[logo.jpg]

Since 1842

 

KUHNS BROTHERS

 

The Farm House

558 Lime Rock Road

Lime Rock, Connecticut 06039

 

May 26, 2011

 

Mr. Zhigang (Harry) Gao

Mr. Lin (Michael) Han

Master Silicon Carbide Industries, Inc.
558 Lime Rock Road

Lakeville, Connecticut 06039

 

ENGAGEMENT AGREEMENT PROVIDING FOR INVESTMENT BANKING SERVICES

 

Dear Mr. Gao and Mr. Lin:

 

This letter agreement (the “Agreement”) is written to set forth the
understanding and agreement between Kuhns Brothers, Inc. and its related
subsidiaries (altogether, “Kuhns Brothers”) and Master Silicon Carbide
Industries, Inc., a Nevada corporation, and its related subsidiaries, including
Yili Carborundum USA, Inc., C3 Capital, Limited and Yili Master Carborundum
Production Co., Ltd. (altogether, the “Company”).

 

The Company hereby engages Kuhns Brothers on an exclusive basis, initially for a
one (1) year period commencing the date hereof, to provide it with investment
banking services and Kuhns Brothers hereby accepts such engagement. In the event
that as a result of this initial engagement Kuhns Brothers successfully arranges
and closes any financing and related merger acquisition as described below (the
“Closing”), this Agreement will remain in force for a period of two (2) years
following the closing of such financing and related transaction.

 

 

 

 

I.   INVESTMENT BANKING SERVICES

 

1.Financial Advisory Services

 

Kuhns Brothers, through its subsidiary Kuhns Bros. & Co., Inc. (the “Advisor”)
and its subsidiary Kuhns Brothers Securities Corporation (the “Placement
Agent”), will assist the Company with its current investment banking
requirements of a capital raise of approximately $10,000,000 to $35,000,000 of
gross proceeds which may be either debt or equity (common stock, preferred
stock, convertible securities, warrants or similar instruments) or a combination
of both (the “Financing”) invested in it or its controlled subsidiaries or
affiliates. Advisor may market to institutional and high-net-worth individual
financial investors (“Financial Investors”) or, at the option of the Company, to
strategic investors (“Strategic Investors”); collectively with Financial
Investors, the (“Investors”). All assistance provided hereunder with respect to
the Financing shall be on a best efforts basis.

 

With respect to Financial Investors, Kuhns Brothers will provide the following
financial advisory and placement agency services:

 

(i)       provide advice regarding the financial structure of the Company or its
subsidiaries or any projects or programs undertaken by any of the foregoing;
(ii) assist in structuring the Financing with respect to what is usual and
standard practice on terms and conditions equivalent for organizations in
similar financings; (iii) assist in preparing and documenting of the Company’s
offering documents relating to the Financing, including the Company’s executive
summary (the “Executive Summary”) and investor PowerPoint presentation (the
“Investor PowerPoint Presentation”), as well as any other related materials
relating to the Offering and the Financing; (iv) when the structuring of the
Financing has reached an appropriate stage, assist in the process to obtain and
execute such Financing; and (v) assist in obtaining and executing such Financing
on the most favorable terms and conditions consistent with current market
conditions and the nature of and risks inherent in the Company.

 

With respect to Strategic Investors, Kuhns Brothers will provide the following
financial advisory and placement agency services:

 

 

 

 

(i) assist in the evaluation of a Strategic Investor from a financial point of
view; (ii) provide advice and assistance with respect to the form and structure
of any Transaction involving a Strategic Investor; and, when the structuring of
the strategic relationship has reached an appropriate stage, (iii) act as the
Company’s agent to assist the Company in locating and obtaining, on the most
favorable terms and conditions, such Strategic Investor(s) in the form of
Company clients, customers or vendors, and assist the parties to enter into
sales, vendor, licensing or related strategic agreements. (Such agreements with
Strategic Investors, whether they result in a financial investment and or
license arrangement, sales or vendor agreement or otherwise, shall also be
considered Financing for purposes of this Agreement.)

 

Kuhns Brothers shall not be required to undertake duties not reasonably within
the scope of the financial advisory services in which it is generally engaged.
In performance of its duties, Kuhns Brothers shall provide the Company with the
benefits of its best judgment and efforts, but it is understood and acknowledged
by the parties that the value of Kuhns Brothers’ advice may not be measurable in
a quantitative manner. Kuhns Brothers does not guarantee that the Company will
receive the valuation for its securities that it desires.

