British
Virgin Islands
(State
or other jurisdiction of
Incorporation
or organization)
|
6770
(Primary
standard industrial
classification
code number)
|
Not
Applicable
(I.R.S.
Employer
Identification
Number)
|
Title
of each Class of
Security
being registered
|
Amount
being Registered
|
Proposed
Maximum Offering Price Per Security(1) |
Proposed
Maximum Aggregate Offering Price(1) |
Amount
of
Registration Fee |
Units,
each consisting of one share of Common Stock, $.0001 par value,
and two
Warrants (2)
|
4,025,000
Units
|
$13.45
|
$54,136,250.00
|
$6,371.84
|
Shares
of Common Stock
|
4,025,000
Shares
|
-------
|
-------
|
-------(2)
|
Warrants
included as part of the Units
|
8,050,000
Warrants
|
-------
|
-------
|
-------(2)
|
Shares
of Common Stock underlying the Warrants included in the
Units(3)
|
8,050,000
Shares
|
$5.00
|
$40,250,000.00
|
$4,737.43
|
Shares
of Common Stock
|
875,000
Shares
|
$7.70
|
$6,737,500.00
|
$793.00(4)
|
Representative’s
Unit Purchase Option
|
1
|
$100
|
$100.00
|
-------(2)
|
Units
underlying the Representative’s Unit Purchase Option (“Underwriter’s
Units”)(3)
|
350,000
Units
|
$9.90
|
$3,465,000.00
|
$407.83
|
Shares
of Common Stock included as part of the Underwriter’s
Units(3)
|
350,000
Shares
|
-------
|
-------
|
-------(2)
|
Warrants
included as part of the Underwriter’s Units(3)
|
700,000
Warrants
|
-------
|
-------
|
-------(2)
|
Shares
of Common Stock underlying the Warrants included in the Underwriter’s
Units(3)
|
700,000
Shares
|
$6.40
|
$4,480,000.00
|
$527.30
|
Total
Fee Due
Amount
of fee previously paid
Amount
of fee due with filing of Amendment No. 1
|
$12,837.40
$10,169.53
$2,667.87
|
(1) |
Based
on the market price of the Units or exercise price for the purpose
of
calculating the registration fee pursuant to Rule 457(f)(1) and Rule
457(g)(1).
|
(2) |
No
fee pursuant to Rule 457(g).
|
(3) |
Pursuant
to Rule 416, there are also being registered such indeterminable
additional securities as may be issued as a result of the anti-dilution
provisions contained in the
Warrants.
|
(4) |
Based
on the market price of a share of common stock on June 25,
2005.
|
· |
we
will acquire an operating business in
China;
|
· |
we
will change our corporate domicile from the State of Delaware to
the
British Virgin Islands, which means we will be governed by the laws
of the
British Virgin Islands;
|
· |
we
will change our corporate name to “Origin Agritech Limited” as a result of
the Redomestication Merger;
|
· |
the
majority of our board of directors and officers will be the Origin
Stockholders and their designees;
|
· |
the
Agritech Memorandum of Association and the Articles of Association
will
become the equivalent of our certificate of incorporation and by-laws,
respectively;
|
· |
each
share of common stock of Chardan will automatically convert into
one share
of common stock of Agritech; and
|
· |
each
outstanding warrant of Chardan will be assumed by Agritech with the
same
terms, but exercisable for common stock of
Agritech.
|
Year
ending June 30,
|
After-Tax
Profit
|
|
2006
|
$11,000,000
|
|
2007
|
$16,000,000
|
|
2008
|
$21,000,000
|
|
2009
|
$29,000,000
|
· |
To
consider and vote upon a proposal to adopt the Stock Purchase Agreement,
dated as of December 20, 2004, among Chardan, State Harvest Holdings
Limited, (“Origin”), a British Virgin Islands company, and the
stockholders of Origin (the “Origin Stockholders,” together with Origin,
the “Origin Parties”), and the transactions contemplated thereby;
|
· |
To
consider and vote upon the merger of Chardan into its wholly owned
subsidiary Origin Agritech Limited (“Agritech”), formed under the laws of
the British Virgin Islands, for the purposes of reincorporation and
redomestication of the company to the British Virgin Islands (the
“redomestication merger”); and
|
· |
To
consider and vote upon a proposal to adopt the Chardan 2005 Performance
Equity Plan.
