Financial Advisory Agreement
This
FINANCIAL
ADVISORY AGREEMENT
(hereinafter referred to as “this
Agreement”)
is
made and entered into on the 15th
day of
October 2006 in Beijing.
BETWEEN:
|
Party
A:
|
(1)
BEIJING
HOLLYSYS CO., LTD.,
HANGZHOU
HOLLYSYS AUTOMATION CO., LTD. and their
shareholders
|
(2)
And
any new
companies established by the shareholders of Beijing HollySys Co., Ltd. and
Hangzhou HollySys Automation Co., Ltd. for
the
purpose of reverse merger with the target company listed on OTCBB in
U.S.
|
Party
B:
|
UPPER
MIX INVESTMENTS LIMITED, and
TIME
KEEP INVESTMENT LIMITED
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WHEREAS:
|
1.
|
Party
A is incorporated and validly existing under the
Company Law of the People’s Republic of China;
|
|
2.
|
Party
B is an investment advisory and management company incorporated in
British
Virgin Island with limited liability;
and
|
|
3.
|
Party
A is aimed at listing on the U.S. OTCBB and switching to Nasdaq through
SPAC model. Party A hence engages Party B as the Financial Advisor
to
propose plans and advises on the merger and acquisition transaction
with
SPAC listed on OTCBB in U.S.(hereinafter referred to as “Target
Company”)
and the switch from OTCBB to Nasdaq after the above
transaction.
|
NOW
THEREFORE,
Party A
and Party B enter into this Agreement through mutual negotiation based on the
following conditions:-
| 1. |
COMMITMENT
|
|
1.1
|
Party
A has entrusted Party B with privileges to represent in the capacity
of
Party A’s Financial Advisor in the M&A and NASDAQ listing (hereinafter
referred to as “the
Transaction”)
related procedures for the Target
Company.
|
|
1.2
|
Party
B, while representing in the capacity as Party A’s Financial Advisor in
the Transaction related procedures for the Target Company, is obligated
to
provide financial advices including but not limited
to:
|
1
|
(1)
|
Get
financials of Party A in readiness for audit and asset
evaluation;
|
|
(2)
|
Propose
sound advices for the Transaction as well as providing feasible business
restructuring plans and assisting in the effective implementation
of such
plan;.
|
|
(3)
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Cooperate
and communicate between Party A and other parties related to the
Transaction, including government agencies and intermediate
agencies;
|
|
(4)
|
Participate
in negotiations with the Target Company as required by Party
A;
|
|
(5)
|
Analyze
and solve issues raised from the transaction with other
parties;
|
|
(6)
|
Conduct
any other necessary consulting services related to the Transaction;
and
|
|
(7)
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Arrange
Due Diligence on Target Company and other works related to the
Transaction.
|
| 2. |
OBJECTIVE
|
Party
B,
as the Financial Advisor of Party A for the Transaction, shall achieve the
following objectives:
|
2.1
|
Achieving
the minimum pricing in common shares received by Party A from Target
Company is no less than 16,000,000 (including
16,000,000);
|
|
2.2
|
Party
A receiving above 50% interest of equity of Target
Company;
|
|
2.3
|
Party
A controlling the Board of Directors of Target Company; and
|
|
2.4
|
Listing
on Nasdaq upon consummation of the
Transaction.
|
| 3. |
PERIOD
OF ENTRUSTMENT
|
This
Agreement shall come into effective upon signature date and expire upon the
consummation of the Transaction. During the period of entrustment, Party A
agrees that if Party A entrusts any other financial advisory or consulting
third
parties with any activities related to the Transaction with the Target Company
as the Commitment set forth in this Agreement, Party B shall have the right
to
charge Party A with all the advisory services fee set force in this
Agreement.
| 4. |
RIGHTS
AND OBLIGATIONS
|
| 4.1 |
Party
A’s Rights and Obligations
|
| 4.1.1 |
Party
A shall provide valid and completed information and documents necessary
for Party B to enforce the Agreement, including but not limited to
the
documents, accounting information and any information requested by
Party B
for fulfilling the obligations as the Financial
Advisor;
|
| 4.1.2 |
Party
A agrees to actively cooperate with Party B to complete entrusted
works in
time; and
|
2
| 4.1.3 |
Party
A agrees to pay related expenses, including Financial Advisory Fee,
etc.
|
| 4.2 |
Party
B’s Rights and Obligations
|
| 4.2.1 |
On
the need-to basis, Party B shall rectify the financial activities
of Party
A and the affiliated companies of Party A, prepare Business Plan
for the
restructuring company, provide reasonable advices on the organization
structure, actively prepare documents (both in English and Chinese)
related to the Transaction, and facilitate the Transaction for Party
A;
|
| 4.2.2 |
Party
B shall complete the entrusted works in time and within the period
of this
Agreement; and
|
| 4.2.3 |
Party
B has the right to sub-contract part of the services specified in
this
Agreement to other Chinese companies designated by Party
B.
