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Exhibit 10.3
CHINA EVERGREEN ENVIRONMENTAL CORPORATION
PLACEMENT AGENT AGREEMENT
Dated: July 18, 2005
Westminster Securities Corporation
100 Wall Street
New York, NY 10007
Ladies and Gentlemen:
The undersigned, China Evergreen Environmental Corporation, a
Nevada
corporation (the "Company"), proposes to
issue and sell a minimum of $1,020,000
(the "Minimum Offering") up to $3,000,000
of investment units ("Units") (the
"Maximum Offering"). The terms and
conditions of the sale, issuance, and rights
held by the securities underlying these
Units will be as set forth in the
Company's Confidential Private Placement
Memorandum (together with all exhibits
and supplements thereto, the "Memorandum")
which shall be prepared by the
Company and subject to the approval of the
Placement Agent. The Units, the
common stock underlying the Units
("Shares"), the warrants underlying the Units
("Warrants"), the common stock underlying
the Warrants ("Warrant Shares"), and
the Placement Agent Warrants (as
hereinafter defined) are referred to
collectively herein as the "Equity".
The offering of Units in the Company (the "Offering") will be
conducted
on a "best efforts, all or none" basis with
respect to the Minimum Offering and
a "best efforts" basis with respect to the
remainder of the Offering up to the
Maximum Offering (subject to an
over-allotment allowance of up to an additional
$600,000). Fractional Units may be sold at
the discretion of the Placement
Agent. As used herein, including with
respect to the representations and
warranties contained herein, unless the
context otherwise requires, the term
"Company" shall include the Company
together with all of its direct and indirect
wholly owned subsidiaries, and all
representations and warranties of the Company
herein shall also be deemed made on behalf
of and with respect to each such
subsidiary of the Company. This Placement
Agent Agreement ("Agreement") is to
confirm the arrangements with you (the
"Placement Agent"), with respect to the
sale of the Units by the Placement Agent as
exclusive agent for the Company in
the Offering.
The Offering will not be registered with the Securities and
Exchange
Commission ("SEC") nor with any state
securities authority, but rather will be
offered as a private placement pursuant to
an exemption from registration under
Regulation D ("Regulation D") promulgated
under Section 4(2) and Rule 506 of the
Securities Act of 1933, as amended
("Securities Act") and available state
securities law exemptions. The Units are to
be sold in the Offering only to
"accredited investors", as that term is
defined in Regulation D, pursuant to the
Memorandum.
SECTION 1. DESCRIPTION OF COMMON STOCK. The Equity shall conform in
all
respects to descriptions thereof contained
in the Memorandum.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company
hereby represents, warrants and covenants
with the Placement Agent as follows:
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(a) The Memorandum, copies of which will be delivered to the
Placement
Agent, will be carefully prepared to
disclose all information concerning the
Company which would be material to an
investment decision by a reasonable
investor. The date on which the Offering is
authorized by the Company to
commence is July 18, 2005 and is herein
called the "Commencement Date." The time
and date of each issuance of Units
hereunder is herein called the "Issuance
Date" or the "Closing."
(b) The Company is duly incorporated and validly existing as a
corporation in good standing under the laws
of the state of its incorporation,
having corporate power and authority to own
its properties and conduct its
business and is duly qualified and in good
standing in each foreign jurisdiction
where the conduct of its business so
requires such qualification. No direct or
indirect rights to acquire Common Stock
exist, except as have been previously
disclosed to the public or as disclosed in
the Memorandum.
(c) The unaudited financial statements of the Company for the
three
months ended March 31, 2005 and the audited
financial statements of the Company
for the year ended December 31, 2004, each
included in the SEC Reports
(collectively, the "Financial Statements"),
fairly present the information
purported to be shown therein of the
Company and Evergreen Asset Group Limited,
at the respective dates to which they
apply; and such Financial Statements have
been prepared in conformity with GAAP
consistently applied throughout the
periods involved and are in accordance in
all material respects with the books
and records of the Company.
(d) The assets of the Company, as shown in the Financial
Statements,
are owned by the Company with good title,
free and clear of all liens,
encumbrances and equities of record or
otherwise, except (i) those specifically
referred to in the Memorandum, (ii) those
which do not materially adversely
affect the use or value of such assets,
(iii) the lien of current taxes not now
due or which are being contested in good
faith and for which adequate reserves
have been set aside and (iv) those
disclosed in the Financial Statements. The
Company has the full right, power and
authority to maintains and operate its
business and properties as the same are now
operated or proposed to be
operated and is complying with all laws,
ordinances and regulations applicable
thereto, except where the failure to so
comply would not have a material adverse
effect on the Company.