 

The Company acknowledges that Kuhns Brothers and its affiliates are in the
business of providing financial advisory services of all types contemplated by
this Agreement to others. Nothing herein contained shall be construed to limit
or restrict Kuhns Brothers or its affiliates in conducting such business with
respect to others or rendering such advice to others.

 

The Company recognizes and confirms that Kuhns Brothers, in acting pursuant to
this Agreement, will be using information in reports and other information
provided by third parties, including information provided by or on behalf of the
Company. Kuhns Brothers does not assume responsibility for and may rely on,
without independent verification, the accuracy and completeness of any such
reports and information. The Company hereby warrants that any information
relating to the Company that is furnished to Kuhns Brothers by or on behalf of
the Company will be accurate and will not contain any material misstatements of
fact or omissions. The Company agrees that any information or advice rendered by
Kuhns Brothers or its representatives in connection with this Agreement is for
confidential use of the Company’s Board of Directors, management and employees,
as well as attorneys, accountants and other agents of the Company on a
need-to-know basis and, except as otherwise required by law, the Company will
not, and will not permit any third party to, disclose or otherwise refer to such
advice or information in any manner without Kuhns Brothers’ prior written
consent.

 

 

 

 

2.   Merger and Acquisition Services

 

Relating to its assistance with respect to the Financing, Kuhns Brothers shall
provide the Company with services related to merger and acquisition transactions
in the event that at any time during which this Agreement is in place, the
Company or any of its affiliates shall enter into any "merger and acquisition
transaction" as described below with any party introduced to the Company by
Kuhns Brothers, directly or indirectly.

 

For purposes of this Agreement, the term "merger and acquisition transaction"
means: (i) any merger, consolidation, reorganization or other business
combination including strategic partnerships or joint ventures pursuant to which
the business or businesses of a third party, including projects, stand-alone
assets or technologies, are combined with that of the Company in either a direct
ownership, joint venture or strategic alliance fashion; (ii) the acquisition,
directly or indirectly, by the Company of all or a substantial portion of the
assets or equity of a third party by way of negotiated purchase or otherwise; or
(iii) the acquisition, directly or indirectly, by a third party of all or a
substantial portion of the assets or equity of the Company by way of negotiated
purchase or otherwise (the “Transaction(s)”).

 

Kuhns Brothers' merger and acquisition services may include, but will not
necessarily be limited to:

 

(i) Assistance in the identification of businesses, organizations, assets or
technologies that may constitute potential Transactions; (ii) assistance in the
evaluation of such third parties from a financial point of view; (iii)
assistance with respect to the form and structure of the Transaction; (iv)
conducting discussions and negotiations regarding a Transaction; and (v)
providing other related advice and assistance as the Company may reasonably
request in connection with a Transaction.

 

The Company acknowledges that Kuhns Brothers and its affiliates are in the
business of providing merger and acquisition services (of all types contemplated
by this agreement) to others. Nothing herein contained shall be construed to
limit or restrict Kuhns Brothers or its affiliates in conducting such business
with respect to others or in rendering such advice to others.

 

3.Strategic Planning Services

 

Relating to its assistance with respect to the Financing, Kuhns Brothers shall
provide the Company with strategic planning services. Kuhns Brothers strategic
planning services shall include, but not be limited to, the following:

 

 

 

 

(i)advice regarding the Company’s business plan; (ii) advice regarding formation
of the Company’s corporate goals and their implementation; (iii) advice
regarding corporate organization, personnel and the related selection of needed
specialty skills; (iv) general corporate documentation preparation and
assistance, including services relating to assisting the Company in preparation
of its business plan and related materials, including regulatory and filing
documentation; (v) assistance regarding preparation and organization of the
Company’s corporate paperwork.

 

II.  COMPENSATION

 

In consideration of rendering such services, the Company agrees to pay Kuhns
Brothers on the following basis:

 

(i) for financial advisory services—

 

(a) a financing fee, payable upon closing(s) of the Financing (the “Closing”),
equal to the following percentages of the total Financing value:

 

CORPORATE FINANCING FEE Equity (including either common stock, preferred stock,
convertible securities, warrants or similar instruments)   7.00%, plus warrants
Debt (including notes, bond, mezzanine, debentures, credit facilities or lines)
  3.00% Exercise of Warrants or Subscription Rights   7.00%

 

(b) Please note that the total Financing includes the exercise of any warrants
or subscription rights, whenever exercised, and the financing fee includes a 7%
charge at such time.

