Agent shall be entitled to receive a cash commission of $40,000
and warrants to purchase 80,000 shares of common stock at an exercise
price of $1.00 per share, and if the Maximum Amount of 60 Units is sold,
the Placement Agent shall be entitled to receive a cash commission of
$120,000 and warrants to purchase 240,000 shares of common stock at an
exercise price of $1.00 per share. In
addition, upon the exercise of Series C Warrants resulting from the
Placement Agent’s warrant solicitation efforts, the Placement Agent shall
be entitled to receive a cash warrant solicitation fee equal to 5% of any
warrant exercise proceeds that it has actively solicited (collectively
with the 8% cash commission described above, the “Commissions”),
as well as 8% warrant coverage, calculated as a percentage of the Series C
Warrant Shares issued as a result of the Placement Agent’s warrant
solicitation efforts.
|
|
7.
|
Fee
Tail. Legend
shall be entitled to a Placement Agent’s Fee, calculated in the manner
provided in Section 6, with respect to any securities purchased in any
subsequent offering (“Subsequent Offering”) by investors whom Legend had
introduced to the Company during the term of this engagement if such
Subsequent Offering is consummated at any time within (i) the 6-month
period following the consummation of this Offering and (ii), if no
Offering shall have been consummated during the term of this engagement,
the six month period following the expiration or termination of this
Agreement.
|
|
8.
|
Future
Transactions. If, at any time during the term
of this engagement, or within the 6-month period following consummation of
this Offering, the Company or any of its subsidiaries (i) disposes of or
acquires business units or acquires any of its outstanding equity
securities or makes any exchange or tender offer or enters into a merger,
consolidation or other business combination or any recapitalization,
reorganization, restructuring or other similar transaction, including,
without limitation, an extraordinary dividend or distribution or a
spin-off or split-off (each, a “Transaction”), and the Company decides to
retain a financial advisor for such Transaction, Legend shall have the
right to act as one of the Company's financial advisors for any such
Transaction; or (ii) decides to finance or refinance any indebtedness
using a manager or agent, Legend (or any affiliate designated by Legend)
shall have the right to act as a manager, placement agent or lead agent
with respect to such financing or refinancing; or (iii) determines to
raise funds by means of a public offering or an Offering of equity or debt
securities using an underwriter or placement agent, Legend shall have the
right to act as an underwriter, initial purchaser or placement agent for
such financing. In each case where Legend so serves, Legend shall be
entitled to an allocation of such percentage of the total fees paid in
connection with the foregoing Transaction as shall be mutually acceptable
to the Company and the lead manager, agent or underwriter. If Legend or
its affiliates decides to accept any such engagement, the agreement
governing such engagement will contain, among other things, provisions for
customary fees for Transactions of similar size and nature and the
provisions of this Agreement, including indemnification, which are
appropriate to such
Transaction.
|
|
9.
|
Accountable
Expenses. Whether or not the offering is successfully
completed, it shall be the Company's obligation to bear all of its
expenses in connection with the proposed Offering, including, but not
limited to, the following: filing fees, printing and
duplicating costs, the Company's and Legend's postage, delivery, and
advertising expenses, registrar and transfer agent fees, reasonable
counsel and accounting fees of the Company and issue and transfer
taxes.
|
|
10.
|
Further
Representations and Agreements of the Company. The
Company further represents and agrees that (i) it is authorized to enter
into this Agreement and to carry out the Offering contemplated hereunder
and this Agreement constitutes a legal, valid and binding obligation of
the Company, enforceable in accordance with its terms, (ii) the Company
will make itself reasonably available to Legend, its agents, auditors,
counsel, officers and directors to discuss with Legend any aspect of the
Company or its business which Legend reasonably may deem relevant, (iii)
the Company will deliver to Legend at each closing of the Offering: (a) a
certificate of each of the Company's President and Treasurer to
the effect that the Memorandum does not contain any untrue statement of
material fact or fail to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made, and all necessary
corporate approvals have been obtained to enable the Company to deliver
the Securities in accordance with the terms of the Offering , and (iv) at
or prior to any closing, the Company will furnish to Legend any documents,
certificates and opinions, containing such representations, warranties,
covenants, agreements and information as Legend may reasonably
request.
|
2
|
11.
|
Further
Agreements of Legend. Legend
will comply with all applicable rules and regulations
in connection with the sale of the
Securities.
|
|
12.
|
Indemnification.
