Exhibit 10.5
 
INDEMNIFICATION AGREEMENT
 
This Agreement is made as of January 6, 2010, by and between China HGS Real
Estate Inc., a Florida corporation (the “Company”), and the undersigned member
(a “Director”) of the Board of Directors (also referred to as the “Board”) of
the Company (such Director hereinafter referred to as the “Indemnitee”), with
reference to the following facts:
 
It is essential to the Company to retain and attract as directors the most
capable persons available.  Highly competent persons have become more reluctant
to serve as directors or in other capacities unless they are provided with
adequate protection through insurance and/or other adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of a corporation.

The Company has determined that the inability to attract and retain such persons
is detrimental to the best interests of the Company’s stockholders and that the
Company should act to assure such persons that there will be increased certainty
of protection in the future.

The Company believes it is reasonable, prudent and necessary for the Company to
contractually obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified.

Indemnitee believes that this Agreement is desirable to augment the protection
available to the Indemnitee under any applicable insurance and may not be
willing to serve as a director without the additional protection provided for
under this Agreement.  The Company desires Indemnitee to serve  as a Director
and Indemnitee is willing to serve and to take on additional service for or on
behalf of the Company on the condition that he be so indemnified.
 
In order to induce the Indemnitee to serve as a Director of the Company and in
consideration of his service, the Company hereby agrees to indemnify the
Indemnitee as follows:
 
1. Certain Definitions:
 
(a) Expense Advance: shall have the meaning ascribed thereto in Section 2(a)
hereof.
 
(b) Expenses: shall include, without limitation, attorneys’ fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements, costs, expenses and
obligations actually and reasonably paid or incurred in connection with
investigating, defending, prosecuting, being a witness in or participating in
(including on appeal), or preparing to defend, prosecute, be a witness in or
participate in, any Proceeding relating to any Indemnifiable Event.
 
(c) Indemnifiable Event:  shall include any event or occurrence related to the
fact that the Indemnitee is or was a director, officer, trustee, employee, agent
or fiduciary of the Company, or is or was serving at the request of the Company
as a director, officer, employee, trustee, agent or fiduciary of the Company, or
is or was serving at the request of the Company as a director, officer,
employee, trustee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise (including employee
benefit plans and administrative committees thereof), or by reason of anything
done or not done by the Indemnitee in any such capacity.
 
(d) Independent Legal Counsel:  a firm of  attorneys with its principal offices
in the United States, selected in accordance with the provisions of Section 3,
who shall not have otherwise performed services for the Company or the
Indemnitee within the last two years (other than with respect to matters
concerning the rights of the Indemnitee under this Agreement, or of other
indemnitees under similar indemnity agreements).  Notwithstanding the foregoing,
the term “Independent Legal Counsel” shall not include any person who, under the
applicable standards of professional conduct then prevailing, would have a
conflict of interest in representing either the Company or the Indemnitee in an
action to determine the Indemnitee’s rights to indemnification under this
Agreement.
 
(e) Proceeding:  shall include any threatened, pending or completed claim,
action, suit or proceeding, or any inquiry or investigation, whether instituted
by the Company or any other party and whether of a civil, criminal,
administrative or investigative nature.
 
(f) Voting Securities:  any securities of the Company that vote generally in the
election of directors.
 
2. Indemnity.
 
(a) In the event the Indemnitee was, is or becomes a party to or witness or
other participant in, or is threatened to be made a party to or witness or other
participant in, a Proceeding by reason of (or arising in part out of) an
Indemnifiable Event, the Company will indemnify the Indemnitee, his executors,
administrators or assigns, to the fullest extent permitted by applicable law, as
soon as practicable but in any event no later than sixty days after written
demand is presented to the Company, against any and all Expenses, judgments,
fines (including excise taxes), penalties and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Expenses, judgments, fines, penalties or
amounts paid in settlement) of such Proceeding.  If so requested by the
Indemnitee, the Company shall advance, to the fullest extent permitted by
applicable law, any and all Expenses incurred by Indemnitee in connection with
any Proceeding to the Indemnitee (an “Expense Advance”), and such advancement
shall be made as soon as reasonably practicable, but in any event no later than
thirty days, after the receipt by the Company of a written statement or
statements requesting such advances from time to time.  Notwithstanding anything
in this Agreement to the contrary, the Indemnitee shall not be entitled to
indemnification pursuant to this Agreement in connection with any Proceeding
initiated by the Indemnitee unless the Board of Directors has authorized or
consented to the initiation of such Proceeding or such Proceeding seeks to
enforce the Indemnitee’s rights hereunder; provided, that the foregoing shall
not limit the Indemnitee’s right to indemnification hereunder in connection with
the defense of any counterclaims brought against the Indemnitee in a Proceeding
initiated by the Indemnitee; and, provided, further, that for purposes of this
Agreement, non-frivolous counterclaims, impleadings or other responsive or
defensive actions by the Indemnitee shall not be deemed Proceedings initiated by
the Indemnitee.
 