|
SUMMARY
|
12
|
SELECTED
HISTORICAL FINANCIAL INFORMATION
|
24
|
THE
ORIGIN PARTIES HISTORICAL FINANCIAL INFORMATION
|
24
|
CHARDAN
HISTORICAL FINANCIAL INFORMATION
|
25
|
SELECTED
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
|
26
|
COMPARATIVE
PER SHARE INFORMATION
|
27
|
MARKET
PRICE INFORMATION
|
28
|
RISK
FACTORS
|
29
|
FORWARD-LOOKING
STATEMENTS
|
40
|
THE
CHARDAN SPECIAL MEETING
|
41
|
CONSIDERATION
OF THE STOCK PURCHASE TRANSACTION
|
45
|
THE
STOCK PURCHASE AGREEMENT
|
59
|
CHARDAN
REDOMESTICATION MERGER
|
75
|
CHARDAN
2005 PERFORMANCE EQUITY PLAN
|
88
|
INFORMATION
ABOUT THE ORIGIN PARTIES
|
97
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
109
|
INFORMATION
ABOUT CHARDAN
|
119
|
PRO
FORMA
|
125
|
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
125
|
DIRECTORS
AND MANAGEMENT
|
132
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
|
140
|
BENEFICIAL
OWNERSHIP OF SECURITIES
|
142
|
PRICE
RANGE OF SECURITIES AND DIVIDENDS
|
146
|
SHARES
ELIBIBLE FOR FUTURE SALE
|
147
|
DESCRIPTION
OF THE COMBINED COMPANY’S
SECURITIES
FOLLOWING THE STOCK PURCHASE
|
148
|
STOCKHOLDER
PROPOSALS
|
151
|
LEGAL
MATTERS
|
151
|
EXPERTS
|
151
|
DELIVERY
OF DOCUMENTS TO STOCKHOLDERS
|
152
|
WHERE
YOU CAN FIND MORE INFORMATION
|
152
|
Q.
|
Why
is Chardan proposing the stock purchase?
|
A.
|
Chardan
was organized to effect a business combination with an operating
business
that is based in China and that has significant growth potential.
The
operating companies of Origin, after the consummation of the stock
purchase will be Beijing Origin Seed Limited, Henan Origin Cotton
Technology Development Limited, Changchun Origin Seed Technology
Development Limited and Beijing Origin State Harvest Biotechnology
Limited
(these four companies are referred to as the “Origin Operating
Companies”). Together they develop, produce, distribute and market hybrid
food crop seeds to the Chinese agriculture industry. The Origin
Operating
Companies have, collectively, demonstrated significant growth since
commencing operations in 1997. Chardan believes that the Origin
Operating
Companies have the infrastructure in place to expand their business
through the development of additional hybrids and the expansion
of its
customer base. As a result, Chardan believes that a business combination
with Origin will provide Chardan stockholders with an opportunity
to
participate in a combined company with significant growth
potential.
|
|
Q.
|
Why
is Chardan proposing the redomestication merger?
|
A.
|
Chardan
is proposing the reincorporation of itself into a company formed
under the
laws of the British Virgin Islands to align its income tax liabilities
with the location of its activities to reduce the overall impact
of
corporate income tax on the surviving company and its stockholders.
