EXHIBIT 10.12
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SINCE 1842
KUHNS BROTHERS
THE FARM HOUSE
558 LIME ROCK ROAD
LIME ROCK, CONNECTICUT 06039
Mr. Fu Li
Dalian Fushi Bimetallic Manufacturing Company, Ltd.
City of Dalian
Liaoning Province
People's Republic of China
c/o Chris Bickel
May 27, 2005
PROPOSAL LETTER
Mr. Fu:
This proposal letter (the "Proposal") to Dalian Fushi Bimetallic Manufacturing
Company, Ltd. with its principal place of business in the city of Dalian located
in the Liaoning Province of the People's Republic of China (hereinafter, the
"Company"), represents the intentions of Kuhns Brothers, Inc. and its affiliates
including for purposes of this transaction Redwood Capital, Inc.("Kuhns
Brothers", or the "Firm") with respect to an equity financing including the
simultaneous issuance of approximately $11.75 million of corporate equity
financing for Company (the "Financing") and the acquisition by Dalian of a
public shell listed on an exchange in the United States of America (the "Public
Shell") in a reverse takeover merger (altogether with the Financing, the
"Transaction").
I. KUHNS BROTHERS EXPECTS THAT THE TRANSACTION WILL TAKE PLACE AS FOLLOWS:
o Kuhns Bros. & Co., Inc., a wholly-owned subsidiary of the Firm, will
act as the financial advisor (the "Financial Advisor") to the
Company with respect to developing the Company's financing plan and
structuring and documenting the related Transaction.
o The Financial Advisor will structure the Financing.
o The Financial Advisor will locate and arrange for the purchase by
the Company of the Public Shell.
o Kuhns Brothers Securities Corporation, a wholly-owned broker/dealer
subsidiary of the Firm, will act as placement agent (the "Placement
Agent") with respect to raising the Financings.
o Preparations for the Equity Financing, consisting of approximately
$11.75 million of Common Stock with attached Warrants, will commence
simultaneously with the execution of this Agreement.
o The Company's purchase of the Public Shell, issuance of the Equity
Financing and reverse takeover merger shall take place
simultaneously.
o The Transaction, including the Financing, the acquisition of the
Public Shell and the other related activities, shall result in the
Company's owning approximately 72% of its shares immediately
subsequent to the issuance of the Financing and the purchase of the
Public Shell.
o The closing of all aspects of the Transaction (the "Closing") shall
take place approximately 90-120 days from the execution by the
Company of Kuhns Brothers' engagement agreement as described below,
subject to the availability on a timely basis of any and all
information required of the Company, including its financial, legal
and accounting information.
o Immediately subsequent to the Closing, the Company shall register
the common stock and warrants comprising the Financing with the US
Securities and Exchange Commission (the "SEC").
o Immediately subsequent to the Closing, the Company shall file an
application to list its shares on either the American Stock Exchange
(the "AMEX") or the National Association of Securities Dealers'
Small-Cap Market (the "NASDAQ Small-Cap Market), with the AMEX being
the preferred venue.
o The proposed terms of the Financings are described in more detail in
Appendix A to this Proposal (the "Proposed Terms").
II. THIS PROPOSAL IS SUBJECT TO THE FOLLOWING TERMS AND CONDITIONS:
o Completion by Kuhns Brothers' personnel, to its sole satisfaction,
of due diligence with respect to the Company, including physical
inspection of the Company's business and financial information in
China.
o Satisfactory preparation by the Company, with the assistance and
direction of Kuhns Brothers, of satisfactory offering materials,
including a private placement memorandum (the "PPM"), investor Power
Point presentation (the "Investor Presentation"), subscription
materials (the "Subscription Booklet") and forms of the bridge
notes, the common stock and the warrants comprising the Financings.
o The execution of an engagement agreement with Kuhns Brother
substantially in the form of Appendix B (the "Engagement
Agreement").
This Proposal is an expression of intent only by Kuhns Brothers. This Proposal
does not give rise to any contractual or legal obligation or commitment of any
kind with respect to Kuhns Brothers. The Company and Kuhns Brothers would only
create a binding obligation upon the execution of the Engagement Agreement.
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If the Company is in agreement with the matters discussed herein, please so
indicate by executing this Proposal in the space provided below.
Very truly yours,
Kuhns Brothers, Inc.
