Document:

fs1a3ex10v_deyu.htm

Exhibit 10.5

 

MAXIMP

 

January 27, 2010

 

Mr. Jianming Hao

Director

China Deyu Agriculture Technology, Ltd.

Room 701, 7th Floor Tower B Jinshang International Building,

Yinbing West Street, Jinzhong City,

Shanxi Province, China

 

RE: Private Placement of Securities 

 

Dear Mr. Hao,

 

This letter confirms our agreement that China Deyu Agriculture Technology, Ltd. (the "Company") has engaged Maxim Group LLC (together with its affiliates and subsidiaries, "Maxim" or the "Placement Agent") to act as the Company's exclusive Placement Agent in connection with the proposed private placement (the "Offering") of equity or equity linked securities (the "Securities") of the Company. The terms of the Securities and the gross proceeds of such Offering will be substantially in the form to be negotiated between the Placement Agent and the Company with one or more accredited investors (described below). The gross proceeds of the Offering will be up to $10,000,000.

 

Upon acceptance, (indicated by your signature below), this letter agreement (the "Agreement") will confirm the terms of the engagement between the Placement Agent and the Company.

 

1.   Appointment.

 

(a) Subject to the terms and conditions of this Agreement, the Company hereby retains the Placement Agent, and the Placement Agent hereby agrees to act, as the Company's exclusive Placement Agent in connection with the Offering. As Placement Agent for the Offering, Maxim will advise and assist the Company in identifying and assisting the Company in issuing the Securities to, one or more accredited Investors ("Investors") in the Offering. The Company acknowledges and agrees that the Placement Agent is only required to use its "commercially reasonable efforts" in connection with the Offering and that this Agreement does not constitute a commitment by the Placement Agent to purchase the Securities or introduce the Company to Investors. Maxim will, in its sole discretion, determine the reasonableness of its efforts, and is under no obligation to perform at any level other than what it deems reasonable. The Company retains the right to determine all of the terms and conditions of the Offering and to accept or reject any proposals submitted to it by the Placement Agent in its sole and absolute discretion.

 

(b) During the Term of this Agreement (as such term is hereinafter defined), neither the Company nor any of its subsidiaries will, directly or indirectly, solicit or otherwise encourage the submission of any proposal or offer ("Investment Proposal") from any person or entity relating to any issuance of the Company's or any of its subsidiaries' equity securities (including debt securities with any equity feature) or participate in any discussions regarding an Investment Proposal. The term "Investment Proposal" shall not include (i) any investment in the equity securities of any other entity, and (ii) any transaction or agreement with one or more persons,

 

 

Members FINRA & SIPC

405 Lexington Ave. • New York, NY 10174 • Tel (212) 895-3500 • (800) 724-0761 • fax (212) 895-3783 • www,maximgp.com

New York, NY • Long Island, NY • Red Bank, NJ

  

  

  

 

China Deyu Agriculture Technology, Ltd.

January     , 2010

Page 2

 

firms or entities designated as a "strategic partner" of the Company, as determined in good faith by the Board of Directors of the Company, provided that each such person, firm or entity is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Company and in which the Company receives benefits in addition to the investment of funds, but shall not include a transaction in which the Company is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities. The Company will immediately cease all contacts, discussions and negotiations with third parties regarding any Investment Proposal.

 

2.   Information.

 

(a) The Company recognizes that, in completing its engagement hereunder, the Placement Agent will be using and relying on both publicly available information and on data, material and other information (including non-public information provided by the Company to Maxim) furnished to Placement Agent by the Company or the Company's affiliates and agents. The Company will cooperate with Maxim and furnish, and cause to be furnished, to Maxim, any and all information and data concerning the Company, its subsidiaries and the Offering that Maxim deems appropriate, including, without limitation, the Company's acquisition and/or merger plans and plans for raising capital or additional financing that is reasonably requested by Maxim (the "Information"), including a risk factor declaration, if any (the "Private Placement Materials"). Any Information and Private Placement Materials forwarded to prospective Investors will be in form acceptable to Placement Agent and its counsel. The Company represents and warrants that all Information and Private Placement Materials, including, but not limited to, the Company's financial statements, will be complete and correct in all material respects and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading.

 

(b) It is further agreed that Maxim will conduct a due diligence investigation of the Company and the Company will reasonably cooperate with such investigation as a condition of Maxim' obligations hereunder. The Company recognizes and confirms that the Placement Agent: (i) will use and rely primarily on the Information, the Private Placement Materials and information available from generally recognized public sources in performing the services contemplated by this letter without having independently verified the same; (ii) is authorized as the Placement Agent to transmit to any prospective investors a copy or copies of the Private Placement Materials, forms of subscription documents and any other legal documentation supplied to the Placement Agent for transmission to any prospective investors by or on behalf of the Company or by any of the Company's officers, representatives or agents, in connection with the performance of the Placement Agent's services hereunder or any transaction contemplated hereby; (iii) does not assume responsibility for the accuracy or completeness of the Information or the Private Placement Materials and such other information, if any provided to the Investors; (iv) will not make an appraisal of any assets of the Company or the Company generally; and (v) retains the right to continue to perform due diligence of the Company, its business and its officers and directors during the course of the engagement.

 

(c) Until the date that is one year from the date hereof, Maxim will keep all information obtained from the Company confidential except: (i) Information which is otherwise publicly available, or previously known to or obtained by, Maxim independently of the Company and without breach of any of Maxim' agreements with the Company; (ii) Maxim may disclose such information to its officers, directors, employees, agents and representatives, and to its other

 

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * Tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

New York, NY * Long Island. NY * Red Bank. NJ

  

  

  

 

China Deyu Agriculture Technology, Ltd.