Because the future operations will be almost exclusively foreign
to the
United States, the redomestication merger is intended to reduce
or
entirely eliminate the income tax liability of the company in the
United
States and permit greater flexibility in structuring acquisitions
or
creating subsidiaries in China and other countries as the business
of
Origin expands. By becoming a non-United States company, it is
believed
that the successor company will only be taxed on its operations
by the
jurisdiction in which they are located and undertaken, and will
not be
subject to additional income taxes merely by virtue of the location
of its
place of incorporation.
|
|
Q.
|
Why
is Chardan proposing the stock option plan?
|
A.
|
Chardan
is proposing the stock option plan to enable the company to attract,
retain and reward its directors, officers, employees and consultants
using
equity-based incentives.
|
|
Q.
|
What
is being voted on?
|
A.
|
There
are three proposals that you are being asked to vote on. The first
proposal is to adopt the stock purchase agreement, dated December
20, 2004
and the transactions contemplated thereby. We refer to this proposal
as
the stock purchase proposal.
The
second proposal is to approve the merger of Chardan with and into
Agritech
for purposes of redomestication to the British Virgin Island. We
refer to
this proposal as the redomestication merger proposal.
The
third proposal is to adopt Chardan’s 2005 Performance Equity Plan. We
refer to this proposal as the stock option plan proposal.
|
Q.
|
What
vote is required in order to adopt the stock purchase
proposal?
|
A.
|
The
approval of the stock purchase will require the affirmative vote
of a
majority of the outstanding shares of Chardan’s common stock. If the
holders of 805,000 or more shares of common stock issued in Chardan’s
initial public offering vote against the stock purchase and demand
that
Chardan convert their shares into a pro rata portion of the trust
account
as of the record date, then the stock purchase will not be consummated.
[No vote of the holders of Chardan’s warrants is necessary to adopt the
stock purchase proposal or other proposals, and Chardan is not
asking the
warrant holders to vote on the stock purchase proposal or the
other
proposals.] Chardan will not consummate the transaction described
in the
stock purchase proposal unless the redomestication merger is
also
approved. Similarly, the redomestication merger will not be consummated
if
the stock purchase proposal is not approved. The approval of
the stock
option plan proposal is not a condition to the consummation of
the stock
purchase or redomestication merger proposals.
|
|
Q.
|
What
vote is required in order to adopt the redomestication
merger?
|
The
affirmative vote of the holders of a majority of the outstanding
shares of
Chardan common stock is required to approve the redomestication
merger
proposal.
|
||
Q.
|
What
vote is required in order to adopt the stock option plan?
|
A.
|
The
approval of the stock option plan will require the affirmative
vote of a
majority of the shares represented and entitled to vote at the
meeting.
The approval of the stock option plan is not a condition to the
approval
of the stock purchase or the redomestication merger
proposals.
|
|
Q.
|
How
do the Chardan insiders intend to vote their shares?
|
A.
|
All
of the insiders who purchased their shares prior to the initial
public
offering (including the officers and directors) have agreed to
vote the
shares held by them on the stock purchase and redomestication
merger
proposals in accordance with the vote of the majority of the
shares of
common stock issued in the initial public offering. They have
indicated
that they also will vote in favor of the stock option plan
proposal.
|
|
Q.
|
What
will I receive in the redomestication merger?
|
A.
|
Chardan
security holders will receive an equal number of shares of common
stock of
Agritech in exchange for their Chardan common stock, and Agritech
will
assume the outstanding Chardan warrants, the terms and conditions
of which
will not change, except that on exercise, they will receive Agritech
common stock.
|
|
Q.
|
How
will the redomestication merger be accomplished?
|
A.
|
Chardan
will merge into Agritech, incorporated as a British Virgin Islands
company
on March 11, 2005, and its wholly owned subsidiary. As a result
of the
redomestication merger, each currently issued outstanding share
of common
stock of Chardan will automatically convert into a share of common
stock
of Agritech. This procedure will result in you becoming a stockholder
in
Agritech.
|
Q.
|
Will
the Chardan stockholders be taxed as a result of the redomestication
merger?
|
A.
|
Generally
for United States federal income tax purposes, stockholders
who are United
States holders will not recognize any gain or loss, provided
no holder
owns 5% or more of the common stock of Agritech following
the
redomestication merger. We urge you to consult your own
tax advisors with
regard to your particular tax consequences of the redomestication
merger.
|
|
Q.
|
Will
Chardan be taxed on the redomestication merger?
|
A.
|
We
believe that Chardan will not incur any material amount
of federal income
or withholding tax as a result of the redomestication merger.
