Exhibit 10.1
Financial Advisory Agreement
FINANCIAL ADVISORY AGREEMENT
THIS FINANCIAL ADVISORY AGREEMENT ("Agreement") is made and entered into on
this the 17th day of November, 2004, by and between HFG INTERNATIONAL, LIMITED,
a Hong Kong corporation ("HFG"), and China Tailong Holdings Co., Ltd, a company
organized under the laws of The People's Republic of China (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, and HFG is willing to be so engaged;
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, HFG hereby agrees to be retained by the
Company as its exclusive financial advisor for the transactions contemplated
herein. In its capacity as a financial advisor to the Company, HFG will:
A. Restructuring and Going Public Transaction.
(i) consult on the development and implementation of a restructuring plan (the
"Restructuring") resulting in an organizational structure that will allow the
Company to complete the Going Public Transaction, as hereinafter defined; and
(ii) be required to provide the Company with access to a public shell
corporation (the "Public Company") that is domiciled in the United States of
America, obligated to file periodic reports with the U.S. Securities and
Exchange Commission and whose shares are quoted on the Over-the-Counter Bulletin
Board exchange with which it can consummate a merger or exchange transaction (a
"Going Public Transaction") resulting in the current stockholders of the Company
acquiring control of 90% (the "Control Percentage") of the issued and
outstanding common stock of the Public Company following consummation of the
Going Public Transaction, leaving 10% of the issued and outstanding common stock
of the Public Company to be held by persons other than the current stockholders
of the Company. The Company acknowledges that the Control Percentage shall be
subject to a proportionate adjustment in the event the Company does not report
net income of at least $3.7 million (the `Net Income Threshold") in its audited
financial statements for fiscal 2004. The proportionate adjustment will be
calculated by multiplying the percentage by which the company misses its number
(the "Shortfall Percentage") by 10%. So for example if the company's actual
fiscal 2005 net income is $2.96 million. It means that it missed its Net Income
threshold by 20%, therefore the total proportionate adjustment of 12% would go
to persons other than the current stockholders of the Company. This adjustment
must be executed within 30 of the date when fiscal 2005 numbers are reported.
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 the Public Company, which shall include
instruction on (a) basic knowledge of U.S. capital markets; (b) corporate
governance; (c) risk management associated with operating a public company;
and (d) US GAAP compliance and internal controls and procedures;
(ii) assist in developing and implementing the Public Company's financial
relations program, which shall include (a) establishing a program for
communicating with brokerage professionals, investment bankers and market
makers; (b) creating a complete investor relations strategy to be
implemented in English and Chinese; and (c) assisting in the preparation
and dissemination of press releases;
(iii)at the appropriate time, provide assistance and guidance in the
preparation and assembly of application materials for the listing of the
Public Company's common stock on a national exchange or quotation medium
that may include the American Stock Exchange or the NASDAQ Stock Market;
(iv) to assist the Company and or the Public Company in any future efforts to
raise additional capital, with the specific terms of such assistance to be
identified in a definitive agreement prior to HFG undertaking any action in
connection with a capital raising effort; and
(v) provide the Public Company with such additional financial advisory services
as may be agreed upon by the parties, to the extent HFG has the expertise
or legal right to render such services.
2. 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).
In addition, except in the event of an act constituting either (a) willful
intent to undermine the success of the Restructuring or the Going Public
Transaction or (b) gross negligence on the part of HFG, the Company agrees that
it will not hold HFG liable or responsible in the event that either the
Restructuring or the Going Public Transaction is not consummated.
3. Authorization Period. HFG's engagement hereunder shall become effective on
the date hereof (the "Effective Date") and will automatically terminate (the
"Termination Date"), except as otherwise provided for in Section 4 below, on the
first to occur of the following: (a) the Company's breach of one of the
covenants set forth in Section 4 hereof, (b) immediately upon the determination
that the either the Restructuring or the Going Public Transaction can not be
consummated because of a due diligence issue regarding the Company, including,
but not limited to, the Company's inability to provide audited financial
statements in accordance with U.S. GAAP, that can not be cured to the
satisfaction of HFG or (c) the earlier of the date the Public Company's
securities are listed on either the AMEX or NASDAQ or 12 months from the closing
date of the Going Public Transaction. This Agreement may be extended beyond the
Termination Date if both parties mutually agree in writing.
