FINANCIAL ADVISORY AGREEMENT
EXHIBIT
10.14
THIS
FINANCIAL ADVISORY AGREEMENT (“Agreement” or “FAA”) is made and entered into on
the 14th
of
February, 2007, by and between HFG International, Limited, a Hong Kong
corporation (“HFG”), and Shan Xxxx Xxxxx Foodstuff Co., Ltd., a P.R.C.
corporation (the “Company”).
W
I T N E
S S E T H:
WHEREAS,
the Company desires to engage HFG to provide certain financial advisory and
consulting services as specifically enumerated below commencing as of the date
hereof related to the Restructuring, the Going Public Transaction and the
Post-Transaction Period (each as hereinafter defined), and HFG is willing to
be
so engaged; and
WHEREAS,
HFG will also advise the Company with regard to matters related to their efforts
to complete a capital raising transaction generating targeted gross offering
proceeds of $20million USD (the “Financing”).
NOW,
THEREFORE, for and in consideration of the covenants set forth herein and the
mutual benefits to be gained by the parties hereto, and other good and valuable
consideration, the receipt and adequacy of which are now and forever
acknowledged and confessed, the parties hereto hereby agree and intend to be
legally bound as follows:
1. Retention.
As of
the date hereof, the Company hereby retains and HFG hereby agrees to be retained
as the Company’s exclusive
financial advisor during the term of this Agreement. The Company acknowledges
that HFG shall have the right to engage third parties to assist it in its
efforts to satisfy its obligations hereunder. In its capacity as a financial
advisor to the Company, HFG will:
| A. |
Restructuring
and Going Public
Transaction.
|
(i) consult
on the implementation of a restructuring plan (the “Restructuring”) resulting in
an organizational structure that will allow the Company to complete the Going
Public Transaction; and
(ii) assist
the Company in evaluating the manner of effecting a going public transaction
with a public shell corporation (“Pubco”) domiciled in the United States of
America and quoted on the “OTC BB” (a “Going Public Transaction”). HFG and the
original Pubco shareholders shall hold, in the aggregate, 6.5% of Pubco’s issued
and outstanding common stock upon completion of both the Financing and the
Going
Public Transaction (the “Pubco Shareholders Ownership Percentage”). In the event
that Pubco, on a consolidated basis with the Company, reports in its Annual
Report filed with the U.S Securities and Exchange Commission, net income of
$12.5 million for fiscal 2008, HFG shall return to the Company for cancellation
that number of shares that will reduce the Pubco Shareholders Ownership
Percentage to 5.6%. At the closing of the Going Public Transaction, HFG shall
place into escrow, which escrow shall be governed by a definitive escrow
agreement, the number of shares of Pubco’s common stock that will be necessary
to allow it to satisfy its obligations under this paragraph.
| B. |
Post
Transaction Period
|
Upon
consummation of the Going Public Transaction, HFG agrees to:
(i) coordinate
and supervise a training program for the purpose of facilitating new
management’s operation of Pubco (the Company agrees that all costs and expenses
charged by third party consultants introduced by HFG and engaged by the Company
will be the sole responsibility of the Company);
(ii) if
necessary, coordinate the preparation by the Company’s legal counsel of an
information statement to be filed with the SEC to change Pubco’s name and to in
turn assist in obtaining a new CUSIP number and stock symbol for
Pubco;
(iii) oversee
third party development by third parties of Pubco’s investor relations efforts,
which effort shall include (a) establishing a program for communicating with
brokerage professionals, investment bankers and market makers; and (b) creating
a complete investor relations strategy to be implemented in English and Chinese.
The Company agrees that all costs and expenses charged by investor relations
and
press relations firms introduced by HFG and engaged by Pubco or the Company
will
be the sole responsibility of the Company;
(iv) coordinate
with the Company’s legal counsel in the preparation and assembly of application
materials for the listing of Pubco’s common stock on a national exchange or
quotation medium that may include, but shall not necessarily be limited to,
the
American Stock Exchange or the NASDAQ Stock Market; and
(v) Provide
Pubco with such additional financial advisory services as may be reasonably
requested, to the extent HFG has the expertise or legal right to render such
services.
2. Financing
and Financing
Conditions.
The
Financing will be accomplished under terms and conditions that are mutually
agreeable to the issuer and the investors. HFG will seek to have the Company
receive a post money valuation of at least 11X its audited 2006 net income.
It
is anticipated that the Company will pay investment bankers involved in the
transaction a commission equal to 7% of the capital raised in the Financing
along with warrants to purchase Pubco’s common stock, the terms of which to be
agreed upon by the Company prior to the closing of the Financing. HFG will
complete the Financing within one month after the Company’s independent auditor
signs the final audit report.