The IRS may
not agree with this conclusion. In such an event, there
may be a
significant tax obligation for Agritech, the surviving
company, to
pay.
|
|
Q.
|
How
much of the surviving company will existing Chardan stockholders
own?
|
A.
|
The
Origin Stockholders and their designee initially will
receive 10,000,000
shares of common stock of Agritech. Messrs Han, Yuan
and Yang, three of
the Origin Stockholders will own in the aggregate 8,619,350
shares of
Agritech common stock, representing 57% of the issued
and outstanding
shares immediately after the acquisition. After the stock
purchase, if no
Chardan stockholders demand that Chardan convert their
shares into a pro
rata portion of the trust account and no Chardan stockholder
exercises its
appraisal rights, then Chardan’s stockholders who own shares immediately
prior to the stock purchase will own approximately 32.5%
of the
outstanding common stock of Agritech. Existing Chardan
stockholders could
own less than approximately 32.5% if one or more Chardan
stockholders vote
against the stock purchase proposal and demand conversion
of their shares
into a pro rata portion of the trust account or appraisal
rights are
exercised.
|
Q.
|
How
much dilution will I experience?
|
A.
|
Currently
there are 4,900,000 shares of common stock outstanding.
For acquisition of
Origin, there will be issued 10,000,000 shares. If
the acquisition is
consummated, an additional 200,000 shares will be
issued to the Best of
the Best as additional compensation for their services
to Chardan.
Therefore, current shareholders will own approximately
32.5% of the
company, which is a dilution of absolute ownership
of 67.5%. To the extent
the earn out shares are issued to the Origin Stockholders
and outstanding
warrants are exercised, the current stockholders
will experience further
dilution of their ownership interest in the
company.
|
Q.
|
What
will the name of the surviving company be after the stock
purchase?
|
A.
|
The
name of the surviving company following completion of the
stock purchase
and redomestication merger will be “Origin Agritech
Limited.”
|
|
Q.
|
Do
I have conversion rights?
|
A.
|
If
you hold shares of common stock issued in Chardan’s initial public
offering, then you have the right to vote against the stock
purchase
proposal and demand that Chardan convert these shares into
a pro rata
portion of the trust account in which a substantial portion
of the net
proceeds of Chardan’s initial public offering are held. We sometimes refer
to these rights to vote against the stock purchase and
demand conversion
of the shares into a pro rata portion of the trust account
as conversion
rights.
|
Q.
|
If
I have conversion rights, how do I exercise them?
|
A.
|
If
you wish to exercise your conversion rights, you must vote
against the
stock purchase proposal and at the same time demand that
Chardan convert
your shares into cash. If, notwithstanding your vote, the
stock purchase
is completed, then you will be entitled to receive a pro
rata portion of
the trust account, including any interest earned thereon
through the
record date. You will be entitled to convert each share
of common stock
that you hold into approximately $5.24. If you exercise
your conversion
rights, then you will be exchanging your shares of Chardan
common stock
for cash and will no longer own these shares. You will
be entitled to
receive cash for these shares only if you continue to hold
these shares
through the closing of the stock purchase and then tender
your stock
certificate. If the stock purchase is not completed, then
your shares
cannot be converted to cash.
|
Q.
|
What
happens to the funds deposited in the trust account after
consummation of
the stock purchase?
|
A.
|
Upon
consummation of the stock purchase:
the
stockholders electing to exercise their conversion rights
will receive
their pro rata portion of the funds in the trust account;· $10,000,000 of
the funds in the trust account will be paid to the Origin
Stockholders as
part of the stock purchase consideration, less $250,000
which will be
retained by Agritech to satisfy any damages of the existing
Chardan
stockholders under the indemnification provisions of the
stock purchase
agreement; and the balance of the funds in the trust account
will be
retained by Agritech for operating capital subsequent to
the closing of
the business combination.
|
|
Q.
|
Who
will manage the combined company?
|
A.
|
The
combined company will be managed by the current management
of Origin. Dr.