4. Professionals and Fees. 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, and that it shall be the sole responsibility of the Company
to (a) solicit appropriate legal and accounting professionals to effect the
transactions contemplated herein and (b) pay all related legal and accounting
fees incurred by either the Company or the post- Restructuring entity
attributable to both the Restructuring and the Going Public Transaction. HFG
shall not be responsible for the payment of any professional or other fees
incurred by the Public Company following the closing of the Going Public
Transaction. HFG shall introduce the Company to audit firms and legal counsel
who are capable of assisting the Company in completing the Going Public
Transaction.
For its services to be performed hereunder, HFG shall be entitled to fee
compensation of 450,000 U.S. (the "Fee") to be paid in accordance with the
provisions of this Section 4. Within 5 days of the execution of this Agreement
the Company shall pay to HFG the amount of $100,000 U.S. Upon closing of the
Going Public transaction the Company shall pay to HFG the amount of $350,000 in
satisfaction of the balance of the Fee.
The Company also agrees to reimburse HFG for all the domestic and
international travel and accommodation expenses incurred during the term of this
Agreement. HFG will claim all the reasonable expenses with attachment of
supporting legal documents. The amount of the expense will not be more than
20,000 USD and HFG shall burden the additional expense other than 20,000USD
itself.
5. Representations and Covenants. The Company and HFG represent and covenant as
follows:
(a) The Company shall make available to HFG and/or shall agree to have
professionally prepared all financial statements, legal documents,
projections, appraisals, performance summaries and other information which
in HFG's reasonable judgment shall be necessary or appropriate for the
respective Transactions contemplated hereby;
(b) The Company represents, warrants and agrees that, except as
required by law or legal process it will keep confidential, and will not
disclose to any third party (other than the Company's representatives,
attorneys, accountants and advisors), (i) the amount of any fees and
expenses contemplated by the Agreement and (ii) the advice rendered by HFG
whether formal or informal;
(c) The Company hereby grants to HFG, during the term of this
Agreement and for a period of 24 months thereafter, the right of first
refusal to complete any financing transaction on behalf of the Company or
the Public Company that may be undertaken by any third party pursuant a
written term sheet delivered by said third party to the Company or the
Public Company. In the event that such a financing opportunity is presented
to HFG, HFG shall have 10 days to advise the Company or the Public Company
of its desire to undertake the financing and the time specified in the
actual term sheet to complete same; and
6. Indemnification. The parties hereto mutually agree to indemnify each other to
the extent provided for in this paragraph. In the absence of gross negligence or
willful misconduct on the part of a party to this Agreement, neither party shall
be liable to the other, or to their respective officers, directors, employees,
shareholders or creditors, for any act or omission in the course of satisfying
or in connection with the performance of their respective obligations under this
Agreement. In those cases where gross negligence or willful misconduct is
alleged and proven, the parties agree to defend, indemnify and hold each other
harmless from and against any and all reasonable costs, expenses and liabilities
(including, but not limited to, attorneys' fees paid in the defense of the
interests of the party seeking indemnification) which may in any way result from
the acts or actions performed by the parties in satisfaction of their
obligations under this Agreement.
7. 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.
It is understood that this Agreement will be prepared and executed in both
the English and Chinese languages, with both versions having legal efficacy. 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 provisions of the preceding
paragraph of this Section 7.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HFG:
HFG International, Limited
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx,
Its:President
The Company:
China TaiLong Holdings Co., Ltd
By: /s/Xxxxx Xx
-------------------------------
Xxxxx Xx
Its:President
Financial Advisory Agreement
WHEREAS, this Agreement is supplemental to an agreement dated 17th Nov,
2004 between HFG INTERNATIONAL, LIMITED, a Hong Kong corporation ("HFG"), and
China Tailong Holdings Co., Ltd, a company organized under the laws of The
People's Republic of China (the "Company") to the Agreement ("FAA").