January     , 2010

Page 3

 

advisors and financial sources on a need to know basis only and will ensure that all such persons will keep such information strictly confidential. No such obligation of confidentiality shall apply to information that: (i) is in the public domain as of the date hereof or hereafter enters the public domain without a breach by Maxim, (ii) was known or became known by Maxim prior to the Company's disclosure thereof to Maxim, (iii) becomes known to Maxim from a source other than the Company, and other than by the breach of an obligation of confidentiality owed to the Company, (iv) is disclosed by the Company to a third party without restrictions on its disclosure, (v) is independently developed by Maxim or (vi) is required to be disclosed by Maxim or its officers, directors, employees, agents, attorneys and to its other advisors and financial sources, pursuant to any order of a court of competent jurisdiction or other governmental body or as may otherwise be required by law.

 

(d) The Company recognizes that in order for Maxim to perform properly its obligations in a professional manner, the Company will keep Maxim informed of and, to the extent practicable, permit Maxim to participate in meetings and discussions between the Company and any third party relating to the matters covered by the terms of Maxim' engagement. If at any time during the course of Maxim's engagement, the Company becomes aware of any material change in any of the information previously furnished to Maxim, it will promptly advise Maxim of the change.

 

3.   Compensation. As compensation for services rendered and to be rendered hereunder by Placement Agent, the Company agrees to pay Placement Agent the following fees in consideration of the services rendered by the Placement Agent in connection with the Offering:

 

(a) The Company agrees to pay Maxim a cash fee payable upon each closing of the transaction contemplated by this Agreement ("Closing") equal to seven percent (7.0%) of the gross proceeds received by the Company from Investors at each Closing (the "Placement Fee").

 

(b) The Company agrees to pay Maxim a cash corporate finance fee equal to one percent (1.0%) of the gross proceeds raised by the Company in the Offering, payable at the time of each Closing.

 

(c) The Company shall provide that, at the Closing, the Company shall grant to Maxim (or its designated affiliates or assignees) share purchase warrants (the "Warrants") covering a number of shares of Securities equal to five percent (5.0%) of the total number of Securities being sold and/or issued in the Offering. The Warrants will be non-exercisable for six (6) months after the date of the Closing and will be exercisable and expire five (5) years after the Closing. The Warrants will be exercisable at a price equal to 110% of the public offering price in connection with the Offering. The Warrants shall not be redeemable. The Company will register the shares of Common Stock underlying the Warrants and will file all necessary undertakings in connection therewith. The Warrants may not be transferred, assigned or hypothecated for a period of six (6) months following the Closing, except that they be assigned, in whole or in part, to any successor, officer, manager or member of Maxim (or to officers, managers or member of any such successor of member). The Warrants may be exercised as to all or a lesser number of shares of Securities, may provide for cashless exercise, and will provide for any anti-dilution or price protection.

 

(d) The Company shall pay to Maxim a non-refundable cash retainer (or restricted shares) of $25,000 (the "Retainer") payable upon the execution of this Agreement. The Retainer shall be paid in U.S. dollars by the Company via check or wire transfer of immediately available funds to an account designated by Maxim.

 

 

Members FINRA & S1PC

405 Lexington Ave. * New York, NY 10174 * Tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www,maximgm.eorn

New York, NY * Long Island, NY * Red Bank. NJ

  

  

  

 

China Deyu Agriculture Technology, Ltd.

January    , 2010

Page 4

 

(e)The Company will bear all fees, disbursements and expenses in connection with the proposed Offering, including, without limitation: the Company's legal and accounting fees and disbursements; Maxim's legal fees and disbursements; the costs of preparing, printing, mailing and delivering the Registration Statement, the preliminary and final prospectus contained therein and amendments thereto, post-effective amendments and supplements thereto, the Underwriting Agreement and related documents (all in such quantities as Maxim may reasonably require); preparing and printing stock certificates and warrant certificates; the costs of any "due diligence" meetings; net roadshow; filing fees (including SEC filing fees), costs and expenses (including third party expenses and disbursements) incurred in registering the Offering, FINRA filing fees; costs and expenses of qualifying the offering under the "blue sky" laws of the states specified by Maxim; preparation of leather bound volumes and Lucite cube mementos in such quantities as Maxim may reasonably request; transfer taxes; and transfer and warrant agent and registrar fees.

 

4.   Term of Engagement.

 

(a) This Agreement will remain in effect until April 15, 2010, after which either party shall have the right to terminate it on thirty (30) days prior written notice to the other. The date of termination of this Agreement is referred to herein from time to time as the "Termination Date." The period of time during which this Agreement remains in effect is referred to herein from time to time as the "Term". If, within two years after the Termination Date, the Company completes any private financing of equity or debt or other capital raising activity of the Company (other than the exercise by any person or entity of any options, warrants or other convertible securities other than the warrants issued pursuant to this Agreement) with any of the Investors who were first introduced to the Company in connection with the financing contemplated hereby by Maxim and disclosed to the Company in writing prior to its introduction to the Company, the Company will pay to Maxim upon the closing of such financing the compensation set forth in Sections 3(a) as a "Source Fee".

 

(b) Notwithstanding anything herein to the contrary, subject to the two years limitation described in Section 4(a) above, the obligation to pay the compensation and expenses described in Section 3, this Section 4, Sections 5, 7 and 9-17 and all of Exhibit A attached, hereto (the terms of which are incorporated by reference hereto), will survive any termination or expiration of this Agreement. The termination of this Agreement shall not affect the Company's obligation to pay fees to the extent provided for in Section 3 herein and shall not affect the Company's obligation to reimburse the expenses accruing prior to such termination to the extent provided for herein. All such fees and reimbursements due shall be paid to the Placement Agent on or before the Termination Date (in the event such fees and reimbursements are earned or owed as of the Termination Date) or upon the closing of the Offering or any applicable portion thereof (in the event such fees are due pursuant to the terms of Section 3 hereof).