 

With respect to warrants provided as compensation as indicated in the table
above, the warrant “coverage”, that is the percent of the dollar amount of
securities issued for which Kuhns Brothers shall receive warrants to purchase
the Company’s equity securities, shall be 7%. For example, if the Company or its
subsidiaries issues $1 million of common stock with warrants attached, Kuhns
Brothers shall receive a warrant to buy $70,000 of common stock with warrants
attached of the Company or its subsidiaries. Such warrant will have a strike
price that is 100% of the price of the equity securities, or underlying equity
securities, offered in the Financing, or in the case of compensation not
involving a Financing shall be at a strike price that is 100% of the price of
the Company’s common stock as set by the most recent third party sale, and shall
be outstanding for a period of ten (10) years. The Warrants shall provide for
cashless exercise (even if the Investors do not have such right).

 

 

 

 

In connection with our financial advisory services, you agree that if during the
period Kuhns Brothers is retained by you a Financing is consummated with a third
party, acting either as a Financial Investor or as a Strategic Investor, who was
introduced directly or indirectly by Kuhns Brothers (“Introduced Investors”), or
if the Company enters into a definitive agreement with Introduced Investors
which at any time thereafter results in a Financing, you will pay Kuhns Brothers
a financing fee equal to the fees indicated above with respect to such
Financing. It is understood that for purposes of this Agreement, Kuhns Brothers
shall be deemed to have introduced such Introduced Investors to the Company not
only by physical introductions and meetings, but also by arranging or
facilitating telephonic or correspondence meetings between the parties, whether
or not Kuhns Brothers participated in such meetings, telephone calls or
correspondence.

 

Additionally, if during two (2) years from the execution of this contract a
Financing is consummated with a third party not introduced to the Company by
Kuhns Brothers, Kuhns Brothers will be paid a fee equal to 50% of its
compensation due pursuant to the language above.

 

Notwithstanding anything contained herein, Kuhns Brothers’ fees payable in
connection with a Financing shall be paid at the level of the compensation table
above at any time as there is a closing of the Financing or Transaction, or
tranche of the Financing or Transaction, or finalization of related
documentation or purchase of a Public Shell (the “Closings”), and at the option
of Kuhns Brothers, shall be paid in cash or in the securities of the Company
being offered in the Financing.

 

In the event that Kuhns Brothers is successful in raising the Financing, but the
Company declines to accept the Financing, Kuhns Brothers will be paid a fee
equal to 50% of its compensation due pursuant to the language above.

 

(ii) for merger and acquisition services—

 

(a)        For any merger or acquisition, a merger and acquisition fee equal to
the “Lehman Formula” based on $5 million increments, that is, 5% of the first $5
million, 4% of the second $5 million, etc., of the consideration paid in the
Transaction, or the Lehman Formula of the equity value of the organization being
acquired, at the option of Kuhns Brothers.

 

In the event that Kuhns Brothers is involved in both merger and acquisition
services and financial advisory services with respect to a Transaction, Kuhns
Brothers shall be paid for each service.

 

For purpose of this Agreement, "consideration" means the aggregate value,
whether in cash, securities, assumption (or purchase subject to) of debt or
liabilities (including, without limitation, indebtedness for borrowed money,
pension liabilities or guarantees) or other property, obligations or services,
paid or payable directly or indirectly (in escrow or otherwise) or otherwise
assumed in connection with a Transaction, or the net present value of the
estimated benefits to the Company of any joint venture, licensing or marketing
agreement (“Consideration”). The value of Consideration shall be determined as
follows:

 

 

 

 

(a)the value of securities, liabilities, obligations, property and services
shall be the fair market value as shall mutually be agreed upon at the date of
the closing of the Transaction;

(b)the value of indebtedness, including indebtedness assumed, shall be the face
amount; and/or

(c)the net present value of the estimated benefits to the Company of any joint
venture, licensing or marketing agreement, as mutually determined by the
parties. If the parties cannot come to such mutual determination, the net
present value described above shall be determined by arbitration.

 

If the Consideration payable in a Transaction includes contingent payments to be
calculated by reference to uncertain future occurrences, such as future
financial or business performance, then any fees of Kuhns Brothers relating to
such Consideration shall be payable at the time of the receipt of such
Consideration.