(e) There are no actions, suits or proceedings at law or in
equity
pending, or to the Company's knowledge
threatened, against the Company before or
by any federal or state commission,
regulatory body, administrative agency or
other governmental body wherein, either in
any case or in the aggregate, an
unfavorable ruling, decision or finding
would materially adversely affect the
business, franchise, licenses, permits,
operations or financial condition of the
Company which are not disclosed in the
Memorandum,
(f) The execution and delivery by the Company of this Agreement,
the
consummation and performance of the
transactions herein contemplated, and
compliance with the terms of this Agreement
and the Memorandum by the Company
will not conflict with, result in a breach
of, or constitute a material default
under, the Certificate or Articles of
Incorporation or the bylaws of the
Company, in each case as amended, or any
indenture, mortgage, deed of trust or
other agreement or instrument to which the
Company is now a party or by which it
or any of its assets or properties is
bound, or any law, order, rule,
regulation, writ, injunction, judgment, or
decree of any government,
governmental instrumentality or court,
domestic or foreign, having jurisdiction
over the Company or any of its business or
properties, to the extent that such
conflict, breach or default might have a
material adverse effect on the Company,
and its subsidiaries as a whole, or their
respective businesses, properties or
financial condition on a consolidated
basis.
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(g) Except as set forth in the Memorandum, all material
licenses,
permits, approval, leases, contracts and
agreements referred to in the
Memorandum (including the Financial
Statements), along with all other material
licenses, permits, approvals, leases,
governmental authorizations or contracts
to which the Company is a party, have been
obtained and are valid and in full
force and effect and neither the Company
nor, to the knowledge of the Company,
any other party is in default thereunder,
and to the knowledge of the Company,
no event has occurred which with the
passage of time or the giving of notice, or
both, would constitute a default
thereunder. There are no proceedings pending,
or to the knowledge of the Company
threatened, seeking to cancel, terminate or
limit such licenses, approvals or
permits.
(h) Except as described in the Memorandum, the Company has timely
filed
all federal, state and local tax returns
required to be filed, including
without limitation, all sales tax returns,
or has obtained extensions thereof
and has paid, or is contesting in good
faith, all taxes shown on such returns.
(i) The Company shall use the net proceeds from the sale of the
Units
hereunder for working capital purposes
primarily. The Company will not use any
proceeds from the sale of the Units for the
satisfaction of the Company's debt
(other than payment of trade payables in
the ordinary course of the Company's
business and prior practices and or
repayment of the bridge loan and interest
made to the Company for an aggregate of up
to $500,000), to redeem any Common
Stock or Common Stock Equivalents or to
settle any litigation outstanding as of
any Closing.
(j) The Memorandum shall set forth a true and complete list of
all
material patents, trademarks, trade names,
copyright registrations and
applications therefor now or heretofore
used or presently proposed to be used in
the conduct of the business of the Company.
Except as set forth in the
Memorandum: (i) the Company owns or
possesses adequate licenses or other valid
rights to use all patents, patent rights,
trademarks, trademark rights, trade
names, trade name rights, trade secrets,
copyright registrations, know-how and
other proprietary information
(collectively, "Rights") necessary to the conduct
of the business of the Company as presently
being conducted; (ii) the validity
of such Rights and the title thereto of the
Company has not been questioned in
any litigation to which the Company is or
has been a party, nor, to the best
knowledge of the Company, is any such
litigation threatened, other than as set
forth in the Memorandum; (iii) to the best
knowledge of the Company, the conduct
of the business of the Company as now
conducted does not and will not conflict
with Rights of others in any way which has
or might reasonably be deemed to have
a material adverse effect on the Company;
and (iv) no proceedings are pending
against the Company nor, to the best
knowledge of the Company, are any
proceedings threatened against the Company,
alleging any violation of Rights of
any third person. The Company does not know
of (x) any use that has heretofore
been or is now being made of any Rights
owned by the Company, except by the
Company or by a person duly licensed by it
to use the same under an agreement
described in the Memorandum or (y) any
material infringement of any Right owned
by or licensed by or to the Company. To the
best knowledge of the Company, all
Rights heretofore owned or held by any
agent, independent contractor, employee
or officer of the Company or any subsidiary
thereof and used in the business of
the Company in any manner have been duly
and effectively transferred to the
Company. The consummation of the
transactions contemplated by this Agreement
will not alter or impair the rights and
interests of the Company in any of the
items referred to in this paragraph or
disclosed in the Memorandum as it
relates to intangible property rights.
(k) All of the representations, agreements and warranties in
this
Section 2 shall survive delivery of and
payment for all or any part of the Units
for three years from and after such
delivery and payment.
(l) The Company has no
subsidiaries other than those disclosed in the
Memorandum.