 

5.   Right of First Refusal. It is expressly agreed that in the event of a closing of an Offering, for a period of 18 months from the closing of an Offering, the Company grants Maxim the right of first refusal to act as lead underwriter and book running manager for any and all future public and private equity and public debt offerings during such eighteen (18) month period of the Company, or any successor to or any subsidiary of the Company (a "Subsequent Offering"). Maxim shall notify the Company within 30 days of its receipt of the written offer contemplated above as to whether or not it agrees to accept such retention. If Maxim should decline such retention, the Company shall have no further obligations to Maxim, except as specifically provided for herein.

 

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * Tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www,maximgrp.com

New York, NY * Long Island, NY * Red Bank. NJ

  

  

  

 

China Deyu Agriculture Technology, Ltd.

January    , 2010

Page 5

 

6.   Certain Placement Procedures. The Company and the Placement Agent each represents to the other that it has not taken, and the Company and the Placement Agent each agrees with the other that it will not take any action, directly or indirectly, so as to cause the Offering to fail to be entitled to rely upon the exemption from registration afforded by Section 4(2) of the Securities Act of 1933, as amended (the "Act"). In effecting the Offering, the Company and the Placement Agent each agrees to comply in all material respects with applicable provisions of the Act and any regulations thereunder and any applicable state laws and requirements. The Company agrees that any representations and warranties made by it to any Investor in the Offering shall be deemed also to be made to the Placement Agent for its benefit. The Company agrees that it shall cause any opinion of its counsel delivered to any Investors in the Offering also to be addressed and delivered to the Placement Agent, or to cause such counsel to deliver to the Placement Agent a letter authorizing it to rely upon such opinion.

 

7.   Indemnification. The Company agrees to indemnify Placement Agent in accordance with the indemnification and other provisions attached to the Agreement as Exhibit A (the "Indemnification Provisions"), which provisions are incorporated herein by reference and shall survive the termination or expiration of the Agreement.

 

8.   Other Activities. The Company acknowledges that Maxim has been, and may in the future be, engaged to provide services as an underwriter, placement agent, finder, advisor and investment banker to other companies in the industry in which the Company is involved. Subject to the confidentiality provisions of Maxim contained in Section 2 hereof, the Company acknowledges and agrees that nothing contained in this Agreement shall limit or restrict the right of Maxim or of any member, manager, officer, employee, agent or representative of Maxim, to be a member, manager, partner, officer, director, employee, agent or representative of, investor in, or to engage in, any other business, whether or not of a similar nature to the Company's business, nor to limit or restrict the right of Maxim to render services of any kind to any other corporation, firm, individual or association; provided that Maxim and any of its member, manager, officer, employee, agent or representative shall not use the Information to the detriment of the Company. Maxim may, but shall not be required to, present opportunities to the Company.

 

9.   Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement will be governed as to validity, interpretation, construction, effect and in all other respects by the internal law of the State of New York. The Company and Maxim each (i) agree that any legal suit, action or proceeding arising out of or relating to this Agreement shall be instituted exclusively in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (ii) waives any objection to the venue of any such suit, action or proceeding, and the right to assert that such forum is an inconvenient forum, and (iii) irrevocably consents to the jurisdiction of the New York State Supreme Court, County of New York, and the United States District Court for the Southern District of New York in any such suit, action or proceeding. Each of the Company and Maxim further agrees to accept and acknowledge service of any and all process that may be served in any such suit, action or proceeding in the New York State Supreme Court, County of New York, or in the United States District Court for the Southern District of New York and agree that service of process upon it mailed by certified mail to its address shall be deemed in every respect effective service of process in any such suit, action or proceeding. The parties hereby expressly waive all rights to trial by jury in any suit, action or proceeding arising under this Agreement.

 

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * Tel (212) 895-3500 * (800) 724-0761 " fax (212) 895-3783 * www,maximalp.com

New York, NY * Long Island, NY * Red Bank, NJ

  

  

  

 

China Deyu Agriculture Technology, Ltd.

January    , 2010

Page 6

 

10.            Securities Law Compliance. The Company, at its own expense, will use its best efforts to obtain any registration or qualification required to sell any Securities under the Blue Sky laws of any applicable jurisdictions.

 

11.            Representations and Warranties. The Company and Maxim each respectively represent and warrant that: (a) it has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder; (b) this Agreement has been duly authorized and executed and constitutes a legal, valid and binding agreement of such party enforceable in accordance with its terms; and (c) the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby does not conflict with or result in a breach of (i) such party's certificate of incorporation or by-laws or (ii) any agreement to which such party is a party or by which any of its property or assets is bound.

 

12.            Parties; Assignment; Independent Contractor. This Agreement has been and is made solely for the benefit of Maxim and the Company and each of the persons, agents, employees, officers, directors and controlling persons referred to in Exhibit A and their respective heirs, executors, personal representatives, successors and assigns, and nothing contained in this Agreement will confer any rights upon, nor will this Agreement be construed to create any rights in, any person who is not party to such Agreement, other than as set forth in this paragraph. The rights and obligations of either party under this Agreement may not be assigned without the prior written consent of the other party hereto and any other purported assignment will be null and void. Maxim has been retained under this Agreement as an independent contractor, and it is understood and agreed that this Agreement does not create a fiduciary relationship between Maxim and the Company or their respective Boards of Directors. Maxim shall not be considered to be the agent of the Company for any purpose whatsoever and Maxim is not granted any right or authority to assume or create any obligation or liability, express or implied, on the Company's behalf, or to bind the Company in any manner whatsoever.