Gengchen Han, who is currently the chief executive officer
of Origin, will
become the chairman and chief executive officer and a director
of
Agritech. Yasheng Yang, who is currently the president
of Origin, will be
the president and chief operating officer and a director
of Agritech.
Liang Yuan, who is currently executive director of Origin,
will be the
executive vice president and a director of Agritech. Dr.
Richard D.
Propper, who is currently the chairman of the Chardan board,
will become
vice president for Corporate Development, but he will not
be a director.
Kerry Propper, who is currently the executive vice president
and a
director of Chardan will become a director of Agritech.
Michael D.
Chermak, who is currently a director of Chardan, will become
a director of
Agritech. In addition, there will be four additional directors.
These
persons are: Bailiang Zhang, Dafang Huang, Steven Urbach
and Remo Richli.
|
|
Q.
|
Do
I have dissenter or appraisal rights?
|
A.
|
In
connection with the redomestication merger, the Chardan
stockholders have
appraisal rights under Delaware corporate
law.
|
Q.
|
What
happens if the stock purchase is not consummated?
|
A.
|
If
the stock purchase is not consummated, Chardan will continue
to search for
an operating company to acquire. However, Chardan will
be liquidated if it
does not consummate a business combination by September
22, 2005, unless a
letter of intent, agreement in principle or definitive
agreement has been
executed by September 22, 2005, in which case, Chardan
will be liquidated
if it does not consummate such business combination by
March 22, 2006. In
any liquidation, the funds held in the trust account,
plus any interest
earned thereon, together with any remaining out-of-trust
net assets, will
be distributed pro rata to Chardan’s common stockholders, excluding the
Chardan initial stockholders, each of whom has waived
any right to any
liquidation distribution.
|
|
Q.
|
When
do you expect the stock purchase to be completed?
|
A.
|
It
is currently anticipated that the stock purchase will
be completed
promptly following the Chardan special meeting on October
28,
2005.
|
Q.
|
If
I am not going to attend the Chardan special meeting
in person, should I
return my proxy card instead?
|
A.
|
Yes.
After carefully reading and considering the information
contained in this
proxy statement/prospectus, please fill out and sign
your proxy card. Then
return the enclosed proxy card in the return envelope
as soon as possible,
so that your shares may be represented at the Chardan
special
meeting.
|
|
Q.
|
What
will happen if I abstain from voting or fail to vote?
|
A.
|
An
abstention or failure to vote will have the same effect
as a vote against
the stock purchase proposal, but will not have the
effect of converting
your shares into a pro rata portion of the trust account.
An abstention or
failure to vote will also have the effect of voting
against the
redomestication merger, but will have no effect on
the approval of the
stock option plan.
|
|
Q.
|
What
do I do if I want to change my vote?
|
A.
|
Send
a later-dated, signed proxy card to Chardan’s secretary prior to the date
of the special meeting or attend the special meeting
in person and vote.
You also may revoke your proxy by sending a notice
of revocation to
Chardan’s secretary at the address of Chardan’s corporate
headquarters.
|
|
Q.
|
If
my shares are held in “street name” by my broker, will my broker vote my
shares for me?
|
A.
|
No.
Your broker can vote your shares only if you provide
instructions on how
to vote. You should instruct your broker to vote your
shares, following
the directions provided by your broker.
|
|
Q.
|
Do
I need to turn in my old certificates?
|
A.
|
No.