 

The Company acknowledges that Kuhns Brothers and its affiliates are in the
business of providing merger and acquisition services (of all types contemplated
by this Agreement) to others. Nothing herein contained shall be construed to
limit or restrict Kuhns Brothers or its affiliates in conducting such business
with respect to others or in rendering such advice to others.

 

The Company also acknowledges that Kuhns Brothers and its affiliates have or may
have ownership interests in businesses, assets or technologies identified by
them or others to the Company as potential Transactions. Nothing herein
contained shall be construed to limit or restrict the ability of Kuhns Brothers
or its affiliates to be compensated for its ownership interest in such a
Transaction on a basis separate and apart from the compensation described
herein.

 

In connection with our merger and acquisition services, you agree that if during
the period Kuhns Brothers is retained by you, a Transaction is consummated with
a third party introduced by Kuhns Brothers or the Company enters into a
definitive agreement with a third party introduced by Kuhns Brothers which at
any time thereafter results in a Transaction (“Third Parties”), you will pay
Kuhns Brothers a transaction fee equal to the Lehman Formula times the
Consideration.

 

It is understood that for purposes of this Agreement, Kuhns Brothers shall be
deemed to have introduced such Third Parties to the Company not only by physical
introductions and meetings, but also by arranging or facilitating telephonic or
correspondence meetings between the parties, whether or not Kuhns Brothers
participated in such meetings, telephone calls or correspondence.

 

Additionally, if during the period Kuhns Brothers is retained by you, a
Transaction is consummated with a third party not introduced to the Company by
Kuhns Brothers, Kuhns will be paid a fee equal to 50% of its compensation due
pursuant to the language above.

 

 

 

 

(iv) for expenses—

 

(a)       in the event of a Financing or Transaction the Company shall pay an
amount equal to 2% of the total Financing, on a non-accountable basis, to
compensate Kuhns Brothers for the expenses incurred by it in relation to the
Transaction, including expenses related to Kuhns Brothers’ due diligence, and
shall reimburse Kuhns Brothers for any expenses reasonably incurred by it
related to the Financing, subject to such expenses being authorized in advance
by the Company (including, without limitation, reasonable professional and
reasonable legal fees and disbursements incurred by Kuhns Brothers in connection
with its engagement hereunder with respect to services to be rendered by it, as
well as any such fees or expenses reasonably incurred directly by personnel of
Kuhns Brothers or its agents or representatives in connection with work on
behalf of the Company);

(b)       in the event the Financing does not close due to a material
misrepresentation by the Company that is discovered during the due diligence
process, the Company will reimburse Kuhns Brothers for its out of pocket
expenses, plus a breakage fee of $100,000;

(c)       with regards to Strategic Planning Services, the Company shall
reimburse Kuhns Brothers for any expenses reasonably incurred (including,
without limitation, reasonable professional and reasonable legal fees and
disbursements incurred by Kuhns Brothers in connection with its engagement
hereunder with respect to services to be rendered by it, as well as any such
fees or expenses reasonably incurred directly by personnel of Kuhns Brothers or
its agents or representatives in connection with work on behalf of the Company).

 

All compensation and expenses will be reimbursed to Kuhns Brothers via wire
transfer. The Firm’s wiring instructions are attached as Schedule A.

 

III.         RIGHT TO BOARD PARTICIPATION OR OBSERVER STATUS

 

Kuhns Brothers has the right, in its sole discretion, to name a representative
to the Company’s board of directors during the time of this Agreement and for
such period of time after the termination of this Agreement as any Financial or
Strategic Investor introduced by Kuhns Brothers owns 5% or more of the Company’s
common stock. In its sole discretion, Kuhns Brothers may not exercise its board
participation right, but shall instead choose to be named an Observer to the
Company’s board of directors. Observer status, if exercised, shall entitle Kuhns
Brothers to be present at all board meetings, including physical and telephonic
sessions, as well as to receive all information provided to the Company’s board
members for such meetings; Observer status shall not enable Kuhns Brothers to
vote or otherwise participate at such board meetings.