 

13.            Validity. In case any term of this Agreement will be held invalid, illegal or unenforceable, in whole or in part, the validity of any of the other terms of this Agreement will not in any way be affected thereby.

 

14.            Counterparts. This Agreement may be executed in counterparts and each of such counterparts will for all purposes be deemed to be an original, and such counterparts will together constitute one and the same instrument.

 

15.            Notices. All notices will be in writing and will be effective when delivered in person or sent via facsimile and confirmed by letter, to the party to whom it is addressed at the following addresses or such other address as such party may advise the other in writing:

 

To the Company:Mr. Jianming Hao

 

Director

China Deyu Agriculture Technology, Ltd.

Room 701, 7th Floor Tower B Jinshang International Building, 

Yinbing West Street, Jinzhong City,

Shanxi Province, China

 

 

 

Members F1NRA & SIPC

405 I exington Ave. * New York, NY 10174 * Tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximgrp.com

New York, NY * Long Island, NY * Red Bank, NJ

 

  

  

  

 

China Deyu Agriculture Technology, Ltd.

January    , 2010

Page 7

 

	
To Maxim:

	
James Siegel, Esq.

Maxim Group LLC

405 Lexington Avenue

New York, NY 10174

Attention: James Siegel 

Telephone: (212) 895-3508 

Facsimile: (212) 895-3888

	 	 
	 	
Mr. Andrew Scott

Maxim Group LLC

405 Lexington Avenue

New York, NY 10174

Attention: Clifford Teller 

Telephone: (212) 895-3744 

Facsimile- (212) 895-3783

 

 

16.            Best Efforts Engagement for Capital Raising. It is expressly understood and acknowledged that Maxim's engagement for the Offering does not constitute any commitment, express or implied, on the part of Maxim or of any of its affiliates to purchase or place the Company's securities or to provide any type of financing and that the Offering will be conducted by Maxim on a "best efforts" basis.

 

17.            Press Announcements. The Company agrees that Maxim shall, upon a successful transaction, have the right to place advertisements in financial and other newspapers and journals at its own expense describing its services to the Company hereunder, provided that Maxim shall submit a copy of any such advertisement to the Company for its approval, such approval not to be unreasonably withheld, conditioned or delayed.

 

(Signature Page Follows)

 

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * Tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximerpeom

New York, NY * Long Island. NY * Red Bank, NJ

  

  

  

 

China Deyu Agriculture Technology, Ltd.

January    , 2010 

Page 8

 

Exhibit A

 

INDEMNIFICATION PROVISIONS

 

Capitalized terms used in this Exhibit shall have the meanings ascribed to such terms in the Agreement to which this Exhibit is attached.

 

The Company agrees to indemnify and hold harmless Placement Agent and each of the other Indemnified Parties (as hereinafter defined) from and against any and all losses, claims, damages, obligations, penalties, judgments, awards, liabilities, costs, expenses and disbursements, and any and all actions, suits, proceedings and investigations in respect thereof and any and all legal and other costs, expenses and disbursements in giving testimony or furnishing documents in response to a subpoena or otherwise (including, without limitation, the costs, expenses and disbursements, as and when incurred, of investigating, preparing, pursing or defending any such action, suit, proceeding or investigation (whether or not in connection with litigation in which any Indemnified Party is a party)) (collectively, "Losses"), directly or indirectly, caused by, relating to, based upon, arising out of, or in connection with, Placement Agent's acting for the Company, including, without limitation, any act or omission by Placement Agent in connection with its acceptance of or the performance or non-performance of its obligations under the Agreement between the Company and Placement Agent to which these indemnification provisions are attached and form a part, any breach by the Company of any representation, warranty, covenant or agreement contained in the Agreement (or in any instrument, document or agreement relating thereto, including any agency agreement), or the enforcement by Placement Agent of its rights under the Agreement or these indemnification provisions, except to the extent that any such Losses are found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from the gross negligence or willful misconduct of the Indemnified Party seeking indemnification hereunder. The Company also agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract or tort or otherwise) to the Company for or in connection with the engagement of Placement Agent by the Company or for any other reason, except to the extent that any such liability is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) to have resulted primarily and directly from such Indemnified Party's gross negligence or willful misconduct.

 

These Indemnification Provisions shall extend to the following persons (collectively, the "Indemnified Parties"): Placement Agent, its present and former affiliated entities, managers, members, officers, employees, legal counsel, agents and controlling persons (within the meaning of the federal securities laws), and the officers, directors, partners, stockholders, members, managers, employees, legal counsel, agents and controlling persons of any of them. These indemnification provisions shall be in addition to any liability, which the Company may otherwise have to any Indemnified Party.

 

If any action, suit, proceeding or investigation is commenced, as to which an Indemnified Party proposes to demand indemnification, it shall notify the Company with reasonable promptness; provided, however, that any failure by an Indemnified Party to notify the Company shall not relieve the Company from its obligations hereunder. An Indemnified Party shall have the right to retain counsel of its own choice to represent it, and the fees, expenses and disbursements of such counsel shall be borne by the Company. Any such counsel shall, to the extent consistent with its professional responsibilities, cooperate with the Company and any counsel designated by the Company. The Company shall be liable for any settlement of any claim against any Indemnified Party made with the Company's written consent. The Company

 

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * Tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www.maximml.com

New York, NY * Long Island. NY * Red Bank, NJ

  

  

  

 

China Deyu Agriculture Technology, Ltd.