By:____________________________
Title:_________________________
Dalian Fushi Bimetallic Manufacturing Company, Ltd
By:___________________________
Title:________________________
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APPENDIX A
PROPOSED TERMS OF THE EQUITY FINANCING
Securities to be Sold......... $11.75 million of Common Stock (the "Common
Stock") and attached warrants to purchase
Common Stock (the "Warrants"); altogether,
the Common Stock and the Warrants are
hereinafter known as the "Securities".
Investors..................... Accredited financial institutions and
selected high-net-worth individuals (the
"Investors").
Offering Documentation........ An executive summary ("Executive Summary")
and power point presentation ("Power Point
Presentation") issued by the Company, and
definitive term sheet (the "Term Sheet")
negotiated between the Company and the
Investors by the Placement Agent.
Financing Documentation....... Common Stock and Warrant purchase agreements
(the "Securities Purchase Agreement"),
Public Shell purchase agreement (the "Public
Shell Purchase Agreement") and Investor
subscription documents (the "Subscription
Documents").
Description of Securities..... Ownership of the Common Stock entitles the
holder to vote on all matters brought before
the Company, and may pay dividends, payable
in cash or shares of Common Stock, at the
rate and at times as determined by the
Company's Board of Directors. Certain terms
of the Securities, including: i) the ratio
of Warrants to Common Stock (the "Warrant
Coverage"); ii) the exercise price of the
Warrants (the "Exercise Price"); and the
period during which the Warrants can be
exercised (the "Exercise Period") will be
mutually determined by the Company and the
Investors and stipulated in the Term Sheet.
Estimated Offering Size....... $11,700,000
Use of Proceeds............... Working capital and capital projects.
Registration Rights........... The Company shall file for the registration
under the Securities Act of 1933 of all
securities contained in the Units
("Registrable Securities") during the period
of six to 12 months after the Closing.
Holders of Registrable Securities
("Holders") shall also have customary
piggyback rights.
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Financial Statements.......... The Company will include in the offering
documents the following Financial
Statements:
Audited financial statements as at and for
the years ended December 31, 2004, and
unaudited financial statements as at and for
the first quarter of 2005 ended March 31,
2005;
In addition, the Company will deliver at the
Closing the following Financial Statements:
Unaudited financial statements and as at and
for the second quarter of 2005 ended June
30, 2005.
Restrictions on Issuances..... For a period of 12 months following the
Closing, the Company and its principal
stockholders will not, without prior written
consent, issue or sell any securities or
rights to acquire securities.
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APPENDIX B
ENGAGEMENT AGREEMENT
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Since 1842
KUHNS BROTHERS
THE FARM HOUSE
558 LIME ROCK ROAD
LIME ROCK, CONNECTICUT 06039
Mr. Fu Li
Chairman & CEO
Dalian Fushi Bimetallic Manufacturing Company, Ltd.
City of Dalian
Liaoning Province
People's Republic of China
c/o Chris Bickel
May 27, 2005
AGREEMENT PROVIDING FOR INVESTMENT BANKING SERVICES
Mr. Fu:
This letter agreement (the "Agreement") is written to set forth the
understanding and agreement between Kuhns Brothers, Inc. and its related
subsidiaries (altogether, "Kuhns Brothers") and Dalian Fushi Bimetallic
Manufacturing Company, Ltd. with its principal place of business in the city of
Dalian located in the Liaoning Province of the People's Republic of China
(hereinafter, the "Company").
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The Company hereby engages Kuhns Brothers on an exclusive basis, initially
for the six month period commencing the date hereof, to provide it with
investment banking services and Kuhns Brothers hereby accepts such engagement.
In the event that as a result of this initial engagement Kuhns Brothers
successfully arranges and closing the financings and related merger acquisition
described below (the "Closing"), this Agreement will remain in force for a
period of two years following the closing of such financing and related
transaction.
I. INVESTMENT BANKING SERVICES
1. FINANCIAL ADVISORY SERVICES
Kuhns Brothers, through its subsidiary Kuhns Bros. & Co., Inc. (the
"Advisor") and its subsidiary Kuhns Brothers Securities Corporation (the
"Placement Agent"), will assist the Company with its current investment banking
requirements, including what is presently expected to be an equity financing
(the "Equity Financing") including the simultaneous issuance of approximately
$11.75 million of corporate equity financing for Company (or things of
equivalent value invested in it or its controlled subsidiaries or affiliates) to
institutional and high-net-worth individual financial investors ("Financial
Investors") or, at the option of the Company, strategic investors ("Strategic
Investors") and the acquisition by the Company of a public shell listed on an
exchange in the United States of America (the "Public Shell") in a reverse
takeover merger (altogether with the Financings, the "Transaction), such
assistance to be provided over the period of this Agreement (altogether, the
"Financing"). Kuhns Brothers assistance with respect to the Financing shall be
on a best efforts basis.