 

 

 

 

IV.         RIGHT TO SUB-CONTRACT OR SYNDICATE

 

Kuhns Brothers has the right, in its sole discretion, to sub-contract any of its
rights to provide services hereunder to qualified third parties in its sole
discretion, so long as Kuhns Brothers remains the prime contractor of such
services to the Company. Kuhns Brothers rights to subcontract hereunder include
the syndication of any underwriting performed for the Company pursuant to this
Agreement, or the formation of a selling group for the sale of any placement
performed for the same purpose. Kuhns Brothers has the right to enter into any
finder, inter dealer or syndication agreements with qualified parties with
respect to placing and arranging the Financing.

 

V.           ADDITIONAL INVESTMENT BANKING SERVICES

 

The Company agrees that Kuhns Brothers shall have the right, but not the
obligation, which right is exercisable in Kuhns Brothers’ sole discretion, to
provide investment banking services to the Company on an irrevocable
preferential right of refusal basis to provide such services in relation to the
Company’s financing for the term this Agreement and such additional period of
time as may be necessary to complete any project or Transaction already
commenced pursuant to the Company’s written request or engagement of Kuhns
Brothers prior to the expiration of such 2 year period. Such services may
include underwriting and acting as a placement agent for the Company’s
securities on a lead-managed or co-managed basis, assisting in merger or
acquisition transactions and providing other financial advisory services. Such
right shall terminate with respect to any financing, transaction or service if
the Company shall request in writing by certified mail Kuhns Brothers to lead
such financing or transaction or to provide such service and Kuhns Brothers
shall fail to notify the Company within fifteen (15) days thereafter that Kuhns
Brothers will accept the engagement. In the event that Kuhns Brothers agrees to
provide such investment banking services, Kuhns Brothers shall be paid as
described in paragraph II above. The remaining terms of such engagement shall be
contained in specific engagement agreements relating to the specific financing
or transaction. Notwithstanding the above or any oral representations or
assurances previously or subsequently made by the parties, this Agreement does
not constitute a commitment by or obligation of Kuhns Brothers to act as
underwriter or placement agent in connection with any future offering of the
Company’s securities. Such a commitment on the part of Kuhns Brothers would
exist only upon the execution of a final, written engagement agreement and then
only in accordance with the terms and conditions thereof. In any event, Kuhns
Brothers may determine in its sole discretion, for any reason (including,
without limitation, the results of its due diligence investigation, a material
change in the Company’s financial condition; business or prospects, the lack of
appropriate internal Kuhns Brothers committee approvals or then current market
conditions) not to participate in such an offering of the Company’s securities.
In the event that Kuhns Brothers, with respect to any particular financing or
transaction, elects not to provide investment banking or financial advisory
services to the Company, nothing contained herein shall be deemed to prevent the
Company from utilizing the services of another investment banking firm for such
financing or transaction, but such retention of another investment banking firm
shall be without prejudice to Kuhns Brothers’ rights hereunder with respect to
other transactions.

 

 

 

 

Upon the successful execution of the Financing, Transaction or any publicly
traded equity or debt capital markets financing lead or co-managed by Kuhns
Brothers, Kuhns Brothers, in accordance with its customary practices, will
provide market making and research services to investors in the securities of
the Company (subject, however, to the Company’s continuation of its engagement
of Kuhns Brothers as a financial advisor pursuant to the terms of this
Agreement) for a period of two years following the closing of such financing,
and subject to the Firm’s customary right not to make a market in such
securities at any time or to suspend research coverage).

 

For the purpose of this Agreement, “cause” means the failure by Kuhns Brothers
to perform in a material respect its obligations hereunder in accordance with
the skill and diligence normally provided by recognized investment banking
companies; provided, however, that the Company shall first give Kuhns Brothers
reasonable prior written notice (a minimum of fifteen days notice) of the
Company’s intent to terminate the engagement (such notice to specify in
reasonable detail the facts alleged to give rise to the Company’s right to
terminate for cause) and shall have provided Kuhns Brothers a reasonable
opportunity to cure by performing such obligations (the reasonableness of such
opportunity to be measured not only by Kuhns Brothers’ ability to perform during
such period but also by the adverse effect on the Company resulting from
providing such additional period to enable Kuhns Brothers to perform).