3. Notwithstanding the foregoing, (i) the obligations of the Company under
Section 2(a) shall be subject to the condition that Independent Legal Counsel
shall not have determined, in a written opinion, that the Indemnitee would not
be permitted to be indemnified with respect to a Proceeding relating to the
Indemnifiable Event under applicable law and (ii) the obligation of the Company
to make an Expense Advance pursuant to Section 2(a) shall be subject to the
condition that, if, when and to the extent that the  Independent Legal Counsel
determines that the Indemnitee would not be permitted under applicable law to be
so indemnified the Company shall be entitled to be reimbursed by the Indemnitee
(who hereby agrees to reimburse the Company) for all such amounts theretofore
paid to the Indemnitee; provided, however that if the Indemnitee has commenced
or thereafter commences legal proceedings in a court of competent jurisdiction
to secure a determination that the Indemnitee should be indemnified under
applicable law any determination made by the Independent Legal Counsel that the
Indemnitee would not be permitted to be indemnified under applicable law shall
not be binding, and the Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed).  The Independent Legal Counsel shall be selected by the
Indemnitee and approved by the Board of Directors (which approval shall not be
unreasonably withheld or delayed). The Company agrees to pay the reasonable fees
of the Independent Legal Counsel referred to above and to indemnify fully such
counsel against any and all Expenses, claims, liabilities and damages arising
out of or relating to this Agreement or its engagement pursuant hereto. If there
has been no determination by the Independent Legal Counsel or if the Independent
Legal Counsel determines that the Indemnitee substantively would not be
permitted to be indemnified in whole or in part under applicable law, the
Indemnitee shall have the right to commence litigation in any court in the State
of Florida having subject matter jurisdiction thereof and in which venue is
proper, or if there are no courts in Florida which have subject matter
jurisdiction and in which venue is proper then a court in any other state which
has subject matter jurisdiction and where venue is proper, seeking an initial
determination by the court or challenging any such determination by the
Independent Legal Counsel or any aspect thereof, including the legal  or factual
bases therefor, and the Company hereby consents to service of process and to
appear in any such proceeding.  Any determination by the Independent Legal
Counsel otherwise shall be conclusive and binding on the Company and the
Indemnitee.
 
4. Indemnification for Additional Expenses.  The Company shall indemnify the
Indemnitee against any and all Expenses actually and reasonably incurred and, if
requested in writing by the Indemnitee, shall (within thirty days of such
request) advance such expenses to the Indemnitee, which are incurred by the
Indemnitee in connection with any action brought in good faith by the Indemnitee
involving (i) the interpretation or enforcement of the rights of the Indemnitee
under this Agreement or any other agreement or Company bylaw now or hereafter in
effect relating to Proceedings for Indemnifiable Events and/or (ii) recovery by
the Indemnitee under any directors’ and officers’ liability insurance policies
maintained by the Company, regardless of whether the Indemnitee ultimately is
determined to be entitled to such indemnification, advance Expense payment or
insurance recovery, as the case may be.
 
5. Subrogation.  In the event of payment under this Agreement, the Company shall
be subrogated to the extent of such payment to all of the rights of recovery of
the Indemnitee, who shall execute all papers required and shall do everything
that may be necessary to secure such rights, including the execution of such
documents necessary to enable the Company effectively to bring suit to enforce
such rights.
 
6. No Duplication of Payment.  The Company shall not be liable under this
Agreement to make any payment in connection with any Proceeding brought against
or involving the Indemnitee to the extent the Indemnitee has otherwise actually
received payment (under any insurance policy, bylaw or otherwise) of the amounts
otherwise indemnifiable hereunder (or for which advancement is provided
hereunder and not subject to repayment).
 
7. Partial Indemnification.  If the Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
Expenses, judgments, fines, penalties and amounts paid in settlement of a
Proceeding, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify the Indemnitee for the portion thereof to which the
Indemnitee is entitled.
 
8. Notice and Defense of Proceeding.
 
(a) The Indemnitee shall give to the Company notice in writing as soon as
practicable of any Proceeding made against it for which indemnity will or could
be sought under this Agreement.  Notice to the Company shall notify the Company
of the existence of the Proceeding, setting forth with reasonable specificity
the facts and circumstances relating to the Proceeding of which the Indemnitee
is aware.  The foregoing notice shall be given at the Company’s principal
office, shall be directed to the Corporate Secretary of the Company (or such
other address as the Company shall have designated in writing to the Indemnitee)
and shall be deemed received if sent by prepaid mail properly addressed, the
date of such notice being the date postmarked.  In the event of any such
Proceeding, the Company shall provide the Indemnitee with copies of all notices,
pleading, and other papers filed, served or received in connection with such
Proceeding.

