Liping Deng, CEO China Agri-Business, Inc. Finance Plaza, 9th Floor Hi-Tech Road No. 42 Hi-Tech Industrial Development Zone Xi’An, Shaanxi China c/o Jeffrey A. Rinde, Esq. Hodgson Russ LLP CONFIDENTIAL Re: Business Advisory Agreement Dear Mr. Deng :
January
28, 2008
Xxxxxx
Xxxx, CEO
Finance
Plaza, 9th Floor
Hi-Tech
Road No. 42
Hi-Tech
Industrial Development Zone
Xi’An,
Shaanxi
China
c/o Xxxxxxx
X. Xxxxx, Esq.
Xxxxxxx
Xxxx LLP
CONFIDENTIAL
Dear Xx.
Xxxx :
This
letter confirms our mutual understanding and agreement (“Agreement”) relating to
the business advisory fees (“Fees”) payable to Legend Merchant Group, Inc.
(“Legend”), China Agri-Business, Inc. (“Company”), a Maryland corporation, for
Legend’s business advisory services rendered in connection with any equity
and/or debt investment, merger, acquisition, partnership, joint venture,
investment, strategic alliance or any other business combination (any such
transaction is referred to herein as a “Transaction”), entered into by the
Company with a business entity and/or individual ( “Entity”) that was introduced
to the Company by Legend.
Legend
hereby agrees to provide such business advisory services to the Company on a
“best efforts, basis for a term (“Term”) of 6 months in accordance with the
terms and conditions of this Agreement. Legend makes no assurances
that the provision of its business advisory services hereunder will be
beneficial to the Company under any circumstances.
It is
further understood and agreed by the parties hereto that the Company is entering
into this Agreement for the purpose of inducing Legend to provide business
advisory services in connection with the Company’s business interests with
investment banking firms, venture firms, hedge funds, brokerage firms,
investors, financiers, buyers and/or sellers who may participate in a
Transaction with the Company. During the period of the contract Legend will
perform a continuous due diligence process which will include visiting Company
management, and visiting the Company. While Legend represents and
warrants using its best efforts to provide business advisory services, it is
specifically understood that no assurances can be made as to the benefit to the
Company of such services.
NEW YORK
· SAN FRANCISCO
·
FLORIDA
Member
NASD · NFA
· ARCAEx · PCX ·
SPIC
Now,
therefore, in consideration of the mutual promises and covenants made herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged by the parties hereto, the parties hereto hereby agree
as follows:
1. The
Company shall pay to Legend the business advisory Fees related to its business
advisory services upon the Company consummating a Transaction during the Term of
this Agreement or within 18 months after the date of the termination of this
Agreement with an Entity introduced by Legend to the Company during the term of
this Agreement. The Company acknowledges that during the Term of this
Agreement and the eighteen months that follow, the Company shall have an
affirmative obligation to promptly notify Legend when and if it is formally
negotiating with an Entity, entering into a Letter of Intent with an Entity
and/or consummating a Transaction with an Entity.
2. Legend
shall be deemed to have introduced the Entity to the Company if (a) the Company
has no prior knowledge of the interest by the Entity in the proposed Transaction
and/or (b) Legend provides an introduction to a representative of such Entity
who is in a position to evaluate the Transaction and whose normal function is to
recommend or commit to such Transactions on behalf of such Entity.
3. In
the event of any equity and/or debt investment, and although not the primary
basis intended with this Agreement; a merger, acquisition, partnership, joint
venture or other business combination by and between the Company and the Entity,
in which Legend was instrumental in introducing to the Company, the Company
shall pay to Legend the business advisory Fees as set forth in the formula
appended hereto as Schedule
I. The Fees shall be paid in cash and shall be due and owing
on the date and at the time the Transaction is first consummated. In
addition to the foregoing Fees, the Company also agrees to issue to Legend a
five-year option (“Option”) sufficient to purchase the number of shares of
common stock of the Company that equal eight percent (8%) of the securities
issued and sold on behalf of the Company in a Transaction and/or to an
Entity. The exercise price of the Option shall be the per share price
of the securities issued and sold on behalf of the Company in a Transaction
and/or to an Entity. The Option will participate in all forward and
reverse stock splits and stock dividends or any readjustment to the shares
outstanding.