 

VI.          INDEMNIFICATION

 

The Company shall indemnify Kuhns Brothers and hold it harmless against any and
all losses, claims, damages or liabilities to which Kuhns Brothers may become
subject arising in any manner out of or in connection with the rendering of
service by Kuhns Brothers hereunder, unless it is finally judicially determined
that such losses, claims, damages or liabilities resulted from the gross
negligence, bad faith and willful misconduct of Kuhns Brothers. Such
indemnification shall extend to any sub-contracted party selected by Kuhns
Brothers pursuant to the provision of its services to the Company pursuant to
this Agreement, including the members of any syndicate or selling group
organized by Kuhns Brothers for the purpose of underwriting or placing the
Company’s securities.

 

The Company shall reimburse Kuhns Brothers promptly for any legal or other
expenses reasonably incurred by it in connection with investigating, preparing
to defend or defending, or providing evidence in or preparing to serve or
serving as a witness with respect to, or otherwise relating to, any lawsuits,
investigations, claims or other proceedings arising in any manner out of or in
connection with the rendering of services by Kuhns Brothers hereunder (including
without limitation, in connection with the enforcement of this Agreement and the
indemnification obligations set forth herein); provided, however, that in the
event of a final judicial determination is made to the effect specified above,
Kuhns Brothers will remit to the Company any amounts reimbursed under such
paragraph.

 

 

 

 

The Company agrees that the indemnification and reimbursement commitments set
forth in this paragraph shall apply if either the Company or Kuhns Brothers is a
formal party to any such lawsuits, claims or other proceedings and that such
commitments shall extend upon the terms set forth in this paragraph to any
controlling person, affiliate, director, officer, employee, or agent of Kuhns
Brothers (each, with Kuhns Brothers, an “Indemnified Person”). The Company
further agrees that, without Kuhns Brothers’ prior written consent, which
consent will not be unreasonably withheld, it will not enter into any settlement
of a lawsuit, claim or any other proceeding arising out of the financings or
transactions contemplated by this Agreement unless such settlement includes an
implicit and unconditional release from the party bringing such lawsuit, claim
or other proceeding of all indemnified persons.

 

The Company further agrees that the indemnified persons are entitled to retain
separate counsel of their choice in connection with any matters in respect of
which Indemnification, reimbursement or contribution may be sought under this
Agreement. Fees for counsel will be payable only if management and counsel to
the Company have has been consulted and allowed to participate fully in the
selection of reasonable and appropriate counsel to the indemnified person(s).
Each indemnified person shall give notice to the Company within thirty (30) days
of the assertion against such indemnified person of any claim or the
commencement of any action or proceeding relating to any foregoing, provided
further that if the indemnified person fails to notify the Company, then the
Company shall be relieved of any liability that it may have to such indemnified
person as to such claim hereunder.

 

The Company and Kuhns Brothers agree that if any indemnification or
reimbursement sought pursuant to the preceding paragraph is judicially
determined to be unavailable for a reason other than the gross negligence, bad
faith or willful misconduct of Kuhns Brothers, then whether or not Kuhns
Brothers is the indemnified person, the Company and Kuhns Brothers shall
contribute to the losses, claims, damages, liabilities and expenses for which
such indemnification or reimbursement is held unavailable (i) in such proportion
as is appropriate to reflect the relative benefits to the Company on the one
hand, and Kuhns Brothers on the other hand, in connection with the financings or
transactions to which such indemnification or reimbursement relates, or (ii) if
the allocation provided by clause (i) above is judicially determined not to be
permitted, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) but also the relative faults of the Company
on the one hand, and Kuhns Brothers on the other hand, as well as any other
equitable considerations; provided, however, that in no event shall the amount
to be contributed by Kuhns Brothers pursuant to this paragraph exceed the amount
of the fees actually received by Kuhns Brothers hereunder.

 

 

 

 

VII.        MISCELLANEOUS

 

Except as contemplated by the terms hereof or subpoena issued by a court of
competent jurisdiction, Kuhns Brothers shall keep confidential all non-public
information provided to it by the Company, and shall not disclose such
information to any third party, other than such of its employees and advisors as
Kuhns Brothers determines to have a need to know.

 

Except as required by applicable law, any advice to be provided by Kuhns
Brothers under this Agreement shall not be disclosed publicly or made available
to any third parties without the prior approval by Kuhns Brothers, and
accordingly such advice shall not be relied upon by any person or entity other
than the Company.

 

Upon the successful close of the reverse merger transaction as contemplated in
this Agreement, Kuhns Brothers shall not provide the similar service to the
Company’s competitors in China during the term of this Agreement.