January   , 2010

Page 9

 

shall not, without the prior written consent of Placement Agent, settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent (i) includes, as an unconditional term thereof, the giving by the claimant to all of the Indemnified Parties of an unconditional release from all liability in respect of such claim, and (ii) does not contain any factual or legal admission by or with respect to an Indemnified Party or an adverse statement with respect to the character, professionalism, expertise or reputation of any Indemnified Party or any action or inaction of any Indemnified Party.

 

In order to provide for just and equitable contribution, if a claim for indemnification pursuant to these indemnification provisions is made but it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that such indemnification may not be enforced in such case, even though the express provisions hereof provide for indemnification in such case, then the Company shall contribute to the Losses to which any Indemnified Party may be subject (i) in accordance with the relative benefits received by the Company and its stockholders, subsidiaries and affiliates, on the one hand, and the Indemnified Party, on the other hand, and (ii) if (and only if) the allocation provided in clause (i) of this sentence is not permitted by applicable law, in such proportion as to reflect not only the relative benefits, but also the relative fault of the Company, on the one hand, and the Indemnified Party, on the other hand, in connection with the statements, acts or omissions which resulted in such Losses as well as any relevant equitable considerations. No person found liable for a fraudulent misrepresentation shall be entitled to contribution from any person who is not also found liable for fraudulent misrepresentation. The relative benefits received (or anticipated to be received) by the Company and it stockholders, subsidiaries and affiliates shall be deemed to be equal to the aggregate consideration payable or receivable by such parties in connection with the transaction or transactions to which the Agreement relates relative to the amount of fees actually received by Placement Agent in connection with such transaction or transactions. Notwithstanding the foregoing, in no event shall the amount contributed by all Indemnified Parties exceed the amount of fees previously received by Placement Agent pursuant to the Agreement.

 

Neither termination nor completion of the Agreement shall affect these Indemnification Provisions which shall remain operative and in full force and effect. The Indemnification Provisions shall be binding upon the Company and its successors and assigns and shall inure to the benefit of the Indemnified Parties and their respective successors, assigns, heirs and personal representatives.

 

 

Members FINRA & SIPC

405 Lexington Ave. * New York, NY 10174 * Tel (212) 895-3500 * (800) 724-0761 * fax (212) 895-3783 * www tnaximgw.com

New York, NY * Long Island. NY * Red Bank, NJ

 

  

  

  

 

China Deyu Agriculture Technology, Ltd.

January   , 2010

Page 10

 

We are delighted at the prospect of working with you and look forward to a successful offering. If you are in agreement with the foregoing, please execute and return one copy of this agreement to the undersigned, together with a check or wire for $25,000 representing the Retainer payment in connection with the agreement. This engagement letter may he executed in ,,(qtriterparts, electronic mail and by facsimile transmission.

 

 

	 	Very truly yours,	 
	 	 	 
	 	MAXIM GROUP LLC.	 
	 	 	 	 
	
 

	
By: 

	/s/ Andrew Scott	 
	 	 	Name:  Andrew Scott	 
	 	 	Title: Sr. Managing Director, Invesment Banking	 
	 	 	 	 

 

	
 

	
By: 

	/s/ Clifford	 
	 	 	Name: Clifford	 
	 	 	Title: Executive Managing Director, Invesment Banking	 
	 	 	 	 

 

 

Agreed to and accepted this         of January, 2010

 

China Deyu Agriculture Technology, Ltd.

 

 

/s/ Jianming Hao

Name: Jianming Hao

Title: Directorfs1a3ex10vi_deyu.htm

Exhibit 10.6

SHARE TRANSFER AGREEMENT

 

BETWEEN

 

KWOK Yam Sheung

 

AND

 

WANG HONG 王宏

  

1

  

THIS SHARE TRANSFER AGREEMENT (this “Agreement”) is made on April 26, 2010 by and among KWOK Yam Sheung, a Canadian citizen with passport number JX416671 (the “Transferor”) and WANG HONG 王宏  (the “Transferee”).

The Transferor and the Transferee are collectively referred to as the “Parties” and each of them as a “Party”.

Whereas, the Transferor is the sole shareholder of Expert Venture Limited (the “Company”), which is the registered shareholder of City Zone Holdings Limited, a British Virgin Islands company, which intends to complete a business combination with a public shell company, traded on the Over the Counter Bulletin Board (the “Listed Company”) pursuant to which it will become a stakeholder of the Listed Company, holding1,000 ordinary shares in the Company as of the date of this Agreement.

Whereas, the Transferee has contributed to the wealth growth of the Transferor through the growth of the Company and its PRC subsidiaries and affiliates (collectively with the Company, the “Group”) and in consideration of the Transferee’s contributions and as an incentive to the Transferee to continue their commitment to the Group, the Transferor has agreed to grant to the Transferee, and the Transferee has agreed to accept from the Transferor, an option (the “Option”) to purchase certain number of ordinary shares of the Company currently held by the Transferor (the “Option Shares”) as set forth in Schedule A hereto, on the terms and subject to the conditions set out in this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals, the mutual promises hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:-

1.                  DEFINITIONS

	 	
Defined terms: In this Agreement (including the Recitals and the Schedules), unless the context otherwise requires, the following words and expressions shall have the following meanings:

“Alternate Exercise Price” means the exercise price to be paid by the Transferee to the Transferor in respect of the Option Shares issued to the Transferee as set forth opposite his name in Schedule A in the event that the Performance Targets (as defined herein) have been met by the Group;

“Business Day” means a day (other than Saturdays, Sundays and public holidays) on which banks are generally open for business in China;

“China” or “PRC” means the People’s Republic of China;

“Completion Date” means the date falling seven (7) Business Days after the service of the Exercise Notice by the Transferee of the Option Shares under this Agreement;

 

  

2

  

 