|
| 5. |
CONSIDERATION
AND TERMS OF PAYMENT
|
| 5.1 |
Financial
Advisory Fee
|
| 5.1.1 |
Both
Parties agree that the entrance fee payable by the Party A to Party
B
shall be US$ 50,000;
|
Both
Parties agree that Financial Advisory Fee payable by Party A to Party B upon
the
consummation of the Transaction shall consist of the following three parts
(Consideration of the Transaction comprises of consideration in cash, common
shares and contingent incentive shares):
| 5.1.2 |
Consideration
in cash: shall be 5% of the total cash consideration of the
Transaction;
|
| 5.1.3 |
Consideration
in common shares: Common shares received by Party A from Target Company
is
no less than an aggregate of
16,000,000.
|
|
(a)
|
If
the sum of common shares received by Party A from Target Company
is no
less than an aggregate of 16,000,000 (including 16,000,000) and no
more
than an aggregate of 18,000,000 (including 18,000,000), Party B shall
receive 2.222% of the total consideration in common
shares;
|
|
(b)
|
If
the sum of common shares received by Party A from the Target Company
is
above an aggregate of 18,000,000 and no more than an aggregate of
18,500,000 (including 18,500,000), Party B shall receive the total
shares
exceeding 18,000,000 shares plus the shares as set force in
Section
5.1.3(a);
|
3
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(c)
|
If
the sum of common shares received by Party A from the Target Company
is
above an aggregate of 18,500,000, Party B shall receive 30% of the
total
shares exceeding 18,500,000 shares plus the shares as set force in
Section
5.1.3(b);
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|
5.1.4
|
Consideration
in contingent incentive shares:
|
|
(d)
|
If
Party A receives no more than an aggregate of 5,500,000 incentive
warrants
from the Target Company, Party A shall not pay any contingent incentive
shares as service fee to Party B;
|
|
(e)
|
If
Party A receives no more than an aggregate of 6,580,000 contingent
incentive shares from the Target Company, Party B shall receive all
contingent incentive shares exceeding an aggregate of
5,500,000;
|
|
(f)
|
If
Party A receives no less than an aggregate of 6,580,000 contingent
incentive shares from the Target Company, Party B shall receive 20%
of
contingent incentive share exceeding an aggregate of 6,580,000 plus
the
contingent incentive shares as set force in Section
5.1.4(e).
|
| 5.2 |
Payments
|
| 5.2.1 |
Payment
time: On the signature date of this Agreement, Party A shall pay
Party B
or any party designated by Party B US$50,000 (equivalent to RMB 400,000),
the remaining fees shall be paid to Party B or any party designated
by
Party B on the date Party A receives the consideration and contingent
incentive shares.
|
| 5.2.2 |
Payment
account: Party B shall designate RMB account or foreign currency
account.
Party B shall submit the written statement and be
liable for any legal disputes in connection with the payment
hereto.
|
| 5.2.3 |
The
receiver of common shares and contingent incentive shares for commitment
shall be the natural person or entity designated by Party
B.
|
|
5.2.4
|
The
shareholders or management of Party A shall fully pay the consideration
to
the Party B pursuant to the terms set force in this Agreement. Party
A
shall take the obligation of payment if its shareholders or management
fail to execute this obligation.
|
| 5.2.5 |
The
contingent incentive shares consideration should be compulsory, i.e.
the
arrangement must be clearly described in stock purchase agreement
between
Target Company and Party A and resolution of board of directors of
Target
Company. The management of Party A should not abandon such consideration.
If The management of Party A abandon the arrangement in contingent
incentive shares, Party A should pay to Party B compensation valued
as 18%
of abandoned contingent incentive share (number shares abandoned
multiplied by market price per share as at date of the grant). If
Party A
does not receive contingent incentive shares because of fail to achieve
operating results committed in stock purchase agreement with Target
Company, without positive abandon, Party A and the management of
Party A
will not compensate to Party B.
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4
| 5.3 |
Traveling
expenses
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Party
A
shall pay traveling expenses occurred by Party B in connection with this
Transaction and fulfillment of the Agreement. Party B shall get consent from
Party A prior to incurrence of the expenses and apply for reimbursement of
the
actual expenditures to Party A after incurrence.
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6.
|
CONFIDENTIALITY
|
Each
Party shall maintain the confidentiality of this Agreement and all
documents acquired
based on this Agreement. Each Party shall make efforts to urge any affiliate
parties to maintain the confidentiality of this Agreement and documents hereof.