(m) All of the Company's filings with the SEC were true and correct
in
all material respects upon the dates of
filing thereof.
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SECTION 3. ISSUANCE, SALE AND DELIVERY OF THE UNITS.
(a) The Company hereby agrees to sell the Units directly through
the
Placement Agent on a "best efforts" basis.
The Offering will commence on July _,
2005. The proceeds of the Offering will be
deposited in escrow in a non-interest
bearing account at Signature Bank ("Escrow
Agent"). Unless a Closing is held,
the Offering will terminate and all funds
theretofore received from the sale of
the Units will be promptly returned to the
subscribers without deduction
therefrom or interest thereon. During the
period of escrow, subscribers will not
be entitled to a return of their
subscriptions, except as required by law. The
Offering will continue until the first to
occur of (i) the completion of the
Maximum Offering (unless increased by
mutual agreement of the Company and the
Placement Agent), (ii) September 1, 2005 or
(iii) the termination of the
Offering by either the Placement Agent or
the Company ("Final Closing").
(b) All checks or wire transfers for the purchase of Units shall
be
deposited with the Escrow Agent in
accordance with the terms of an escrow
agreement to be executed among the Company,
the Placement Agent, and the Escrow
Agent. Upon receipt thereof or on such
scheduled Issuance Date as the Company
and the Placement Agent may agree, the
Company shall issue the Units and,
simultaneously with the delivery of the
Units, the Company, or its counsel,
shall deliver to the Placement Agent's
counsel such opinions, documents and
certificates as are provided for herein. No
funds shall be disbursed from escrow
in connection with any Closing without the
written consent of both the Company
and the Placement Agent. Notwithstanding
anything contained herein to the
contrary, each of the Company and the
Placement Agent, in their respective sole
discretion, shall have the right to return
any amount to any potential investor
together with the appropriate cancellation
of any signed subscription agreement
prior to consummation of such potential
investors' purchase of Units. The
Company may withdraw its offer to sell the
Units at any time prior to acceptance
of a subscription. No purchase will be
effective unless and until accepted by
the Company and included in a Closing.
(c) The parties
hereto represent that at each Issuance Date, the
representations and warranties herein
contained, and the statements contained in
all certificates theretofore or
simultaneously delivered by any party to another
pursuant to this Agreement, shall be true
and correct,
SECTION 4. COVENANTS, OF THE COMPANY. The Company covenants and
agrees
with the Placement Agent that:
(a) On the Commencement Date, and on each Issuance Date, the
Memorandum
(as amended or as supplemented, if the same
shall have been amended or
supplemented) will not (i) contain an
untrue statement of a material fact and
will not omit to state a material fact
required to be stated therein or
necessary in order to make the statements
therein, in light of the circumstances
under which they were made, not misleading
and (ii) contain any material,
non-public information required to be
disclosed to the general public in order
to comply with Regulation FD promulgated
under the Securities Exchange Act of
1934, as amended, unless all recipients of
the Memorandum execute a
confidentiality agreement in form and
substance acceptable to the Company and
the Placement Agent, prior to receipt of
the Memorandum.
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(b) The Company will prepare promptly upon the reasonable request
of
the Placement Agent, such amendments or
supplements to the Memorandum, in such
form as in the opinion of counsel to the
Placement Agent may be reasonably
necessary or advisable in connection with
the Offering. In addition, if at any
time prior to the last date on which Units
shall be issued, (i) an event
relating to or affecting the Company shall
have occurred which, in the judgment
of the Company or in the opinion of counsel
for the Placement Agent, would cause
the Memorandum as then in effect to include
an untrue statement of a material
fact or to omit to state a material fact
required to be stated therein or
necessary in order to make the statements
therein, in light of the circumstances
under which they were made, not misleading,
or (ii) it is otherwise necessary to
amend or supplement the Memorandum, the
Company shall promptly notify the
Placement Agent of the occurrence and shall
promptly prepare and deliver to the
Placement Agent, without charge, sufficient
copies of an amended or supplemented
Memorandum, and shall use its reasonable
best efforts to cause the appropriate
state securities authorities to take any
required action with regard to any
amendment as may be necessary to permit the
lawful use of the Memorandum in
connection with the Offering.
(c) The Company's counsel shall prepare and file any necessary
filings,
in the reasonable opinion of Company's
counsel or Placement Agent's counsel,
under the state securities, or so-called
"blue sky" laws and regulations (the
"Blue Sky Laws") and the Company shall pay
the filing fees and all other
expenses in connection with any such
qualification in such jurisdictions as the
Placement Agent shall designate, and to
continue such qualification in effect so
long as required for the purposes of the
Offering; provided, however, that the
Company shall not be required to qualify as
a foreign corporation or to file a
consent to service of process in any
jurisdiction in any action other than one
arising out of the offering or sale of the
Units. The Company will provide
copies to the Placement Agent of all
documents, exhibits and information filed
in connection with the qualification of the
Units for sale under the Blue Sky
Laws.