 

The Company agrees that Kuhns Brothers has the right to place advertisements in
financial and other newspapers and journals describing the Company’s Financing
and Kuhns Brothers’ related services to the Company hereunder, provided that
Kuhns Brothers will submit a copy of any such advertisements to the Company for
its prior approval, which approval shall not be unreasonably withheld.

 

Nothing in this Agreement, expressed or implied, is intended to confer or does
it confer on any person or entity other than the parties hereto or their
respective successors and assigns, and to the extent expressly set forth herein,
the indemnified persons, any rights or remedies under or by reason of this
Agreement or as a result of the services to be rendered by Kuhns Brothers
hereunder.

 

Neither the execution and delivery of this Agreement by the Company nor the
consummation of the financings or transactions contemplated hereby will,
directly or indirectly, with or without the giving of notice or lapse of time,
or both: (i) violate any provisions of the Certificate of Incorporation or
By-laws of the Company; or (ii) violate, or be in conflict with, or constitute a
default under, any agreement, lease, mortgage, debt or obligation of the Company
or require the payment, any pre-payment or other penalty with respect thereto.

 

The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provisions of this Agreement,
which shall remain in full force and effect.

 

 

 

 

VIII        TERMINATION; SURVIVAL OF CERTAIN PROVISIONS.

 

The term of Kuhns Brothers’ engagement hereunder shall extend from the date
hereof until terminated. Subject to the provisions of this Agreement that shall
survive any termination or expiration of the understanding between the parties
as set forth below, Kuhns Brothers may terminate the engagement hereunder at any
time by giving the Company at least 10 days written notice.

 

The expense, indemnification, reimbursement, advertisements, and contribution
obligations of the Company provided herein and Kuhns Brothers’ rights to
compensation (which term includes all fees, amounts and warrants due or which
may become due) shall remain operative and in full force and effect regardless
of (i) any withdrawal, termination or consummation of or failure to initiate or
consummate any transaction described herein or (ii) any termination or the
completion or expiration of this Agreement.

 

This Agreement may not be amended or modified except in writing signed by each
of the parties and shall be governed by and construed and enforced in accordance
with the laws of the State of Connecticut. The Company and Kuhns Brothers hereby
irrevocably and unconditionally consent to submit to the exclusive jurisdiction
of the courts of the State of Connecticut and of the United States District
Courts located in Connecticut for any lawsuits, actions or other proceedings
arising out of or relating to this Agreement and agree not to commence any such
lawsuit, action or other proceeding except in such courts. The Company further
agrees that service of any process, summons, notice or document by mail, return
receipt requested, to the Company’s address set forth above shall be effective
service of process for any lawsuit, action or other proceeding brought against
the Company in any such court. The Company and Kuhns Brothers hereby irrevocably
and unconditionally waive any objection to the laying of venue of any lawsuit,
action or other proceeding arising out of or relating to this Agreement in the
courts of the State of Connecticut or the United States District Courts located
in the State of Connecticut, and hereby further irrevocably and unconditionally
waive and agree not to plead or claim in any such court that any such lawsuit,
action or other proceeding brought in any such court has been brought in an
inconvenient forum. Any right to trial by jury with respect to any lawsuit,
claim or other proceeding arising out of or relating to this Agreement or the
services to be rendered by Kuhns Brothers hereunder is expressly and irrevocably
waived.

 

This Agreement is subject to the approval of the board of directors of both
companies. Johns D. Kuhns, Chief Executive Officer and a director of the Company
and Mary Fellows, Executive Vice President and a director of the Company are
each affiliates of Kuhns Brothers. Accordingly, the board of directors of the
Company should take this relationship into consideration in approving this
Agreement.

 

If the foregoing correctly sets forth the understanding and agreement between
Kuhns Brothers and the Company, please so indicate in the space provided for
that purpose below, whereupon this letter shall constitute a binding agreement
as of the date hereof.

 

 

 

  

  Kuhns Brothers, Inc.       By: /s/ Robert Drake   Name:   Robert Drake  
Title:   Vice President

 

AGREED:       Master Silicon Carbide Industries, Inc.       By: Zhigang (Harry)
Gao   Name:     Mr. Zhigang (Harry) Gao       By: Lin (Michael) Han   Name:
    Mr. Lin (Michael) Han  

  

 

 

 

SCHEDULE A

 

Kuhns Brothers Electronic Wire Transfer Instructions

 

Please wire funds to: