Unassociated Document


    Exhibit 10.5

    ADMINISTRATIVE SERVICES AGREEMENT

     

    THIS
ADMINISTRATIVE SERVICES AGREEMENT (this “Agreement”), dated as
of October 1, 2010, is by and among AGFEED INDUSTRIES, INC., a Nevada
corporation (the “Parent”), AGFEED
ANIMAL NUTRITION HOLDINGS, INC., a British Virgin Island corporation (“AANI
Holdings”), and AGFEED ANIMAL NUTRITION, INC., a British Virgin Islands
corporation and a wholly-owned subsidiary AANI Holdings (AANI Holdings and AANI,
along with their subsidiaries, being collectively referred to herein as, the
“AANI
Group”).

     

    BACKGROUND

     

    WHEREAS,
AANI Holdings is a wholly-owned subsidiary of AgFeed Industries, Inc., a British
Virgin Island corporation and wholly-owned subsidiary of the Parent (the “AgFeed
BVI”);

     

    WHEREAS,
AgFeed BVI and AANI have entered into a Master Separation Agreement, dated
July 19, 2010 (the “Master Separation
Agreement”), pursuant to which the parties thereto have agreed to
consummate an internal reorganization to separate the animal nutrition business
of the Parent from its other businesses; and

     

    WHEREAS,
it is a covenant of AgFeed BVI pursuant to the Master Separation Agreement that
the Parent shall have executed and delivered this Agreement to
AANI.

     

    NOW,
THEREFORE, in consideration of the mutual agreements, provisions and covenants
contained in this Agreement and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereby agree
as follows:

     

    1.       Incorporation of Background;
Defined Terms.  The Background provisions to this Agreement are
incorporated herein by reference thereto as if fully set forth in this
Agreement.  Any capitalized terms used in this Agreement or the
Background provisions hereof which are not so defined, but which are defined in
the Master Separation Agreement, shall have the meanings given to those terms in
the Master Separation Agreement.

     

    2.       Administrative Services and
Fees.

     

    (a)         Administrative
Services.  The services to be rendered by the Parent to the
AANI Group under this Agreement following the consummation of the Separation are
set forth on Exhibit A
attached hereto and are hereinafter referred to as the “Administrative
Services.”  The Parent agrees to provide, or cause to be
provided, each of the Administrative Services for the period set forth on Exhibit A.

     

    (b)         Fees.  In
consideration of the Parent providing the Administrative Services to the AANI
Group, AANI Holdings shall pay to the Parent a fee for each calendar month
(prorated for any partial months) in an amount equal to the actual Direct Costs
and Indirect Costs of providing such services during the preceding calendar
month plus 0.5%.  The fees shall be paid monthly in arrears based on
invoices provided to AANI Holdings by the Parent.  Such invoices shall
be paid within fifteen (15) days after the Parent renders an invoice for
such services.  “Direct Costs” shall
include compensation and travel expenses attributable to employees, temporary
workers, and contractors directly engaged in performing the services as well as
materials and supplies consumed in performing the services. “Indirect Costs” shall
include occupancy, IT supervision and other overhead burden of the department
incurring the direct costs of providing the service.  For purposes of
this Section 2(b),
the term the “Parent” shall mean any member of the AgFeed Group.

     

    
      
         


      

      
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    (c)         Termination
Rights.  Notwithstanding the foregoing, or anything else set
forth in this Agreement to the contrary, (i) the Parent shall have the right to
terminate this Agreement as to any or all of the Administrative Services at any
time prior to the expiration of the term hereof, and from time to time prior to
the expiration of the term hereof in the event that AANI Holdings fails to pay
any fee when due under Section 2(b)
hereof and such failure continues for a period of ten (10) business days
following written notice thereof from the Parent to AANI Holdings, and
(ii) AANI Holdings may terminate its usage of all or any portion of the
Administrative Services at any time on ten (10) days’ prior written
notice to the Parent.

     

    3.       Termination.  The
term of the Agreement shall commence on the date of the consummation of the
Separation and shall terminate upon the discontinuation of all of the
Administrative Services, except for those provisions of this Agreement which, by
their terms, survive such termination.

     

    4.       Manner of Providing
Administrative Services; Limitation on Liability.

     

    (a)         Nature of Administrative
Services; Limited Warranty.  AANI Holdings and AANI acknowledge
that the AgFeed Group is not in the business of providing services such as the
Administrative Services to third parties not affiliated with the Parent, and
that the Parent is willing to provide, or cause to be provided, the
Administrative Services only on a transition basis as an accommodation to the
AANI Group.  Notwithstanding the foregoing, the Parent will use its
commercially reasonable efforts to provide, or cause to be provided, the
Administrative Services to the AANI Group in good faith and with due care,
consistent with the care that it exercises in the normal performance of similar
services for itself.  EXCEPT AS SET FORTH HEREIN, THERE ARE NO
WARRANTIES RELATING TO THE ADMINISTRATIVE SERVICES OF ANY KIND OR NATURE,
EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

     

    (b)         Limitation on the Parent’s
Liability.  Notwithstanding anything contained in this
Agreement or any other agreement, document or instrument to the contrary,
neither the Parent nor any of its affiliates will be liable (in contract, tort
or otherwise) to the AANI Group for any losses, liabilities, claims and expenses
including, without limitation, attorneys’ fees (collectively “Losses”) suffered by
the AANI Group arising out of or attributable, directly or indirectly, to the
performance or non-performance of any Administrative Services or otherwise
arising out of this Agreement with respect to the Administrative Services in
excess of the fees actually paid by AANI Holdings to the Parent pursuant to this
Agreement.