(d) The Company, at its own expense, will give and continue to
give
such financial statements and other
information to and as may be required by the
proper public bodies of the jurisdictions
in which the Offering may be
qualified.
(e) The Company will pay all cash, and security-based compensation
and
expenses due to the Placement Agent in the
manner set forth in the engagement
letter dated January 4, 2005 between the
Company and the Placement Agent
("Engagement Letter"). The warrants
issuable to the Placement Agent or its
assignees pursuant to Section 2b of the
Engagement Letter ("Placement Agent
Warrants") shall be exercisable at any time
from the Issuance Date through the
last expiration date of any of the
Warrants. The Placement Agent Warrants and
the shares of Common Stock issuable upon
exercise of the Placement Agent
Warrants shall have registration,
anti-dilution and other rights identical to
the Shares and Warrants Shares included in
or issuable upon sale of the Units.
In the event that any payment due to the
Placement Agent hereunder shall not be
made when due, interest shall accrue on the
unpaid balance of such overdue
payments at the rate of twelve percent
(12%) per annum until paid.
(f) Intentionally Omitted.
(g) The Company shall not release any Offering documents or the
Memorandum unless they are reasonably
acceptable to Placement Agent and its
counsel.
(h) Except as described in the Memorandum, all material
licenses,
permits, approvals or governmental
authorization necessary to permit the Company
to conduct its business will be valid on
each Issuance Date, the Company shall
in all material respects be complying
therewith and there shall be no
proceedings pending, or to the knowledge of
the Company threatened, seeking to
cancel, terminate, suspend or limit any
such licenses, permits, approvals or
governmental authorization.
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(i) At each Issuance Date, the Company shall not have failed to
qualify
to do business as a foreign corporation in
any jurisdiction where required,
except where failure to so qualify would
not have a material adverse effect on
the Company or where any qualification is
required solely as a result of
conducting business over the Internet.
(j) At the Commencement Date and at each Issuance Date, the
Company
will be validly existing as a corporation
in good standing under the laws of the
state of its incorporation, having
corporate power and authority to own its
properties and conduct its business, and
will have a capitalization as described
in the Memorandum. Prior to the first
Issuance Date, the Company shall have
outstanding and of record not more than
99,999,997 shares of Common Stock.
Except as set forth in the Memorandum,
there are no outstanding options,
warrants, script rights to subscribe to,
calls or commitments of any character
whatsoever relating to, or securities,
rights or obligations convertible into or
exchangeable for, or giving any person or
entity any right to subscribe for or
acquire, any shares of Common Stock, or
contracts, commitments, understandings
or arrangements by which the Company or
either of the Subsidiaries is or may
become bound to issue additional shares of
Common Stock, or securities or rights
convertible or exchangeable into shares of
Common Stock. Following the date of
publication of the Memorandum and prior to
the final Issuance Date, no
additional securities shall be issued in
addition to those described in the
previous sentence, the Equity or any
securities issued pursuant to a stock
incentive plan approved by the board of
directors of the Company.
(k) At each Closing, (i) the Equity will conform, in all
material
respects, to all statements with regard
thereto contained in the Memorandum,
(ii) the Equity shall have been duly and
validly authorized by proper corporate
authority, (iii) each portion of the
Equity, when issued, exercised and/or paid
for (as applicable), or otherwise earned,
each in accordance with its terms,
will be validly issued, fully paid and
nonassessable and (iv) all shares of
Common Stock that comprise the Equity shall
have been duly and validly reserved
for issuance. The Company shall ensure that
all exercises properly requested
shall be effected promptly by the
Company.
SECTION 5. INDEMNIFICATION.
(a) The Company hereby agrees to indemnify and hold harmless
the
Placement Agent, its directors, officers,
agents, employees, members,
affiliates, counsel and each other person
or entity who controls the Placement
Agent within the meaning of Section 15 of
the Securities Act (collectively, the
"Agent Indemnified Parties") from and
against any and all losses, claims,
damages or liabilities (or actions in
respect thereof), joint or several, to
which they or any of them may become
subject under the Securities Act or any
other statute or at common law, and to
reimburse such Agent Indemnified Parties
for any reasonable legal or other expense
(including the cost of any
investigation and preparation) incurred by
them in connection with any
litigation, whether or not resulting in any
liability, but only insofar as such
losses, claims, liabilities and litigations
arise out of or are based upon (i)
any untrue statement or alleged untrue
statement of a material fact required to
be stated in the Memorandum or necessary to
make the statements therein not
misleading, o