“Completion” means the completion of the sale to and purchase by the Transferee of the Option Shares under this Agreement;

“Distribution” means any cash proceeds arising from or in respect of, or in exchange for, or accruing to or in consequence of the Option Shares from the Effective Date to the Completion Date, including without limitation the Dividends;

“Dividends” means the dividends declared by the Company and accrued in respect of the Option Shares (whether or not such dividends shall have been paid and received by the Transferee);

“Effective Date” means the date of this Agreement;

“Exercise” means the exercise by a Transferee or his Nominee(s) of the Option pursuant to the terms of this Agreement;

“Exercise Notice” means the notice substantially in the form set out in Part 1 of Schedule B;

“Exercise Price” means the exercise price to be paid by the Transferee to the Transferor in respect of the Option Shares issued to the Transferee as set forth opposite his name in Schedule A;

“Nominee” means such person nominated by a Transferee in the Transfer Notice to be the transferee of the Option or Option Shares;

“Option Effective Dates” have the meaning ascribed to them in Clause 2.3;

“Performance Targets” have the meaning ascribed to them in Clause 3;

“RMB” means the lawful currency of China;

“Acquisition” means the transaction wherein the Listed Company will acquire 100% equity interest (whether directly or through its subsidiaries) of City Zone Holdings Limited;

“Transfer Notice” means the notice substantially in the form set out in Part II of Schedule B;

“US$” or “United States Dollars” means the lawful currency of the United States of America.

1.2                Interpretation: Except to the extent that the context requires otherwise:

	
1.2.1  

	
words denoting the singular shall include the plural and vice versa; words denoting any gender shall include all genders; words denoting persons shall include firms and corporations and vice versa;

 

  

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1.2.2  

	
any reference to a statutory provision shall include such provision and any regulations made in pursuance thereof as from time to time modified or re-enacted whether before or after the date of this Agreement and (so far liability thereunder may exist or can arise) shall include also any past statutory provisions or regulations (as from time to time modified or re-enacted) which such provisions or regulations have directly or indirectly replaced;

	
1.2.3  

	
the words “written” and “in writing” include any means of visible reproductions;

	
1.2.4  

	
any reference to “Clauses”, “Recitals” and “Schedules” are to be construed as references to clauses and recitals of , and schedules to, this Agreement; and

	
1.2.5  

	
any reference to a time of day is a reference to China time unless provided otherwise.

1.3                Headings: The headings in this Agreement are inserted fro convenience only and shall be ignored in construing this Agreement.

2.                  OPTION

	 	
Option: In consideration of the contributions which the Transferee have made to the Group and their continuing commitment to the Group, the Transferor hereby irrevocably and unconditionally grants to the Transferee the Option for such Transferee to acquire from the Transferor, at the Exercise Price or the Alternative Exercise Price, at any time during the Exercise Period (defined below) any or all of the Option Shares set forth opposite his name in Schedule A hereto, free from all claims, liens, charges, pledges, mortgages, trust, equities and other encumbrances, and with all rights attaching thereto on the Completion Date.

 

	 	
Vesting Schedule: Subject to the terms and conditions hereto, the Option may be exercised, in whole or in part, in accordance with the following schedule:

40% of he Option Shares subject to the Option shall vest and become exercisable upon the Option Effective Date (as defined below), 30% of the Option Shares subject to the Option shall vest and become exercisable on the date of fulfillment of the 2010 Income (as defined below) and 30% of the Option Shares subject to the Option shall vest and become exercisable on the date of fulfillment of the 2011 Income (as defined below).

	 	
Exercise Period: Once the Acquisition has been completed or abandoned pursuant to the terms of the definitive agreement regarding the Acquisition, the Option shall be exercisable in accordance with and on the dates set forth in Exhibit A (the “Option Effective Date”). Subject to the vesting schedule set forth in Section 2.2 of this Agreement, the Option may be exercised by the Transferee (or his Nominee on behalf of the Transferee) at any time following the Option Effective Date (“Exercise Period”).

 

	 	
Nominees: The Transferee may, at any time during the Exercise Period, at his sole discretion, nominate one or more person(s) (each a “Nominee”) to be the transferee of whole or part of his Option, who shall hold and/or exercise the transferred Option on behalf of the Transferee.

 

  

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Exercise Notice: The Option may be exercise by the Transferee or his Nominee(s), in whole or in part, at any time during the Exercise Period, by serving an Exercise Notice on the Transferor.

	 	
Exercise: The Transferor agrees that he shall, upon receipt of the Exercise Notice and payment of either the Exercise Price or the Alternative Exercise Price, depending on whether the Performance Targets have been met, issue to the Transferee (or his Nominee(s), as the case may be) any and all of the Option Shares specified in the Exercise Notice, free from all claims, liens, charges, pledges, mortgages, trust, equities and other encumbrances, and with all rights now or hereafter attaching thereto.  The Option shall be exercisable only in compliance with PRC laws and regulations and the Transferee (or his Nominee(s), as the case may be) shall complete any and all approval or registration procedures regarding the exercise of his Option at PRC competent authorities in accordance with applicable PRC laws and regulations.

	 	
Transfer Notice: In case that the Transferee transfers any or all of his/her Option to one or more Nominee(s) in accordance with Clause2.4 above, the Transferee shall serve a Transfer Notice on the Transferor.

	 	
Transfer to Nominees: The Transferor agrees that he shall, upon receipt of the Transfer Notice, take all actions necessary to allow the Nominee(s) to be entitled to any or all of the Options specified in the Transfer Notice.