     

    5.       Access to Records;
Cooperation.

     

    (a)         During
the term of this Agreement, the AANI Group shall provide the Parent and its
authorized representatives reasonable access to the AANI Group’s records to the
extent they relate to the Administrative Services at reasonable times during
reasonable business hours upon prior written notice.

     

    
      
         


      

      
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    (b)         Each
party hereto agrees to cooperate with the other party in the provision of the
Administrative Services hereunder, and each party agrees to use reasonable
efforts in good faith to cooperate with the other party in all matters relating
to the provision and receipt of such Services.

     

    6.       Confidential
Information.  The Parent, AANI Holdings, and AANI acknowledge
that, by reason of their relationship pursuant to this Agreement, they each may
have access to certain proprietary information concerning the business,
operations and affairs of the other and their respective business and
operations, which information is of a confidential and proprietary nature
(collectively, the “Confidential
Information”), all of which Confidential Information is a valuable,
special and unique asset of the party hereto to whom it belongs (the “Disclosing Party”),
access to and knowledge of which are essential to the preservation of the
goodwill, going business value and proprietary rights of such Disclosing
Party.  In recognition of the highly competitive nature of the
business of the parties, the Parent, AANI Holdings, and AANI acknowledge that
all of the Confidential Information of a Disclosing Party shall be considered
confidential.  In recognition of this fact, any party hereto who, in
any way, receives any Confidential Information of a Disclosing Party (a “Recipient”) will not,
at any time, disclose, or permit or cause the disclosure of, any such
Confidential Information to any person for any reason or purpose whatsoever,
except to the extent necessary in the performance of its obligations under this
Agreement (provided that the Recipient shall require any person to whom such
Confidential Information may be disclosed in connection with the performance of
its obligations hereunder to execute a nondisclosure agreement in form and
substance acceptable to the Disclosing Party), nor shall such Recipient make use
of any of the Disclosing Party’s Confidential Information for its own purposes
or for the benefit of any other person under any circumstances at any time,
other than for the purpose of performing such party’s obligations under this
Agreement.  Notwithstanding the foregoing or anything contained herein
to the contrary, the term “Confidential
Information” shall not include information which:

     

    (a)         at
the time of receipt from or on behalf of the Disclosing Party is already in the
possession of the Recipient or its affiliates on a non-confidential
basis;

     

    (b)         becomes
generally available to the public other than as a result of a disclosure by the
Recipient or its representatives;

     

    (c)          becomes
available to the Recipient on a non-confidential basis from a source other than
the Disclosing Party, provided that such source is not known by the Recipient to
be bound by a confidentiality agreement with the Disclosing Party or another
party; or

     

    (d)         was
independently developed by the Recipient or its representatives without
reference to the Confidential Information.

     

    7.       Notices.  Any
notice, demand, request or consent permitted or required to be delivered
hereunder shall be so delivered in accordance with Section 8.01 of
the Master Separation Agreement.

     

    8.       Governing
Law.  This Agreement shall be governed by and interpreted and
enforced in accordance with the laws of the Commonwealth of Pennsylvania
(without giving effect to any conflicts of laws principles thereof or of any
other State).

     

    
      
         


      

      
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    9.       Miscellaneous.

     

    (a)         This
Agreement shall be binding upon and inure to the benefit of each party hereto,
its legal successors and permitted assigns, including, without limitation,
successors by merger or consolidation, provided, however, that neither
the Parent, on the one hand, nor AANI Holdings or AANI, together on the other
hand, shall have the right to assign this Agreement without the consent of the
other party, except that (i) upon at least ten (10) days’ prior
written notice to the Parent, AANI Holdings or AANI shall be permitted to assign
its rights under this Agreement in connection with a sale of the AANI Group’s
business, whether by sale of assets, sale of stock, merger, consolidation or
otherwise, and (ii) AANI Holdings and AANI shall be permitted to assign its
rights under this Agreement to its senior lender(s) for collateral purposes, so
long as neither assignment transaction described in clause (i) or
(ii) shall expand, increase or otherwise adversely impact the scope and
nature of the duties and obligations of the Parent hereunder.

     

    (b)         This
Agreement (together with the Master Separation Agreement) contains the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof.  It may not be amended, modified or supplemented, and
none of its provisions may be waived, except by an agreement in writing signed
by the parties hereto.

     

    (c)         If
any term, condition or provision of this Agreement shall be declared, to any
extent, invalid or unenforceable, the remainder of the Agreement, other than the
term, condition or provision held invalid or unenforceable, shall not be
affected thereby and shall be considered in full force and effect and shall be
valid and be enforced to the fullest extent permitted by law.