4. Legend
agrees that it will use its best efforts to assist the Company with its business
advisory services. However, Xxxxxx is not an agent of the
Company. Rather, Legend is an independent contractor and business
advisor who is doing business with the Company as exclusive, independent
business advisor. Both the Company and Legend recognize and
acknowledge that Xxxxxx has no authority to execute any agreements on behalf of
the Company.
NEW YORK
· SAN FRANCISCO
·
FLORIDA
Member
NASD · NFA
· ARCAEx · PCX ·
SPIC
2
5. If
the Company was aware of an Entity from a source other than Legend prior to the
date that Legend provides an introduction or otherwise makes the Company aware
of the Entity’s interest, the Company must provide Legend with evidence of this
fact within 15 business days. If the Company does not provide such
evidence within this time period, the Company will be deemed to have expressly
waived any objection it has to paying Legend the business advisory Fees in
accordance with this Agreement. If, however, the Company does provide
such evidence within the time specified, the Company will have no obligation to
Legend to pay the business advisory Fees with respect to the introduction of
that particular Entity.
6. In
consideration of such financial advisory services, the Company agrees to pay
Legend Merchant Group, Inc a non-refundable and non-accountable retainer of
$25,000, which shall be payable at the closing and from the gross proceeds of
the initial Transaction. In addition, as and for additional consideration
and as a material inducement for Legend to enter into this agreement, the
Company agrees to issue to Legend or its designee(s), upon execution and
delivery of this Agreement, an option to purchase 100,000 shares of restricted
common stock of the Company at an exercise price equal to the per share price of
the Common Shares, as defined and determined in accordance with the Term Sheet
dated December 25, 2007 and attached hereto as Exhibit A. The
common stock will have anti-dilution for stock splits and other similar
transactions. The foregoing compensation shall be in addition to any other
compensation and reimbursement of expenses described herein.
7. The
company shall give Legend a right of first refusal to any financing for a period
of one year from the date of this agreement.
8. Either
party hereto may terminate this Agreement at any time upon 30 days written
notice, without any liability or continuing obligation, except that the
termination of this Agreement shall not affect the business advisory Fees
payable to Legend as provided in paragraph 1 herein.
9. Any
controversy, dispute or claim between the parties relating to this Agreement
shall be resolved by binding arbitration in accordance with the rules of the
American Arbitration Association. If either party to this Agreement
shall bring a complaint against the other party for relief, declaratory or
otherwise, arising out of this Agreement, the prevailing party shall be entitled
to recover its legal, accounting and related costs and expenses as may be
determined.
10. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Delaware. This Agreement is the sole and entire agreement
between the parties hereto pertaining to its subject matter and supersedes all
prior oral and written agreements, representations and understandings of the
parties hereto. No modifications of the Agreement shall be binding
unless agreed to in writing by the parties hereto. This Agreement
shall be binding on and inure to the benefit of the successors and assigns of
the parties hereto provided that neither this Agreement nor any of Legend's
rights hereunder may be assigned by Legend without the prior written consent of
the Company.
NEW YORK
· SAN FRANCISCO
·
FLORIDA
Member
NASD · NFA
· ARCAEx · PCX · SPIC
3
Best
regards,
Xxxxx X.
Xxxxxxxx Xx.