Upon exercise by any Nominee(s) of the transferred Option on behalf of the Transferee, the Transferee shall serve the Exercise Notice on the Transferor in his own name for the exercising Nominee(s). Upon receipt of such Exercise Option, the Transferor shall issue to such Nominee(s) any and all of the relevant Option Shares in the same manner as specified in Clause 2.6.

	 	
Payment of Exercise Price: Upon Exercise of the Option in whole or in part, the exercising Transferee (or his/her Nominee(s), as the case may be) shall pay the Exercise Price to the Transferor.

 

 

	 	
The Transferor’s Obligation upon Exercise: The Transferor agrees that upon the Exercise of  any Option by any Transferee (or his Nominee(s), he shall cause and procure the number of Option Shares provided in the Exercise Notice to be transferred to such exercising Transferee (or his Nominee(s)) within seven (7) Business Days after the date of the Exercise Notice.

3.                      PERFORMANCE TARGET AND CONDITION PRECEDENT

	 	
The obligation of the Transferor to effect the Option and the transfer of the Option Shares at the Exercise Price to an exercising Transferee upon his Exercise of  the Option shall be subject to the fulfillment of the following conditions (the “Performance Targets”) set forth in Exhibit A hereto.  In the event that the Group does not achieve the Performance Targets specified in Exhibit A, then the Transferee may exercise the Option at the Alternative Exercise Price on the date at which the Option would have otherwise been exercisable had the Performance Targets been met.

 

  

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4.                  INFORMATION, DISTRIBUTIONS AND ADJUSTMENTS

	
4.1  

	
Information: The Transferee (the “Requesting Transferees”) shall be entitled to request from the Transferor at any time before the Completion, a copy of any information received from the Group which may be in the possession of the Transferor and, upon such request, the Transferee shall provide such information to the Requesting Transferee;

 

 

	
4.2  

	
Distributions: The Transferor agrees that the Transferee shall be entitled to all the Distributions in respect of his Option Shares.  In the event that any such Distributions have been received by the Transferor for any reason, the Transferor shall, at the request of the relevant Transferee pay an amount equivalent to the Distributions received by him/her to such Transferee at the time of the Option Exercise by the Transferee.

5.                  COMPLETION

	
5.1  

	
Time and Venue: Completion of the sale and purchase of the Option Shares pursuant to the Exercise shall take place at such place decided by the exercising Transferee on the Completion Date.

 

	
5.2  

	
Business at Completion: At Completion of each Exercise, all (but not part only) of the following shall be transacted:

	
5.2.1  

	
the exercising Transferees shall pay the Exercise Price to the Transferor in cash;

 

	
5.2.2  

	
the Transferor shall cause shall cause the Company to within seven (7) Business Days after the date of Exercise Notice, deliver to each of the exercising Transferee (or his Nominee(s), same below) the following documents and take all corporate actions necessary to give effect to such delivery;

	
(a)  

	
a share certificate or share certificates in respect of the number of the Option Shares exercised by such exercising Transferee;

 

	
(b)  

	
a certified true copy of the register of members of the Company updated to show the entry of the exercising Transferee as the holder of the Option Shares so exercised; and

	
(c)  

	
any other documents as the exercising Transferee may reasonably believe necessary to give effect of the issuance of the exercised Option Shares.

 

  

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6.                  CONFIDENTIALITY

The transaction contemplated hereunder and any information exchanged between the Parties pursuant to this Agreement will be held in complete and strict confidence by the concerned Parties and their respective advisors, and will not be disclosed to any person except (1) to the Parties’ respective officers, directors employees, agents, representatives, advisors counsel and consultants that reasonably require such information and who agree to comply with the obligation of non-disclosure pursuant to this Agreement; (ii) with the express prior written consent of the other Party; or (iii) as may be required to comply with any applicable law, order , regulation or ruling, or an order, request or direction of a government agency; provided, however that the foregoing shall not apply to information that: (1)was known to the receiving Party prior to its first receipt from the other Party; (2) becomes a matter of pubic knowledge without the fault of the receiving Party; or (3) is lawfully received by the Party from a third person with no restrictions on its further dissemination.

7.                  TRANSFEROR’S UNDERTAKINGS

	
  

	
Without the prior written consent of the Transferee, the Transferor shall vote his shares in the Company such that the Company shall not (i) issue or create any new shares, equity, registered capital, ownership interest, or equity linked securities, or any options or warrants that are directly convertible into, or exercisable or exchangeable for, shares, equity, registered capital, ownership interest, or equity-linked securities of the Company, or other similar equivalent arrangements, (ii) alter the shareholding structure of the Company, (iii) cancel or otherwise alter the Option Shares, (iv) amend the register of members or the memorandum and articles of association of the Company, (v) liquidate or wind up the Company, or (vi) act or omit to act in such a way that would be detrimental to the interest of the Transferees in the Option Shares.  The Transferor shall cause the Company to disclose to the Transferee true copies of all the financial, legal and commercial documents of the Company and the resolutions of the shareholders and the board of directors.

8.                  MISCELLANEOUS

	
8.1  

	
Indulgence, Waiver, etc.: No failure 0n the part of any Party to exercise and no delay on the part of such Party in exercising any right hereunder will operate as a release or waiver thereof, nor will any single or partial exercise of any right under this Agreement preclude any other further exercise of it or any other right or remedy.

 

	
8.2  

	
Effective Date and Continuing Effect of Agreement: This Agreement shall take effect from the Effective Date. All provisions of this Agreement shall not, so far as they have not been performed at Completion, be in any respect extinguished or affected by Completion or by any other event or matter whatsoever and shall continue in full force and effect so far as they are capable of being performed or observed, except in respect of those matters then already performed.