With respect to Financial Investors, Kuhns Brothers will provide the
following financial advisory and placement agency services relating to the
Financing:
(i) provide advice regarding the financial structure of the Company or
its subsidiaries or any projects or programs undertaken by any of the
foregoing; (ii) assist in structuring the Financing with respect to what
is usual and standard practice on terms and conditions equivalent for
organizations in similar financings; (iii) assist in preparing and
documenting the offering memorandum and related materials relating to the
Financing; (iv) when the structuring of the Financing has reached an
appropriate stage, assist in the process to obtain and execute such
Financing; and (v) assist in obtaining and executing such Financing on the
most favorable terms and conditions consistent with current market
conditions and the nature of and risks inherent in the Company.
With respect to Strategic Investors, Kuhns Brothers will provide the
following services:
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(i) assist in the evaluation of a Strategic Investor from a financial
point of view; (ii) provide advice and assistance with respect to the form
and structure of the transaction involving the Strategic Investor; and,
when the structuring of the strategic relationship has reached an
appropriate stage, (iii) act as the Company's agent to assist the Company
in locating and obtaining, on the most favorable terms and conditions,
such Strategic Investors in the form of Company clients, customers or
vendors, and assist the parties to enter into sales, vendor, licensing or
related strategic agreements. (Such agreements with Strategic Investors,
whether they result in a financial investment and or license arrangement,
sales or vendor agreement or otherwise, shall also be considered Financing
for purposes of this Agreement.)
Kuhns Brothers shall not be required to undertake duties not reasonably
within the scope of the financial advisory services in which it is generally
engaged. In performance of its duties, Kuhns Brothers shall provide the Company
with the benefits of its best judgment and efforts, but it is understood and
acknowledged by the parties that the value of Kuhns Brothers' advice may not be
measurable in a quantitative manner. Kuhns Brothers does not guarantee that the
Company will receive the valuation for its securities that it desires.
The Company acknowledges that Kuhns Brothers and its affiliates are in the
business of providing financial advisory services of all types contemplated by
this Agreement to others. Nothing herein contained shall be construed to limit
or restrict Kuhns Brothers or its affiliates in conducting such business with
respect to others or rendering such advice to others.
The Company recognizes and confirms that Kuhns Brothers, in acting
pursuant to this Agreement, will be using information in reports and other
information provided by third parties, including information provided by or on
behalf of the Company. Kuhns Brothers does not assume responsibility for and may
rely on, without independent verification, the accuracy and completeness of any
such reports and information. The Company hereby warrants that any information
relating to the Company that is furnished to Kuhns Brothers by or on behalf of
the Company will be accurate and will not contain any material misstatements of
fact or omissions. The Company agrees that any information or advice rendered by
Kuhns Brothers or its representatives in connection with this Agreement is for
confidential use of the Company's Board of Directors, management and employees,
as well as attorneys, accountants and other agents of the Company on a
need-to-know basis and, except as otherwise required by law, the Company will
not, and will not permit any third party to, disclose or otherwise refer to such
advice or information in any manner without Kuhns Brothers' prior written
consent.
2. MERGER AND ACQUISITION SERVICES
Relating to its assistance with respect to the Financing, Kuhns Brothers
shall provide the Company with services related to merger and acquisition
transactions in the event that at any time during which this Agreement is in
place, the Company or any of its affiliates shall enter into any "merger and
acquisition transaction" as described below with any party introduced to the
Company by Kuhns Brothers, directly or indirectly.
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For purposes of this Agreement, the term "merger and acquisition
transaction" means: (i) any merger, consolidation, reorganization or other
business combination including strategic partnerships or joint ventures pursuant
to which the business or businesses of a third party, including projects,
stand-alone assets or technologies, are combined with that of the Company in
either a direct ownership, joint venture or strategic alliance fashion; (ii) the
acquisition, directly or indirectly, by the Company of all or a substantial
portion of the assets or equity of a third party by way of negotiated purchase
or otherwise; or (iii) the acquisition, directly or indirectly, by a third party
of all or a substantial portion of the assets or equity of the Company by way of
negotiated purchase or otherwise (the "Transaction(s)").