CEO/Chairman
LEGEND
MERCHANT GROUP, INC
|
By:
|
Dated:
January 28, 2008
|
||
|
Xxxxx
X. Xxxxxxxx Xx.
|
|||
|
CEO
|
AGREED
AND ACCEPTED:
|
By:
|
/s/ Xxxxxx Xxxx | ||
|
Xxxxxx
Xxxx, CEO
|
|||
NEW YORK
· SAN FRANCISCO
·
FLORIDA
Member
NASD · NFA
· ARCAEx · PCX · SPIC
4
Exhibit
A
TERM
SHEET
|
Issuer
|
China
Agri-Business, Inc. (the “Company”)
Finance
Plaza, 9th
Floor
Hi-Xxxx
Xxxx Xx. 00
Xx-Xxxx
Xxxxxxxxxx Xxxxxxxxxxx Xxxx
Xx’Xx,
Xxxxxxx, Xxxxx
|
|
Investors
|
______
(collectively, the “Investors”).
|
|
Securities
offered
|
An
aggregate of $4,000,000 of units (the “Units”), each unit consisting of (i) a
convertible promissory note (the “Note”) in the principal amount of
$25,000, and (ii) ____ shares of Common Stock to be calculated on a
pre-offering valuation of US$10,000,000, par value $0.001 per share (the
“Common Shares”).” The Notes and the
Shares may hereinafter be referred to collectively as the “Securities.”
|
|
Purchase
Price
|
$25,000
per Unit (the “Unit Purchase
Price”)
|
|
Closing
Date
|
On
one or more dates on or prior to January __, 2007.
|
|
Notes
|
(i) Conversion: Each Note shall be
convertible into shares of the Company's Common Stock at any time, and
from time to time, at the Conversion Price at the election of a holder
thereof in respect to its holdings.
(ii) Conversion
Price (per share):
$___ per share to be calculated on a pre-offering valuation of US
$16,000,000, subject to adjustment.
(iv) Maturity: The entire principal
amount of the Notes and all accrued and unpaid interest thereon shall be
due and payable on two (2) year anniversary of the relevant Closing Date
(the “Maturity Date”).
(iv) Prepayment: Subject to the
effectiveness of the Registration Statement (as defined herein), the
Company shall have the option to pre-pay the Notes at 110% of the
principal amount then outstanding upon sixty (60) days prior written
notice. During such notice period the holder of the Notes shall have the
right to convert any portion thereof.
(v) Interest: 1% per annum payable
annually, in cash upon each anniversary date of the Closing Date; late fee
of 15% per annum.
Anything
to the contrary notwithstanding, in the event the principal amount of the
Notes are not paid in full prior to the Maturity Date the Investors shall
be entitled to interest of 8% per annum from the Closing
Date.
(vi) Ownership
Limitation:
Each Note will include a provision that limits each Investor's
ownership of the Company's Common Stock at any time to no more than 4.9%
of the Company's issued and outstanding Common Stock.
(vii) Anti-dilution
Provisions: Anti-dilution
protection for stock splits, combinations and dividends.
|
5
|
Registration
rights
|
Within
thirty (30) business days of the Closing Date (the “Filing Date”), the Company will file a
registration statement with the SEC (the “Registration Statement”) covering the
resale of (i) the Common Shares, and (ii) the Common Stock underlying the
Notes (collectively (i) and (ii), the “Registrable Securities”). The Company will
use its best efforts to cause the Registration Statement to be declared
effective within ninety (90) calendar days from the Filing Date, or, if
reviewed by the SEC, within one hundred twenty (120) calendar days after
the Filing Date. The Company will use its best efforts to keep
the Registration Statement continuously effective until two (2) years
after the first Closing Date, subject to normal and customary blackout
periods.
The
Company will be required to pay liquidated damages (payable in cash in
arrears at the end of each month during which a registration default
occurs and is continuing) to the holders of the Common Shares, the Notes
or the Common Stock issued upon conversion of the Notes if (i) the Company
fails to file the Registration Statement within thirty (30) business days
from the Closing Date, (ii) the SEC does not declare the Registration
Statement effective within ninety (90) days of the Filing Date (or one
twenty eighty (120) days in the event of a review by the SEC) (the “Effectiveness Date”), (iii) the Company
fails to request acceleration of effectiveness within five (5) business
days of a notice of no further review from the SEC, (iv) the Company fails
to respond to the SEC within ten (10) business days of receipt by the
Company of any comments on the Registration Statement, or (v) after it has
been declared effective, the Registration Statement ceases to be effective
or available or if the Company suspends the use of the prospectus forming
a part of the Registration Statement (A) for more than thirty (30) days in
any period of 365 consecutive days if the Company suspends in reliance on
its ability to do so due to the existence of a development that, in the
good faith discretion of its board of directors, makes it appropriate to
so suspend or which renders the Company unable to comply with SEC
requirements, or (B) for more than sixty (60) days in any period of 365
consecutive days for any reason. The liquidated damages will
accumulate at the rate of one and one-half percent (1.5%) of the purchase
price paid by the Investors for the Securities offered for each thirty
(30) day period during which a registration default is
continuing.