(b) In the event of any Proceeding for which indemnity will or could be sought
under this Agreement, the Company hereby agrees to assume the defense thereof
with counsel satisfactory to the Indemnitee, and the Company shall not be liable
to the Indemnitee for any legal expenses of other counsel or any other expenses
subsequently incurred by the Indemnitee in connection with the defense thereof;
provided, that, (i) the Indemnitee shall have the right at its own expense to
participate in any such Proceeding with counsel of its own choosing and (ii) if
(A) the retention of other counsel by the Indemnitee has been previously
authorized by the Company, (B) the Company shall not have employed counsel to
which Indemnitee has consented or the Company discontinues the retention of
Company’s counsel to defend such Proceeding or (C) the Indemnitee or counsel
selected by the Company shall have reasonably concluded that there may be a
conflict of interest between the Company and the Indemnitee, then the fees and
Expenses related to the Indemnitee’s other counsel shall be subject to
indemnification by the Company.  The Company shall not be required to obtain the
consent of the Indemnitee to settle any Proceeding which the Company has
undertaken to defend if the Company assumes full and sole responsibility for
such settlement and such settlement grants the Indemnitee a complete and
unqualified release in respect of any potential liability.

9. Burden of Proof.  In connection with any determination by the Independent
Legal Counsel or otherwise as to whether the Indemnitee is entitled to be
indemnified hereunder, to the fullest extent not prohibited by law, the burden
of proof shall be on the Company to establish that the Indemnitee is not so
entitled.
 
10. No Presumptions.  For purposes of this Agreement, the termination of any
Proceeding by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere, or its equivalent,
shall not create a presumption that the Indemnitee did not meet any particular
standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by applicable law.  In addition, neither
the failure of the Independent Legal Counsel to have made a determination as to
whether the Indemnitee has met any particular standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by the
Indemnitee to secure a judicial determination that indemnification of the
Indemnitee is permitted under applicable law shall be a defense to the
Indemnitee’s claim or create a presumption that the Indemnitee has not met any
particular standards of conduct or did not have any particular belief.
 
 
 
 
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11. Liability Insurance.  To the extent the Company maintains an insurance
policy or policies providing directors’ and officers’ liability insurance, the
Indemnitee shall be covered by such policy or policies, in accordance with its
or their terms.
 
12. Amendments, Etc.  No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by each of the parties hereto.  No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
 
13. Binding Effect, Etc.  This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors, assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Company, spouses, heirs, executors and personal and legal
representatives.  This Agreement shall continue in effect regardless of whether
the Indemnitee continues to serve as a Director of the Company or of any other
enterprise at the Company’s request.
 
14. Indemnification Hereunder Not Exclusive.  The rights of the Indemnitee
hereunder shall be in addition to any other rights the Indemnitee may have under
the Articles of Incorporation or Company  bylaws (collectively, the Company’s
“Governing Documents”),  including any amendments thereto, the laws of the state
of Florida or otherwise.  To the extent that a change in the laws of Florida
(whether by statute or judicial decision) permits greater indemnification by
agreement than would be afforded currently under the Governing Documents and
this Agreement, it is the intent of the parties hereto that the Indemnitee shall
enjoy by this Agreement the greater benefits so afforded by such change, subject
to the restrictions expressly set forth herein or therein..
 
15. Governing Law.  This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflict of laws.
 
16. Severability.  The provisions of this Agreement shall be severable in the
event that any of the provisions hereof (including any provision within a single
section, paragraph or sentence) are held by a court of competent jurisdiction to
be invalid, void, or otherwise unenforceable in any respect, and the validity
and enforceability of any such provisions in every other respect and of the
remaining provisions hereof shall not be in any way impaired and shall remain
enforceable to the fullest extent permitted by applicable law.
 
17. Coverage.  The provisions of this Agreement shall apply with respect to the
Indemnitee’s service as a Director of the Company or in any other capacity
encompassed in an Indemnifiable Event prior to the date of this Agreement and
with respect to all periods of such service after the date of this Agreement,
even though the Indemnitee may have ceased to be a Director of the Company and
to hold every other office or position encompassed within an Indemnifiable
Event.
 
18. Counterparts.  This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one instrument.
 
[Signature Page Follows]
 
 
 
 
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and signed as of the day and year first above written.
 
China HGS Real Estate Inc.
By:           /s/ Xiaojun Zhu
Name: Xiaojun Zhu
Title: Chief Executive Officer
DIRECTOR:
/s/ H. David Sherman
 

 
 
 
 
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