Kuhns Brothers' merger and acquisition services may include, but will not
necessarily be limited to:
(i) Assistance in the identification of businesses, organizations,
assets or technologies that may constitute potential Transactions; (ii)
assistance in the evaluation of such third parties from a financial point
of view; (iii) assistance with respect to the form and structure of the
Transaction; (iv) conducting discussions and negotiations regarding a
Transaction; and (v) providing other related advice and assistance as the
Company may reasonably request in connection with a Transaction.
The Company acknowledges that Kuhns Brothers and its affiliates are in the
business of providing merger and acquisition services (of all types contemplated
by this agreement) to others. Nothing herein contained shall be construed to
limit or restrict Kuhns Brothers or its affiliates in conducting such business
with respect to others or in rendering such advice to others.
3. STRATEGIC PLANNING SERVICES
Relating to its assistance with respect to the Financing, Kuhns Brothers
shall provide the Company with strategic planning services. Kuhns Brothers
strategic planning services shall include, but not be limited to, the following:
(i) advice regarding the Company's business plan; (ii) advice regarding
formation of the Company's corporate goals and their implementation; (iii)
advice regarding corporate organization, personnel and the related
selection of needed specialty skills; (iv) general corporate documentation
preparation and assistance, including services relating to assisting the
Company in preparation of its business plan and related materials,
including regulatory and filing documentation; (v) assistance regarding
preparation and organization of the Company's corporate paperwork.
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II. COMPENSATION
In consideration of rendering such services, the Company agrees to pay
Kuhns Brothers on the following basis:
(I) FOR FINANCIAL ADVISORY SERVICES--
(a) a signing fee of $50,000, payable upon the execution of this
Agreement;
(b) a non-refundable documentation fee of $30,000, upon the successful
purchase of the Public Shell, payable from the proceeds of the
Equity Financing; and
(c) a purchase fee of $120,000, payable upon the successful purchase of
the Public Shell, payable from the proceeds of the Equity Financing;
and
(d) a financing fee, payable upon closing(s) of the Financing, equal to
the following percentages of the total Financing value:
----------------------------------------------
CORPORATE FINANCING FEE
----------------------------------------------
Public equity offering 10.00%, plus
warrants
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Exercise of Warrants or 10.00%
Subscription Rights
----------------------------------------------
With respect to warrants provided as compensation as indicated in the
table above, the warrant "coverage", that is the percent of the dollar amount of
securities issued for which Kuhns Brothers shall receive warrants to purchase
the Company's equity securities, shall be 10%. For example, if the Company
issues $1 million of common stock with warrants attached, Kuhns Brothers shall
receive a warrant to buy $100,000 of common stock with warrants attached of the
Company. Such warrant will have a strike price that is 110% of the price of the
equity securities, or underlying equity securities, offered in the Financing, or
in the case of compensation not involving a Financing shall be at a strike price
that is 100% of the price of the Company's common stock as set by the most
recent third party sale, and shall be outstanding for a period of 6 years.
In connection with our financial advisory services, you agree that if
during the period Kuhns Brothers is retained by you a Financing is consummated
with a third party, acting either as a Financial Investor or as a Strategic
Investor, who was introduced directly or indirectly by Kuhns Brothers
("Introduced Investors"), or if the Company enters into a definitive agreement
with Introduced Investors which at any time thereafter results in a Financing,
you will pay Kuhns Brothers a financing fee equal to the fees indicated above
with respect to such Financing. It is understood that for purposes of this
Agreement, Kuhns Brothers shall be deemed to have introduced such Introduced
Investors to the Company not only by physical introductions and meetings, but
also by arranging or facilitating telephonic or correspondence meetings between
the parties, whether or not Kuhns Brothers participated in such meetings,
telephone calls or correspondence.
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Additionally, if during 2 years from the execution of this contract a
Financing is consummated with a third party not introduced to the Company by
Kuhns Brothers, Kuhns Brothers will be paid a fee equal to 50% of its
compensation due pursuant to the language above.
Notwithstanding anything contained herein, Kuhns Brothers' fees payable in
connection with a Financing shall be paid at the level of the compensation table
above at any time as there is a closing of the Financing or Transaction, or
tranche of the Financing or Transaction, or finalization of related
documentation or purchase of a Public Shell (the "Closings"), and at the option
of Kuhns Brothers, shall be paid in cash or in the securities of the Company
being offered in the Financing.