|
(a)
Subject to the conditions set forth below, the Company and Legend hereby agree
that they will indemnify and hold harmless each other and each director,
officer, employee or representative thereof and each person controlling,
controlled by or under common control with such party within the meaning of
Section 15 of the Act or Section 20 of the 1934 Act (individually, an
"Indemnified Person") from and against any and all loss, claim, damage,
liability, cost or expense whatsoever (including, but not limited to, any and
all reasonable legal fees and other expenses and disbursements incurred in
connection with investigating, preparing to defend or defending any claim
action, suit or proceeding (a "Claim"), including any inquiry or investigation,
commenced or threatened, or in appearing or preparing for appearance as a
witness in any Claim, including any inquiry, investigation or pretrial
proceeding such as a deposition) (collectively a "Loss") to which such
Indemnified Person may become subject under the Act, the 1934 Act or other
federal or state statutory law or regulation at common law or otherwise, arising
out of an act or omission of the other party related to (i) this Agreement, (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the Memorandum (except those statements given by an Indemnified Person for
inclusion therein) or omission of a material fact from the Memorandum delivered
by such party, or (iii) the breach of any representation or warranty made by the
other party in this Agreement. The parties further agree that upon
demand by an Indemnified Person at any time or from time to time, they will
promptly reimburse such Indemnified Person for any Loss actually and reasonably
paid by the Indemnified Person as to which the other party has indemnified such
Indemnified Person pursuant hereto. Notwithstanding the foregoing
provisions of this Paragraph 12, any such payment or reimbursement by the other
party of fees, expenses or disbursements incurred by an Indemnified Person in
any Claim in which a final judgment by a court of competent jurisdiction (after
all appeals or the expiration of time to appeal) is entered against such
Indemnified Person as a direct result of such person's gross negligence, bad
faith or willful misfeasance will be promptly repaid to the other
party.
(b) In
the event any Claim shall be brought or threatened against an Indemnified
Person, prompt notice of such action shall be given by such Indemnified Person
to the party from whom indemnification is or may be sought pursuant to this
Section 12 (the “Indemnifying Party”), in writing, together with a copy of all
papers served on, or received by, such Indemnified Person in connection with
such action; provided, however, that failure
to give such notice shall not affect the Indemnified Person’s rights under these
indemnification provisions, unless, and only to the extent that, such failure
results in the forfeiture by the Indemnifying Party of substantive rights or
defenses. If such an event occurs, the Indemnifying Party may, by
notice to the Indemnified Person, assume the defense of such action, including
the employment of counsel and the payment of all expenses. Each
Indemnified Person shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the Indemnified Person unless (a) the
employment thereof has been specifically authorized by the Indemnifying Party in
writing or (b) the Indemnifying Party has failed to assume the defense and
employ counsel (in which cases the Indemnified Party shall have the right to
employ its own counsel and in such cases any reasonable fees and expenses of
such counsel shall be paid by the Indemnifying Party). In the event
the named parties, or parties threatened to be named, to any such action
(including any impleaded parties or parties threatened to be impleaded) include
both the Company and Legend such that each is both an Indemnified Person and an
Indemnifying Party, each party have the right to employ its own counsel and in
such each shall bear the costs and expenses of its own counsel.
3
(c) In
order to provide for just and equitable contribution in circumstances in which
the indemnification provided for in paragraph (a) of this Section 12 is due in
accordance with its terms, but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the Company and Legend shall
contribute to the aggregate Losses to which the Company and Legend may be
subject in such proportion so that Legend is responsible for that portion
represented by the percentage that the aggregate of its commission and expenses
under this Agreement bears to the aggregate offering price for all Securities
sold under the Memorandum to the Legend Investors and the Company is responsible
for the balance, except as the Company may otherwise agree to reallocate a
portion of such liability with respect to such balance with any other person;
provided, however, that no
person guilty of fraudulent misrepresentation within the meaning of Section
11(f) of the Act shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this
paragraph (c), any person controlling, controlled by or under common control
with Legend, or any partner, director, officer, employee, representative or any
agent of any thereof, shall have the rights to contribution as Legend and each
person who controls the Company within the meaning of Section 15 of the Act or
Section 20 of the 1934 Act, each officer of the Company and each director of the
Company shall have the same rights to contribution as the
Company. Any party entitled to contribution shall, promptly after
receipt of notice of commencement of any Claim against such party in respect of
which a claim for contribution may be made against the other party under this
paragraph (c), notify such party from whom contribution may be sought, but the
omission to so notify such party shall not relieve the party from whom
contribution may be sought from any obligation it or they may have hereunder or
otherwise than under this paragraph (c). The indemnity and
contribution agreements contained in this Paragraph 10 shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any Indemnified Person or any termination of this
Agreement.
|
13.
|
Confidentiality. Except
as to the extent required by law, each of the parties agrees that it will
not disclose, and will not include in any public announcement, the name of
the other party, unless expressly agreed to by the other party or unless
and until such disclosure is required by law or applicable regulation, and
then only to the extent agreed to or required. The Placement Agent
will not use any confidential information of the Company or disclose any
confidential information of the Company to third parties in each instance
without securing the prior written consent of Company. For purposes of
this agreement, confidential information includes certain information and
data which is material non-public information and which the Company wishes
to keep confidential. Confidential information may include information or
materials in oral, written, pictorial, magnetic or graphic form or
maintained or transferred in any other
media.
|
|
14.
|
Governing
Law and Jurisdiction. New York Law; New York
Courts
|
|
By:
|
/s/ Xxxxxx Xxxx |
|
Name:
Xxxxxx Xxxx
|
|
|
Title:
President
|
|
|
Confirmed
and Agreed To:
|
|
|
LEGEND
MERCHANT GROUP, INC.
|
|
|
By:
|
|
|
Name:
Xxxxx X. Xxxxxxxx Xx.
|
|
|
Title:
CEO
|
|
4