Without the consent of the other Party hereto, neither Party hereto may release
or disclose any information, document and data concerning this Agreement (save
disclosure to their respective legal counsel or financial consultant for this
M&A purpose or that required by Law). Subject to the approval from the other
Party, related Confidential Information may be disclosed to the third party
who
enters into a confidential agreement and takes the obligation of
confidentiality. All documentation, manuals and specific materials developed
by
Party B on behalf of Party A in connection with the services rendered under
this
Agreement shall owned by Party A. Documents (including this Agreement) provided
pursuant to this Agreement shall only be disclosed to any third party with
the
Parties consent. Meanwhile, the disclosure shall specify purpose and
confidentiality obligation under Article 6 herein.
|
7.
|
FORCE
MAJEURE
|
Should
either Party be prevented from performing its obligations under this Agreement
in whole by an event of force majeure, such as acts of God, adjustments in
government policies or for any reasons without any Party’s fault, it shall not
be liable to any responsibilities under this Agreement.
| 8. |
DEFAULT
|
Each
Party shall abide by this Agreement strictly, and it shall constitute a default,
if either Party is in breach of any provision of this Agreement. The defaulting
Party shall be liable to compensate all the losses suffered by the
non-defaulting Party as a result of such breach.
| 9. |
DISPUTE
RESOLUTION AND GOVERNING LAW
|
|
9.1
|
Any
dispute arising out of this Agreement shall be resolved by both Parties
through mutual negotiation. If both Parties could not reach an agreement,
either Party may initiate legal action in the competent
court.
|
5
|
9.2
|
This
Agreement shall be signed, governed, construed, performed, and dispute
resolved and judged by and in accordance with the laws of PRC.
|
|
10.
|
EFFECTIVENESS
|
This
Agreement shall be effective on the date of endorsement by each Party or its
authorized representative and hence be binding on each Party.
|
11.
|
AMENDMENT,
TERMINATION, SUPPLIMENT
|
|
11.1
|
Any
amendment to this Agreement shall be negotiated by all the Parties
and
shall only become effective upon a written amendment agreement being
reached. Should Parties fail to reach an agreement, this Agreement
shall
remain effective. No modification or amendment or waiver to this
Agreement
will be effective unless being signed by each of the parties in
writing.
|
|
11.2
|
Should
either Party is in breach of this Agreement, the non-defaulting Party
is
entitled to terminate this Agreement.
|
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11.3
|
Should
both Parties agree to terminate this Agreement, a written agreement
shall
be reached.
|
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11.4
|
After
effective date of this Agreement, each Party shall perform its
responsibilities in accordance with this Agreement. A supplemental
agreement regarding to matters not yet stipulated herein or need
adjustment may be reached in consensus through negotiation by both
Parties. The supplemental agreement or appendices to this Agreement
shall
form an integral part of this Agreement and shall have the same force
as
this Agreement itself.
|
|
12.
|
MISCELLANEOUS
|
| 12.1 |
Each
Party to this Agreement shall provide all and any necessary documents
and
take all and any necessary actions to fulfill the purposes
hereunder.
|
| 12.2 |
The
convents of this Agreement include the warranty and commitment set
force
in this Agreement. If this Agreement can not be fulfilled completely
in
time, these convents will continue in full force and
effect.
|
| 12.3 |
Both
Parties shall have adequate knowledge and full understanding of the
essence nature and legal meaning of all provisions of this
Agreement.
|
6
| 12.4 |
The
entire agreement, warranty and commitment constitute this Agreement,
which
replaces and supersedes all prior, written or oral communication,
negotiation, warranty and
agreements.
|
| 12.5 |
The
titles and headings of all paragraphs are inserted for convenience
only
and shall not be utilized in construing any meaning
hereunder.
|
| 12.6 |
This
Agreement is executed in four copies and Party A and Party B each
keeps
two of them.
|
7
IN
WITNESS whereof this Agreement has been executed on the day and year first
above
written.
SIGNED
by
Party
A
for
and
on behalf of
Beijing
HollySys Co, Ltd.
The
legal
representative or authorized representative
/s/
Wang
▇▇▇▇▇▇▇
▇▇▇▇
Changli
for
and
on behalf of
Hangzhou
HollySys Automation Co, Ltd.
The
legal
representative or authorized representative
/s/
Wang
▇▇▇▇▇▇▇
▇▇▇▇
Changli
Signature
Date: October 15, 2005
SIGNED
by
Party
B
for
and
on behalf of
Upper
Mix Investment Limited
The
legal
representative or authorized representative
/s/
Song
Xuesong
Song
Xuesong
for
and
on behalf of
Time
keep Investment Limited
The
legal
representative or authorized representative
/s/
Song
Xuesong
Song
Xuesong
Signature
Date: October 15, 2005
8