In the event that Kuhns Brothers is successful in raising the Financing,
but the Company declines to accept the Financing, Kuhns Brothers will be paid a
fee equal to 50% of its compensation due pursuant to the language above.
(II) FOR MERGER AND ACQUISITION SERVICES--
(a) a merger and acquisition fee equal to the "Lehman Formula" based on
$5 million increments, that is, 5% of the first $5 million, 4% of
the second $5 million, etc., of the consideration paid in the
Transaction, or the Lehman Formula of the equity value of the
organization being acquired, at the option of Kuhns Brothers.
In the event that Kuhns Brothers is involved in both merger and
acquisition services and financial advisory services with respect to
a Transaction, Kuhns Brothers shall be paid for each service.
For purpose of this Agreement, "consideration" means the aggregate value,
whether in cash, securities, assumption (or purchase subject to) of debt or
liabilities (including, without limitation, indebtedness for borrowed money,
pension liabilities or guarantees) or other property, obligations or services,
paid or payable directly or indirectly (in escrow or otherwise) or otherwise
assumed in connection with a Transaction, or the net present value of the
estimated benefits to the Company of any joint venture, licensing or marketing
agreement ("Consideration"). The value of Consideration shall be determined as
follows:
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(a) the value of securities, liabilities, obligations, property and
services shall be the fair market value as shall mutually be agreed
upon at the date of the closing of the Transaction;
(b) the value of indebtedness, including indebtedness assumed, shall be
the face amount; and/or
(c) the net present value of the estimated benefits to the Company of
any joint venture, licensing or marketing agreement, as mutually
determined by the parties. If the parties cannot come to such mutual
determination, the net present value described above shall be
determined by arbitration.
If the Consideration payable in a Transaction includes contingent payments
to be calculated by reference to uncertain future occurrences, such as future
financial or business performance, then any fees of Kuhns Brothers relating to
such Consideration shall be payable at the time of the receipt of such
Consideration.
The Company acknowledges that Kuhns Brothers and its affiliates are in the
business of providing merger and acquisition services (of all types contemplated
by this Agreement) to others. Nothing herein contained shall be construed to
limit or restrict Kuhns Brothers or its affiliates in conducting such business
with respect to others or in rendering such advice to others.
The Company also acknowledges that Kuhns Brothers and its affiliates have
or may have ownership interests in businesses, assets or technologies identified
by them or others to the Company as potential Transactions. Nothing herein
contained shall be construed to limit or restrict the ability of Kuhns Brothers
or its affiliates to be compensated for its ownership interest in such a
Transaction on a basis separate and apart from the compensation described
herein.
In connection with our merger and acquisition services, you agree that if
during the period Kuhns Brothers is retained by you, a Transaction is
consummated with a third party introduced by Kuhns Brothers or the Company
enters into a definitive agreement with a third party introduced by Kuhns
Brothers which at any time thereafter results in a Transaction ("Third
Parties"), you will pay Kuhns Brothers a transaction fee equal to the Lehman
Formula times the Consideration.
It is understood that for purposes of this Agreement, Kuhns Brothers shall
be deemed to have introduced such Third Parties to the Company not only by
physical introductions and meetings, but also by arranging or facilitating
telephonic or correspondence meetings between the parties, whether or not Kuhns
Brothers participated in such meetings, telephone calls or correspondence.
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Additionally, if during the period Kuhns Brothers is retained by you, a
Transaction is consummated with a third party not introduced to the Company by
Kuhns Brothers, Kuhns will be paid a fee equal to 50% of its compensation due
pursuant to the language above.
(III) FOR STRATEGIC PLANNING SERVICES--
Upon execution of this Agreement:
(a) commencing on upon the closing(s) of the Financing, a non-refundable
monthly retainer of $10,000 per month will be paid to Kuhns Brothers
in arrears for work performed in this Agreement prior to the
closing(s) of the Financing; and
(b) commencing upon the closing(s) of the Financing , a non-refundable
monthly retainer of $10,000 per month, payable on the first of the
month, will be paid to Kuhns Brothers for 24 months for strategic
and financial advisory services.