The
Company will not permit any other securities to be included in the
Registration Statement; provided,
however, that, subject to the terms
and conditions hereof, any shares underlying warrants issued to placement
agents engaged in connection herewith shall be eligible to be included
therein.
Notwithstanding
anything to the contrary stated herein, the Company shall be entitled to
limit the Registrable Securities to the extent necessary to avoid any
issues arising from the recent interpretations by the SEC of Rule 415 of
the Securities Act of 1933, as amended.
|
6
|
Placement
Agent Fees
|
Placement
Agent commissions of eight percent (8%) of the amount of the Private
Placement in cash and eight percent (8%) in Warrant coverage, to be
determined based on the number of shares issuable by dividing the gross
proceeds of the Private Placement by the purchase price of the Units
offered in the Private Placement (the “Placement Agent’s
Warrants”). The Placement Agent’s Warrants shall have the same
term and shall have an exercise price of one hundred percent (100%) of the
Exercise Price, subject to anti-dilution adjustment.
|
|
Closing
Conditions
|
The
Closing shall be conditioned upon:
(i) The
absence of any material adverse change in the business, condition, assets,
operations or prospects of the Company;
(ii)
Receipt by both parties of all required consents to consummate the
Offering;
(iii) The
satisfactory completion of all documents by the Investor prior to the
Closing Date;
(iv) Satisfactory
due diligence review by both parties;
(v)
Other standard and customary closing conditions for transactions of this
type.
|
|
Use
of Proceeds
|
The
net proceeds from this Offering will be used for expenses incurred in
connection with Offering and the Registration Statement and for general
working capital purposes.
|
|
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.
|
|
Exclusivity
|
Prior
to the earlier of: (i) the closing of the transaction contemplated by this
term sheet, and (ii) 30 days, the Company shall not solicit, discuss or
enter into any proposal, agreement, commitment or obligation relating to a
financing with any person or entity.
|
|
Governing
Law and Jurisdiction
|
New York Law; New York Courts |
It is expressly understood that no
liability or obligation of any nature whatsoever is intended to be created by
this Term Sheet between the parties signing below. However, this Term Sheet does
evidence the good faith intention of the parties signing below to proceed with
the proposed transaction on the conditions and terms described
above.
The foregoing terms and conditions are
acceptable to the parties signing below as a basis for proceeding with the work
that must be completed before the transaction described in this Term Sheet be
consummated.
7
Executed
as of December __, 2007.
|
By:
____________________
[Name]
[Title]
Date:__________________
|
[____________________]
By:
______________________
[Name]
[Title]
Date:
_________________
|
8
Schedule
I
The
amount of the business advisory Fees that the Company shall pay to Legend in
connection with a Transaction in which the Company was introduced by Legend
shall be determined as follows:
|
·
|
Eight
percent of the Gross Aggregate Consideration less than $5 million;
plus
|
|
·
|
Six
percent of the Gross Aggregate Consideration over $5 million to $10
million; plus
|
|
·
|
Four
percent of the Gross Aggregate Consideration over $10 million to $20
million; plus
|
|
·
|
Two
percent of the Gross Aggregate Consideration over $20
million.
|
NEW YORK
· SAN FRANCISCO
·
FLORIDA
Member
NASD · NFA
· ARCAEx · PCX ·
SPIC
9