If you hold your securities in Chardan in certificate
form, as opposed to
holding them through your broker, you do not need to
exchange them for
certificates issued by Agritech. Your current certificates
will represent
your rights in Agritech. You may exchange them by contacting
the transfer
agent, Continental Stock Transfer & Trust Company, Reorganization
Department, and following their requirements for reissuance.
If you elect
conversion or appraisal, you will need to deliver your
old certificate to
Agritech.
|
Q.
|
Who
can help answer my questions?
|
A.
|
If
you have questions about the stock purchase, you may write
or call Chardan
China Acquisition Corp., 625 Broadway, Suite 1111, San
Diego, CA 92101.
The phone number is (619)
795-4627.
|
Year
ending June 30,
|
After-Tax
Profit
|
2006
|
$11,000,000
|
2007
|
$16,000,000
|
2008
|
$21,000,000
|
2009
|
$29,000,000
|
· |
Chardan’s
stockholders have approved the stock purchase agreement and the
redomestication merger proposals;
|
· |
holders
of less than 20% of the shares of common stock issued in Chardan’s initial
public offering vote against the stock purchase proposal and demand
conversion of their shares into cash;
and
|
· |
the
other conditions specified in the stock purchase agreement have been
satisfied or waived.
|
· |
if
the stock purchase is not approved and Chardan fails to consummate
an
alternative transaction within the time allotted pursuant to its
amended
and restated certificate of incorporation, Chardan will be required
to
liquidate. In such event, the shares of common stock held by Chardan’s
officers and directors will be worthless because Chardan’s officers,
directors and initial stockholders are not entitled to receive any
liquidation proceeds. Additionally, the warrants held by such persons
will
expire worthless in the event of liquidation;
|
· |
if
a business combination is consummated, Kerry Propper will be repaid
non-interest bearing loans to Chardan, currently in the aggregate
principal of $55,950;
|
· |
after
the completion of the stock purchase, Kerry Propper and Steven Urbach,
a
designee of Mr. Propper’s, will serve as members of the board of directors
of Agritech;
|
· |
after
the completion of the stock purchase, Dr. Richard Propper will
continue to
serve in the capacity of Vice President, Corporate Development
(without
individual compensation), and Chardan Capital, LLC, an affiliate
of Dr.
Propper, Mr. Beharry, Mr. Zhang, and Mr. Huang, will provide a
variety of
ongoing services to Origin. Such services will be provided on a
month-to-month basis, terminable at will by Origin without penalty,
at a
cost to Origin of $30,000 per month. There is no written agreement
governing the services to be provided, which will be on a non-exclusive
basis and include advice and help in meeting US public reporting
requirements and accounting standards, Sarbanes-Oxley compliance,
corporate structuring and development, stockholder relations, corporate
finance and operational capitalization and such other similar services
as
requested and agreed to by Chardan Capital,
LLC;
|
· |
if
the business combination transaction is not consummated under certain
circumstances, Chardan’s officers and directors and certain initial
stockholders may be personally liable for a termination fee payable
to the
Origin Stockholders in the aggregate amount of $1,000,000;
and
|
· |
if
Chardan is liquidated without having consummated a business combination,
Dr. Richard Propper and Mr. Kerry Propper will be personally
liable to pay
the debts and obligations to vendors to Chardan that are owed
money for
services and products in excess of the proceeds of the initial
public
offering not held in the trust
account.
|
· |
Approval
by Chardan’s stockholders of the stock purchase and redomestication merger
proposals;
|
· |
the
absence of any order or injunction preventing consummation of the
stock
purchase;
|
· |
the
absence of any suit or proceeding by any governmental entity or any
other
person challenging the stock purchase or seeking to obtain from the
Origin
Parties or Chardan any damages;
|
· |
at
Chardan’s stockholders’ meeting, holders of no more than 805,000 shares of
common stock issued in Chardan’s initial public offering, vote against the
stock purchase proposal and demand that Chardan convert their shares
into
a pro rata portion of the trust account;
and
|
· |
Certain
key members of the management team of Origin and the Origin Operating
Companies will have entered into employment agreements in form and
substance acceptable to Chardan, providing, among other things, for
a term
of three (3) years at compensation levels in effect prior to the
closing
of the stock purchase and including intellectual property assignment
and
non-competition provisions to be in effect for a period of two (2)
years
following termination of
employment.