(IV) FOR EXPENSES--
(a) the Company shall pay directly the reasonable expenses incurred by
Kuhns Brothers in relation to the Financing, including expenses
related to Kuhns Brothers' due diligence, and shall reimburse Kuhns
Brothers for any expenses reasonably incurred by it related to the
Financing, subject to such expenses being authorized in advance by
the Company (including, without limitation, reasonable professional
and reasonable legal fees and disbursements incurred by Kuhns
Brothers in connection with its engagement hereunder with respect to
services to be rendered by it, as well as any such fees or expenses
reasonably incurred directly by personnel of Kuhns Brothers or its
agents or representatives in connection with work on behalf of the
Company).
(b) In the event the Financing does not close due to a material
misrepresentation by the Company that is discovered during the due
diligence process, the Company will reimburse Kuhns Brothers for its
out of pocket expenses, plus a breakage fee of $50,000.
All compensation and expenses will be reimbursed to Kuhns Brothers via
wire transfer. The Firm's wiring instructions are attached as Schedule A.
III. RIGHT TO BOARD PARTICIPATION OR OBSERVER STATUS
Kuhns Brothers has the right, in its sole discretion, to name a
representative to the Company's board of directors during the time of this
Agreement and for such period of time after the termination of this Agreement as
any Financial or Strategic Investor introduced by Kuhns Brothers owns 5% or more
of the Company's common stock. In its sole discretion, Kuhns Brothers may not
exercise its board participation right, but shall instead choose to be named an
Observer to the Company's board of directors. Observer status, if exercised,
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shall entitle Kuhns Brothers to be present at all board meetings, including
physical and telephonic sessions, as well as to receive all information provided
to the Company's board members for such meetings; Observer status shall not
enable Kuhns Brothers to vote or otherwise participate at such board meetings.
IV. RIGHT TO SUB-CONTRACT OR SYNDICATE
Kuhns Brothers has the right, in its sole discretion, to sub-contract any
of its rights to provide services hereunder to qualified third parties in its
sole discretion, so long as Kuhns Brothers remains the prime contractor of such
services to the Company. Kuhns Brothers has the right to enter into any finder,
inter dealer or syndication agreements with qualified parties with respect to
placing and arranging the Financing.
V. ADDITIONAL INVESTMENT BANKING SERVICES
The Company agrees that Kuhns Brothers shall have the right, but not the
obligation, which right is exercisable in Kuhns Brothers' sole discretion, to
provide investment banking services to the Company on an irrevocable
preferential right of refusal basis to provide such services in relation to the
Company's financing for the term this Agreement and such additional period of
time as may be necessary to complete any project or Transaction already
commenced pursuant to the Company's written request or engagement of Kuhns
Brothers prior to the expiration of such 2 year period. Such services may
include underwriting and acting as a placement agent for the Company's
securities on a lead-managed or co-managed basis and providing other financial
advisory services. Such right shall terminate with respect to any transaction or
service if the Company shall request Kuhns Brothers to lead such transaction or
to provide such service and Kuhns Brothers shall fail to notify the Company
within fifteen (15) days thereafter that Kuhns Brothers will accept the
engagement. In the event that Kuhns Brothers agrees to provide such investment
banking services, Kuhns Brothers shall be paid as described in paragraph II
above. The remaining terms of such engagement shall be contained in specific
engagement agreements relating to the specific transaction. Notwithstanding the
above or any oral representations or assurances previously or subsequently made
by the parties, this Agreement does not constitute a commitment by or obligation
of Kuhns Brothers to act as underwriter or placement agent in connection with
any future offering of the Company's corporate securities. Such a commitment on
the part of Kuhns Brothers will exist only upon the execution of a final,
written engagement agreement and then only in accordance with the terms and
conditions thereof. In any event, Kuhns Brothers may determine in its sole
discretion, for any reason (including, without limitation, the results of its
due diligence investigation, a material change in the Company's financial
condition; business or prospects, the lack of appropriate internal Kuhns
Brothers committee approvals or then current market conditions) not to
participate in such an offering of the Company's securities. In the event that
Kuhns Brothers, with respect to any particular transaction, elects not to
provide investment banking or financial advisory services to the Company,
nothing contained herein shall be deemed to prevent the Company from utilizing
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the services of another investment banking firm for such transaction, but such
retention of another investment banking firm shall be without prejudice to Kuhns
Brothers' rights hereunder with respect to subsequent transactions.