 

  

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8.3  

	
Successors and Assigns: This Agreement shall be binding on and shall ensure for the benefit of each of the Parties’ successors and permitted assigns.  This Agreement shall be binding upon the Transferor and his or her heirs, executors, administrators, successors and assigns.  Any reference in this Agreement to any of the Parties shall be construed accordingly.

	
8.4  

	
Further Assurance: At any time after the date of this Agreement, each of the Parties shall, and shall use its best endeavors to procure that any necessary third party shall, execute such documents and do such acts and things any other Party may reasonably require for the purpose of giving to such other Party the full benefit of all the provisions of this Agreement.

	
8.5  

	
Remedies: No remedy conferred by any of the provisions of this Agreement is intended to be exclusive of any other remedy which is otherwise available at law, in equity, by statute or otherwise, and each and every other remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law, in equity, by statute r otherwise;.  The election of any one or more of such remedies by any Party shall not constitute a waiver by such Party of the right to pursue any other available remedies.

	
8.6  

	
Severability of Provisions: If any provision of this Agreement is held to be illegal, invalid or unenforceable in whole or in part in any jurisdiction, this Agreement shall, as to such jurisdiction, continue to be valid as to its other provisions and the remainder of this affected provision, and the legality, validity and enforceability of such provision in any other jurisdiction shall be unaffected.

	
8.7  

	
Governing Law: This Agreement shall be governed by, and construed in accordance with, the laws of the New York.

	
8.8  

	
Dispute Resolution: In the event of any dispute, claim or difference (the “Dispute”) between any Parties arising out of or in connection with this Agreement, the Dispute shall be resolved in accordance with the following:

	
(a)  

	
Negotiation between Parties; Mediations.  The Parties agree to negotiate in good faith to resolve any Dispute.  If the negotiations do not resolve the Dispute to the reasonable satisfaction of all parties within thirty (30) days, subsection (b) below shall apply.

 

	
(b)  

	
Arbitration.  In the event the Parties are unable to settle a Dispute in accordance with subsection (a) above, such Dispute shall be referred to and finally settled by arbitration at Hong Kong International Arbitration Centre in accordance with the UNCITRAL Arbitration Rules (the “UNCITRAL Rules”) in effect which rules are deemed to be incorporated by reference into this subsection (b) The arbitration tribunal shall consist of three arbitrators to be appointed according to the UNCITRAL Rules.  The language shall be either English or Chinese.

 

  

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8.9  

	
Counterparts: This Agreement may be signed in any number of counterparts, all of which taken together shall constitute one and the same instrument.  Any Party hereto may enter into this Agreement by signing any such counterpart.

 

	
8.10  

	
Representation of the Transferor: The Transferor acknowledges that he has received, read and understood the Agreement and agrees to abide by and be bound by their terms and conditions of the Agreement.  The Transferor represents that he has consulted with any consults he deems advisable in connection with the execution of the Agreement for disposition of the Option Shares and that he is not and will not be forced to execute the Agreement or consummate the transactions contemplated by the Agreement.

[SIGNATURE PAGE FOLLOWS]

  

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IN WITNESS WHEREOF the Parties hereto have executed this Agreement on the date first above written.

The transferor:

By:  _________________________

KWOK Yam Sheung

The Transferee:

By:  ________________________

WANG HONG 王宏

 

  

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EXHIBIT A

PERFORMANCE TARGETS

The Listed Company shall have generated a consolidated net income of (i) at least 120% of the audited consolidated net profit of the fiscal year ended December 31, 2009, for the fiscal year commencing from January 1, 2010 to December 31, 2010 (the “2010 Income”); (ii) at 120% of the audited consolidated net profit of the fiscal year ending December 31, 2010, for a fiscal year commencing from January 1, 2011 to December 31, 2011 (the “2011 Income”).

The Option Effective Date for each performance period shall be that date that is forty five (45) days following the last day of each such performance period.

 

  

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SCHEDULE A

Transferee and Option Shares

 

	
Transferee

	
ID Card Number

	
Number of Option Shares

	
Exercise Price

	
 

WANG HONG 王宏

	
 

142401197502082716

	
 

120

	
 

US$120

 

  

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SCHEDULE B

Part I

Form of Exercise Notice

To:           KWOK Yam Sheung (the “Transferor”)

From:       WANG HONG 王宏   (the “Transferee”)

We refer to the Share Transfer Agreement (the “Share Transfer Agreement”) dated April 26, 2010 made between the Transferee and the Company.  Terms defined in the Share Transfer Agreement shall have the same meanings as used herein.

We hereby give you notice that we require you to sell to us / [Nominees’ names] in accordance with the terms and conditions of the Share Transfer Agreement, the following Option Shares at the Exercise Price set out below, subject to the terms and conditions set out in the Share Transfer Agreement Completion shall take place at [    ] on [     ] at the office of [     ]:

Transferee                                                      Option Shares                                                      Exercise Price/ Alternative Exercise Price

Dated this        day of            , 20

Yours faithfully

____________________________

Name:

Title:

For & on behalf of Transferee

 

  

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Part II

Form of Transfer Notice

To:           KWOK Yam Sheung (the “Transferor”)

From:       WANG HONG 王宏 (the “Transferee”)

We refer to the Share Transfer Agreement (the “Share Transfer Agreement”) dated April 26, 2010 made between the Transferees and the Transferor.  Terms defined in the Share Transfer Agreement shall have the same meanings as used herein.

We hereby give you notice that we will transfer to [Nominees’ names] the following portion of the Option, expressed in terms of the number of Option Shares represented by the portion of the Option transferred in accordance with the terms and conditions of the Share Transfer Agreement.

Transferee                                                      Nominees                                           Option Shares Represented

Dated this        day of            , 20

Yours faithfully

____________________________

Name:

Title:

For & on behalf of the Transferee

 

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