|
· |
the
Origin Parties’ representations and warranties that are qualified as to
materiality must be true and correct in all respects, and those not
qualified as to materiality must be true and correct in all material
respects, as of the date of completion of the stock purchase, except
representations and warranties that address matters as of another
date,
which must be true and correct as of that other date, and Chardan
must
have received an officer’s certificate from the Origin Parties to that
effect;
|
· |
the
Origin Parties must have performed in all material respects all
obligations required to be performed by them;
|
· |
Origin
will have acquired ownership and control of the four Origin Operating
Companies and the technology service agreements among the Origin
Operating
Companies will be executed;
|
· |
the
Origin Parties must have received all required and unconditional
approvals
or consents of governmental authorities, and Chardan must have
received
written confirmation that such approvals and consents have been
received;
|
· |
at
closing, Origin and the Origin Stockholders will have certified
to Chardan
that on a consolidated basis, immediately prior to closing, Origin
and the
Origin Operating Companies, together, will have not less than $4,000,000
in cash assets and its short and long term debt arose only in the
ordinary
course;
|
· |
Chardan’s
board of directors must have determined that the combined fair market
value of Origin and the Origin Operating Companies, together, is
at least
80% of the net assets of Chardan;
|
· |
there
must not have occurred since the date of the stock purchase agreement
any
Origin Material Adverse Effect, as defined in the stock purchase
agreement;
|
· |
the
Origin Proxy Statement/Prospectus Information, as defined in the
stock
purchase agreement, accurately describes Origin, the Origin Operating
Companies and the business in which they are engaged, and the Origin
Stockholders, and the Origin Proxy Statement/Prospectus Information
does
not contain any untrue statement of a material fact or omit to state
a
material fact necessary in order to make the statements in the Origin
Proxy Statement/Prospectus Information not misleading;
and
|
· |
Chardan’s
representation and warranty regarding the compliance of the stock
purchase
agreement and the agreements contemplated by the stock purchase agreement
with the applicable provisions in Chardan’s certificate of incorporation
and the underwriting agreement it executed in its initial public
offering
must be true and correct in all respects, as of the date of completion
of
the stock purchase;
|
· |
Chardan
must have performed in all material respects all obligations required
to
be performed by them under the stock purchase agreement;
|
· |
the
Origin Parties must have received a written opinion, dated as of
the
closing date, from Guantao Law Firm, counsel to the Origin Parties
relating to, among other things, the validity and enforceability
of the
stock consignment agreements;
|
· |
there
must not have occurred since the date of the stock purchase agreement
any
Chardan Material Adverse Effect, as defined in the stock purchase
agreement; and
|
· |
the
Origin Parties must have received an officer’s certificate of Chardan to
the effect that the Chardan board of directors has independently
determined that the combined fair market value of Origin and the
Origin
Operating Companies is at least 80% of the net assets of Chardan
as of the
date of consummation of the stock purchase.