Upon the successful execution of the Financing, Transaction or any
publicly traded equity or debt capital markets transaction lead or co-managed by
Kuhns Brothers, Kuhns Brothers, in accordance with its customary practices, will
provide market making and research services to investors in the securities of
the Company (subject, however, to the Company's continuation of its engagement
of Kuhns Brothers as a financial advisor pursuant to the terms of this
Agreement) for a period of two years following the closing of such financing and
related transaction, and subject to the Firm's customary right not to make a
market in such securities at any time or to suspend research coverage).
For the purpose of this agreement, "cause" means the failure by Kuhns
Brothers to perform in a material respect its obligations hereunder in
accordance with the skill and diligence normally provided by recognized
investment banking companies; provided, however, that the Company shall first
give Kuhns Brothers reasonable prior written notice (a minimum of fifteen days
notice) of the Company's intent to terminate the engagement (such notice to
specify in reasonable detail the facts alleged to give rise to the Company's
right to terminate for cause) and shall have provided Kuhns Brothers a
reasonable opportunity to cure by performing such obligations (the
reasonableness of such opportunity to be measured not only by Kuhns Brothers'
ability to perform during such period but also by the adverse effect on the
Company resulting from providing such additional period to enable Kuhns Brothers
to perform).
VI. INDEMNIFICATION
The Company shall indemnify Kuhns Brothers and hold it harmless against
any and all losses, claims, damages or liabilities to which Kuhns Brothers may
become subject arising in any manner out of or in connection with the rendering
of service by Kuhns Brothers hereunder, unless it is finally judicially
determined that such losses, claims, damages or liabilities resulted from the
gross negligence, bad faith and willful misconduct of Kuhns Brothers.
The Company shall reimburse Kuhns Brothers promptly for any legal or other
expenses reasonably incurred by it in connection with investigating, preparing
to defend or defending, or providing evidence in or preparing to serve or
serving as a witness with respect to, or otherwise relating to, any lawsuits,
investigations, claims or other proceedings arising in any manner out of or in
connection with the rendering of services by Kuhns Brothers hereunder (including
without limitation, in connection with the enforcement of this Agreement and the
indemnification obligations set forth herein); provided, however, that in the
event of a final judicial determination is made to the effect specified above,
Kuhns Brothers will remit to the Company any amounts reimbursed under such
paragraph.
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The Company agrees that the indemnification and reimbursement commitments
set forth in this paragraph shall apply if either the Company or Kuhns Brothers
is a formal party to any such lawsuits, claims or other proceedings and that
such commitments shall extend upon the terms set forth in this paragraph to any
controlling person, affiliate, director, officer, employee, or agent of Kuhns
Brothers (each, with Kuhns Brothers, an "Indemnified Person"). The Company
further agrees that, without Kuhns Brothers' prior written consent, which
consent will not be unreasonably withheld, it will not enter into any settlement
of a lawsuit, claim or any other proceeding arising out of the transactions
contemplated by this Agreement unless such settlement includes an implicit and
unconditional release from the party bringing such lawsuit, claim or other
proceeding of all Indemnified Persons.
The Company further agrees that the Indemnified Persons are entitled to
retain separate counsel of their choice in connection with any matters in
respect of which Indemnification, reimbursement or contribution may be sought
under this Agreement. Fees for counsel will be payable only if management and
counsel to the Company have has been consulted and allowed to participate fully
in the selection of reasonable and appropriate counsel to the Indemnified
Person(s). Each Indemnified person shall give notice to the Company within
thirty (30) days of the assertion against such Indemnified Person of any claim
or the commencement of any action or proceeding relating to any foregoing,
provided further that if the Indemnified person fails to notify the Company,
then the Company shall be relieved of any liability that it may have to such
Indemnified Person as to such claim hereunder.
The Company and Kuhns Brothers agree that if any indemnification or
reimbursement sought pursuant to the preceding paragraph is judicially
determined to be unavailable for a reason other than the gross negligence, bad
faith or willful misconduct of Kuhns Brothers, then whether or not Kuhns
Brothers is the Indemnified Person, the Company and Kuhns Brothers shall
contribute to the losses, claims, damages, liabilities and expenses for which
such indemnification or reimbursement is held unavailable (i) in such proportion
as is appropriate to reflect the relative benefits to the Company on the one
hand, and Kuhns Brothers on the other hand, in connection with the transactions
to which such indemnification or reimbursement relates, or (ii) if the
allocation provided by clause (i) above is judicially determined not to be
permitted, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) but also the relative faults of the Company
on the one hand, and Kuhns Brothers on the other hand, as well as any other
equitable considerations; provided, however, that in no event shall the amount
to be contributed by Kuhns Brothers pursuant to this paragraph exceed the amount
of the fees actually received by Kuhns Brothers hereunder.