     

    (d)         The
headings set forth in this Agreement are used solely for convenience of
reference and shall not control or affect the meaning or interpretation of any
of the provisions.

     

    (e)         This
document may be translated into languages other than English.  If any
conflict between this Agreement and any translation into a language other than
English arises, the English version of this document shall control the meaning
or interpretation of any provisions.

     

    (f)         This
Agreement may be signed in any number of counterparts, each of which shall be
deemed an original and all of which, taken together, shall constitute one and
the same agreement. The exchange (by facsimile) of facsimile copies of executed
counterparts of this Agreement shall be deemed execution and delivery
thereof.

     

    (g)         Each
party agrees to execute such agreements and other documents and to take such
further actions as the other party may reasonably request in order to carry out
the provisions of this Agreement in accordance herewith.

     

    (h)         The
Parent and the AANI Group are each independent contractors.  This
Agreement does not in anyway create any fiduciary relationship between the
parties nor the relationship of principal and agent, franchise, joint venture or
partnership.  Neither party shall have any right, authority or power
to bind the other in any contract or to the performance of any obligation as to
any third party without the other party’s prior written
consent.  Neither party hereto shall act, attempt to act or represent
itself to others, as an agent of the other party or in any manner assume or
create any obligation on behalf of or in the name of the other
party.

     

    
      
         


      

      
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    IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers, each of whom is duly authorized, all as
of the day and year first above written.

     

    
      
        
          
            
              	 
      	
                      AGFEED
      INDUSTRIES, INC.

                    
	 
      	 
      
	 
      	
                      By

                    	
                        

                    
	 
      	 
      	
                      Name:

                    	
                        

                    
	 
      	 
      	
                      Title:

                    	
                        

                    
	 
      	 
      	 
      
	 
      	
                      (The
      “Parent”)

                    
	 
      	 
      
	 
      	
                      AGFEED
      ANIMAL NUTRITION HOLDINGS, INC.

                    
	 
      	 
      	 
      
	 
      	
                      By

                    	
                        

                    
	 
      	 
      	
                      Name:

                    	
                        

                    
	 
      	 
      	
                      Title:

                    	
                        

                    
	 
      	 
      	 
      
	 
      	
                      (“AANI
      Holdings”)

                    
	 
      	 
      
	 
      	
                      AGFEED
      ANIMAL NUTRITION INC.

                    
	 
      	 
      	 
      
	 
      	
                      By

                    	
                        

                    
	 
      	 
      	
                      Name:

                    	
                        

                    
	 
      	 
      	
                      Title:

                    	
                        

                    
	 
      	 
      	 
      
	 
      	
                      (“AANI”)

                    


            

          

        

      

    

     

    
      
         


      

      
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    EXHIBIT
A

     

    The
Parent shall provide the following services and devote the personnel required to
perform such services in a manner consistent with that provided by the Parent to
the Business immediately prior to the reorganization and IPO:

     

    
      
        
          
            	
                    Service to be Provided

                  
	 
      	 
      
	
                    1.

                  	
                    Accounting
      and Financial Reporting Administration

                  
	 
      	 
      
	
                    2.

                  	
                    Human
      Resources Administration

                  
	 
      	 
      
	
                    3.

                  	
                    Information
      Technology Maintenance and Administration

                  
	 
      	 
      
	
                    4.

                  	
                    Legal
      and Compliance Administration

                  
	 
      	 
      
	
                    5.

                  	
                    Additional
      Services

                  


          

        

      

    

     

    
      
         


      

      
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    SCHEDULE
“A”

     

    SERVICES PROVIDED BY THE
PARENT

    
    

    Accounting
and Financial Reporting Administration

     

    The
Parent will provide the following accounting and financial reporting
administrative services on behalf of the AANI Group until the termination or
amendment of this Agreement:

     

    
      	
               
      

            	
              ·

            	
              ___________________________.

            


    

     

    
      	
               
      

            	
              ·

            	
              ___________________________.

            


    

     

    Human
Resources Administration

     

    The
Parent will provide the following human resources services on behalf of the AANI
Group until the termination or amendment of this Agreement:

     

    
      	
               
      

            	
              ·

            	
              ________________________.

            


    

     

    
      	
               
      

            	
              ·

            	
              ________________________.

            


    

     

    Information
Technology Maintenance and Administration

     

    The
Parent will provide the following information technology maintenance and
administrative services on behalf of the AANI Group until the termination or
amendment of this Agreement:

     

    
      	
               
      

            	
              ·

            	
              ___________________________.

            


    

     

    
      	
               
      

            	
              ·

            	
              ___________________________.

            


    

     

    Legal
and Compliance Administration

     

    The
Parent will provide the following legal services on behalf of the AANI Group
until the termination or amendment of this Agreement:

     

    
      	
               
      

            	
              ·

            	
              ________________________.

            


    

     

    
      	
               
      

            	
              ·

            	
              ________________________.

            


    

     

    Additional
Services

     

    The AANI
Group may request that the Parent provide additional services with respect to
management or administrative functions that are not set forth
above.

     

    
      
         


      

      
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