The
Company acknowledges that the closing of a Financing will be contingent upon
(a)
the agreement of the Company’s shareholders to enter into a Make Good Escrow
Agreement whereby they shall agree to place into escrow an agreed upon number
of
shares of Pubco’s common stock that they will receive upon the closing of the
Going Public Transaction that shall be delivered to investors in the Financing
in the event that the Financing is completed before July, 2007, and the Company
fails to report a 60% increase in net income for fiscal 2007 over fiscal 2006,
(b) the Company’s commitment to ensure that Pubco files a registration statement
with the U.S. Securities and Exchange Commission for the purpose of registering
the Pubco shares held by HFG or its assignees, the shares purchased in the
Financing, or any security for which the purchased shares are exchanged, for
resale, with offering proceeds not to be released from escrow until the
registration statement is filed, (c) consummation of the Going Public
Transaction in accordance with this FAA, (d) the agreement by the Company that
$300,000 of the net proceeds of the Financing will be placed into escrow and
used for financial public and investor relations activities and the engagement
of a US domiciled spokesperson(s), recommended by HFG and confirmed by Company,
for a period of at least 12 months following the closing of the Financing and
(e) the agreement of the Company to have HFG act as its exclusive advisor for
any capital raising transactions undertaken by Pubco following the closing
of
the Going Public Transaction.
3. Non-circumvent.
The
Company agrees that in the event that this Agreement is terminated for any
reason, other than upon the completion of a Financing, it shall not enter into
discussions or negotiations with or close a financing, regardless of terms,
with
any party introduced by HFG as a possible investor or placement agent for the
Financing, each of which shall be listed on Schedule “A” to this Agreement at
the time of introduction, for a period of one year following the date of
termination of this Agreement.
4. Authorization.
Subject
to the terms and conditions of this Agreement, the Company hereby appoints
HFG
to act on a best efforts basis as its exclusive consultant during the
Authorization Period (as hereinafter defined). HFG hereby accepts such appoint,
with it being expressly acknowledged that HFG is acting in the capacity of
independent contractor and not as agent of either the Company, affiliates of
the
Company resulting from the Restructuring, or Pubco.
In
addition, except in the event of an act constituting either willful misconduct
or gross negligence on the part of HFG, the Company agrees that it will not
hold
HFG responsible in the event that either the Restructuring, the Financing or
the
Going Public Transaction is not consummated, nor shall it hold HFG liable for
any damages suffered by the Company as a result of the Company’s inability to
consummate either the Restructuring, the Financing or the Going Public
Transaction. However, in the event HFG commits an act constituting either
willful misconduct or gross negligence which makes it impossible to complete
either the Financing or the Going Public Transaction, HFG shall indemnify the
Company against all costs, including legal, accounting and other fees and
expenses, arising from the Company’s efforts to complete the Financing and the
Going Public Transaction. It is expressly acknowledged by the Company that
HFG
shall not render legal or accounting advice in connection with the services
to
be provided herein. HFG shall have the right to recommend the legal and
accounting professionals for the transactions contemplated herein.
5. Authorization
Period.
HFG’s
engagement hereunder shall become effective on the date hereof (the “Effective
Date”) and will automatically terminate (the “Termination Date”) on the first to
occur of the following: (a) either party exercises their right of termination
as
provided for in this FAA, (b) the Company’s breach of its covenants herein, or
(c) 12 months following the completion of the Going Public Transaction. This
Agreement may be extended beyond the Termination Date if both parties mutually
agree in writing. Except as to certain obligations of the Company under
Section 3.
hereof,
this Agreement shall also terminate immediately upon the mutual decision of
the
parties not to move forward with the Restructuring, the Financing or the Going
Public Transaction.
6. Fees
and Expenses.
On the
closing date of the Going Public Transaction, the Company shall pay to HFG
the
fee of $450,000.
In
addition, the Company shall reimburse HFG for all documented travel and lodging
expenses incurred by HFG personnel during the term of this Agreement.
Reimbursement is to be made within 10 days of receipt of a written request
for
reimbursement submitted to the Company.
7. Due
Diligence and Auditabilty.
HFG
shall have the right to perform a due diligence investigation of the Company
that demonstrates to HFG’s sole satisfaction that the Company is a suitable
candidate for the Going Public Transaction, which due diligence investigation
shall include consultation with the Company’s independent audit firm regarding
the auditablity of the Company in accordance with US GAAP. HFG shall have the
right to terminate this Agreement in the event it determines that there exists
a
material and non-curable due diligence matter. The Company shall also have
the
right to perform a due diligence investigation of Pubco.
8. Governing
Law.
This
Agreement shall be governed by the laws of the Peoples Republic of China and
any
dispute arising hereunder shall be submitted for binding arbitration to the
China Foreign Trade Commission Arbitration Committee in Shanghai.
It
is
understood that this Agreement will be prepared and executed in both the English
and Chinese languages. If a dispute arises as to the interpretation of a
particular provision of this Agreement because of differences between the
Chinese and English languages, the dispute shall be resolved in accordance
with
the Chinese version.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first above written.
| HFG: | ||
| HFG International, Limited | ||
| |
|
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| By: | Xxxxxxx X. Xxxxxx | |
|
Xxxxxxx X. Xxxxxx, |
||
| Its: President | ||
|
The
Company:
|
||
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Shang
Xxxx Xxxxx Foodstuff Co., Ltd.
|
||
| |
|
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| By: | Xx Xxxx | |
|
Xx Xxxx |
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| Its: Chairman | ||
SCHEDULE
A
|
NAME
OF POTENTIAL INVESTOR
|
DATE
INTRODUCED
|
|
|
Granite
Global Ventures
|
0000-0-00
|
|
|
|
||
|
Xxx-Xxx
00xx
Xxxxxxx
|
0000-0-00
|
|
|
Xxxxxxxx
Corporation Equity Asia
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2007-1-20
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