VII. MISCELLANEOUS
Except as contemplated by the terms hereof or subpoena issued by a court
of competent jurisdiction, Kuhns Brothers shall keep confidential all non-public
information provided to it by the Company, and shall not disclose such
information to any third party, other than such of its employees and advisors as
Kuhns Brothers determines to have a need to know.
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Except as required by applicable law, any advice to be provided by Kuhns
Brothers under this Agreement shall not be disclosed publicly or made available
to any third parties without the prior approval by Kuhns Brothers, and
accordingly such advice shall not be relied upon by any person or entity other
than the Company.
The term of Kuhns Brothers' engagement hereunder shall extend from the
date hereof until terminated as set forth below. Subject to the provisions of
this Agreement that shall survive any termination or expiration of the
understanding between the parties, either party may terminate Kuhns Brothers'
engagement hereunder at any time by giving the other party at least 10 days
written notice.
The Company agrees that Kuhns Brothers has the right to place
advertisements in financial and other newspapers and journals describing the
Company's Financing and Kuhns Brothers' related services to the Company
hereunder, provided that Kuhns Brothers will submit a copy of any such
advertisements to the Company for its prior approval, which approval shall not
be unreasonably withheld.
Nothing in this Agreement, expressed or implied, is intended to confer or
does it confer on any person or entity other than the parties hereto or their
respective successors and assigns, and to the extent expressly set forth herein,
the Indemnified Persons, any rights or remedies under or by reason of this
Agreement or as a result of the services to be rendered by Kuhns Brothers
hereunder.
Neither the execution and delivery of this letter Agreement by the Company
nor the consummation of the transactions contemplated hereby will, directly or
indirectly, with or without the giving of notice or lapse of time, or both: (i)
violate any provisions of the Certificate of Incorporation or By-laws of the
Company; or (ii) violate, or be in conflict with, or constitute a default under,
any agreement, lease, mortgage, debt or obligation of the Company or require the
payment, any pre-payment or other penalty with respect thereto.
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.
This Agreement may not be amended or modified except in writing signed by
each of the parties and shall be governed by and construed and enforced in
accordance with the laws of the State of Connecticut. The Company and Kuhns
Brothers hereby irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the courts of the State of Connecticut and of the
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United States District Courts located in Connecticut for any lawsuits, actions
or other proceedings arising out of or relating to this Agreement and agree not
to commence any such lawsuit, action or other proceeding except in such courts.
The Company further agrees that service of any process, summons, notice or
document by mail, return receipt requested, to the Company's address set forth
above shall be effective service of process for any lawsuit, action or other
proceeding brought against the Company in any such court. The Company and Kuhns
Brothers hereby irrevocably and unconditionally waive any objection to the
laying of venue of any lawsuit, action or other proceeding arising out of or
relating to this Agreement in the courts of the State of Connecticut or the
United States District Courts located in the State of Connecticut, and hereby
further irrevocably and unconditionally waive and agree not to plead or claim in
any such court that any such lawsuit, action or other proceeding brought in any
such court has been brought in an inconvenient forum. Any right to trial by jury
with respect to any lawsuit, claim or other proceeding arising out of or
relating to this Agreement or the services to be rendered by Kuhns Brothers
hereunder is expressly and irrevocably waived.
This agreement is subject to the approval of the board of directors of
both companies.
If the foregoing correctly sets forth the understanding and agreement
between Kuhns Brothers and the Company, please so indicate in the space provided
for that purpose below, whereupon this letter shall constitute a binding
agreement as of the date hereof.
Kuhns Brothers, Inc.
By:____________________________
Name: John D. Kuhns
Title: Chairman
AGREED:
By:_________________________________
Name:
Title: Chairman of the Board
Dalian Fushi Bimetallic Manufacturing Company, Ltd
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SCHEDULE A
KUHNS BROTHERS ELECTRONIC WIRE TRANSFER INSTRUCTIONS
Please wire funds to:
Bank: National Iron Bank
195 Main Street
Salisbury, Connecticut
Telephone: (860) 435-2581
Account: Kuhns Brothers, Inc.
Account #: 38718
ABA#: 011102638
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