"The $100,000 payment shall be returned to the Company in the event the
audit firm that is engaged by the Company determines that the Company's
financial statements can not be audited in conformity with U.S. GAAP for
purposes of completing the Going Public Transaction.
But if it is determined that such audited financial statements can be
prepared or are prepared but the Company elects not to go forward with the Going
Public Transaction, the $ 100,000 shall not be refundable to the Company.
This supplemental agreement and Financial Advisory Agreement have the same
legal efficacy.
HFG:
HFG International, Limited
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx,
Its:President
The Company:
China TaiLong Holdings Co., Ltd
By: /s/ Xxxxx Xx
-------------------------------
Name: Xxxxx Xx
Its: President
FIRST AMENDMENT TO
FINANCIAL ADVISORY AGREEMENT
THIS FIRST AMENDMENT TO FINANCIAL ADVISORY AGREEMENT ("Agreement") is made
and entered into on this the 23rd day of December, 2004, by and between HFG
INTERNATIONAL, LIMITED, a Hong Kong corporation ("HFG"), and China Tailong
Holdings Co., Ltd., a company organized under the laws of The People's Republic
of China (the "Company").
W I T N E S S E T H:
WHEREAS, the parties entered into that certain Financial Advisory Agreement
(the "FAA") on or about November 17, 2004 and that certain Supplement to
Financial Advisory Agreement (the "Supplement") also on November 17, 2004;
WHEREAS, the parties desire to amend and restate certain provisions of the
FAA as set forth below;
WHEREAS, unless otherwise modified hereby, all terms and conditions of the
FAA and the Supplement shall remain in full force and effect; and
WHEREAS, all defined terms used herein shall have the meaning set forth in
either the FAA or the Supplement unless otherwise defined herein.
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. First Amendment and Restatement. (a) Paragraph A.(ii) of Section 1. of
the FAA is herby amended and restated in its entirety as follows:
"be required to provide the Company with access to a public shell
corporation (the "Public Company") that is domiciled in the United States of
America, obligated to file periodic reports with the U.S. Securities and
Exchange Commission and whose shares are quoted on the Over-the-Counter Bulletin
Board exchange with which it can consummate a merger or exchange transaction (a
"Going Public Transaction") resulting in the current stockholders of the Company
acquiring control of 90% (the "Control Percentage") of the issued and
outstanding common stock of the Public Company following consummation of the
Going Public Transaction, leaving 10% of the issued and outstanding common stock
of the Public Company to be held by persons other than the current stockholders
of the Company. The Company acknowledges that the Control Percentage shall be
subject to a proportionate adjustment in the event the Company does not report
net income of at least $3.33 million (the `Net Income Threshold") in its audited
financial statements for fiscal 2004. The proportionate adjustment will be
calculated by multiplying the percentage by which the Company misses its number
(the "Shortfall Percentage") by 10%. So for example if the Company's actual
fiscal 2004 net income is $2.66 million. It means that it missed its Net Income
threshold by 20%, therefore the total proportionate adjustment of 12% would go
to persons other than the current stockholders of the Company. This adjustment
must be executed within 30 of the date when fiscal 2004 numbers are reported."
2. Second Amendment and Restatement. The second paragraph of Section 4.
Professionals and Fees. of the FAA is hereby amended and restated in its
entirety as follows:
"For its services to be performed hereunder, HFG shall be entitled to fee
compensation of $640,000 U.S. (the "Fee") to be paid in accordance with the
provisions of this Section 4. Within 5 days of the execution of this Agreement,
the Company shall pay to HFG the amount of $100,000 U.S. Upon the closing of the
Going Public Transaction, the Company shall pay to HFG the amount of $540,000
U.S. in satisfaction of the balance of the Fee."
3. 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 Chinese International Economic and Trade
Arbitration Commission.
It is understood that this Agreement will be prepared and executed in both
the English and Chinese languages, with both versions having legal efficacy. 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 provisions of the preceding
paragraph of this Section 3.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
HFG:
HFG International, Limited
By: Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx, President
Company:
China Tailong Holdings Co., Ltd.
By: /s/Xxxxx Xx
--------------------------------
Name: Xxxxx Xx