|
· |
by
mutual written consent of Chardan and
Origin;
|
· |
by
either party if the other party amends a schedule and such amendment
or
supplement reflects a material adverse change in the condition, operations
or prospects of its business;
|
· |
by
either party if the closing has not occurred by November 15,
2005 (unless
such terminating party is in breach of any of its material covenants,
representations or warranties);
|
· |
by
either party if the other party has breached any of its covenants
or
representations and warranties in any material respect and has not
cured
its breach within ten business days of the notice of an intent to
terminate, provided that the terminating party is itself not in
breach;
|
· |
by
Origin, if the board of directors of Chardan (or any committee thereof)
shall have failed to recommend or withdraw or modify in a manner
adverse
to Origin its approval or recommendation of the stock purchase agreement
and any of the transactions contemplated
thereby;
|
· |
by
Chardan if its board of directors shall have determined in good faith,
based upon the advice of outside legal counsel, that failure to terminate
the stock purchase agreement is reasonably likely to result in the
board
of directors breaching its fiduciary duties to stockholders by reason
of a
pending, unsolicited, bona fide written proposal for a superior
transaction; or
|
· |
by
either party if, at the Chardan stockholder meeting, the stock purchase
agreement and the redomestication merger shall fail to be approved
and
adopted by the affirmative vote of the holders of Chardan’s common stock,
or 20% or more of the shares sold in Chardan’s initial public offering
request conversion of their shares into the pro rata portion of the
trust
account in accordance with the Chardan certificate of
incorporation.
|
Year
Ended December 31,
|
||||||||||||||||
2004
|
2003
|
2002
|
2001
|
2000
|
||||||||||||
Revenue
|
$
|
36,430,799
|
$
|
23,155,094
|
$
|
11,936,798
|
$
|
9,075,764
|
$
|
5,650,225
|
||||||
Net
income
|
7,909,076
|
3,497,959
|
3,211,752
|
981,259
|
481,848
|
|||||||||||
Income
(loss) per share
|
790.91
|
349.80
|
321.18
|
98.13
|
48.18
|
|||||||||||
Book
value per share
|
1,654.99
|
887.95
|
557.27
|
238.35
|
140.79
|
|||||||||||
Dividends
paid per share
|
24.16
|
19.40
|
-0-
|
-0-
|
-0-
|
|||||||||||
|
As
at Year Ended December 31,
|
|||||||||||||||
2004
|
2003
|
2002
|
2001
|
2000
|
||||||||||||
Total
assets
|
$
|
50,309,138
|
$
|
37,153,175
|
$
|
31,123,038
|
$
|
11,781,627
|
$
|
9,312,712
|
||||||
Total
current liabilities
|
32,985,232
|
27,541,487
|
24,807,546
|
9,336,486
|
7,317,013
|
|||||||||||
Long-term
liability
|
346,982
|
347,255
|
347,255
|
-0-
|
-0-
|
|||||||||||
Stockholders’
equity
|
16,549,920
|
8,879,466
|
5,572,684
|
2,383,516
|
1,407,861
|
Six
Months Ended
June 30, 2005
(unaudited)
|
Year
Ended
December
31, 2004
|
For
the Period
From
December
5, 2003 (Inception) to June
30, 2005
(unaudited)
|
||||||||
Revenue
|
$
|
—
|
$
|
—
|
$
|
—
|
||||
Interest
income on trust account
|
191,291
|
166,483
|
357,774
|
|||||||
Net
loss
|
(282,395
|
)
|
(667,699
|
)
|
(950,629
|
)
|
||||
Net
loss per share
|
(0.06
|
)
|
(0.17
|
)
|
—
|
|||||
Cash
dividends per share
|
—
|
—
|
—
|
|||||||
|
June
30,
|
December
31,
|
||||||||
|
2005
(unaudited) |
2004
|
|
|
2003
|
|||||
Total
assets (including cash deposited in trust account in 2004)
|
$
|
20,993,246
|
$
|
20,884,091
|
$
|
84,988
|
||||
Common
stock subject to possible conversion
|
4,103,450
|
4,103,450
|
—
|
|||||||
Stockholders’
equity
|
16,213,344
|
16,495,739
|
24,465
|
Year
Ended
December
31, 2004
|
|||||||
Assuming
Maximum
Approval |
Assuming
Minimum
Approval |
||||||
(in
thousands, except per share data)
|
|||||||
Revenue
|
$
|
36,431
|
$
|
36,431
|
|||
Net
income
|
7,282
|
7,241
|
|||||
Net
income per share
|
0.51
|
0.53
|
|||||
Total
assets
|
$
|
61,443
|
$
|
57,298
|
|||
Long-term
debt
|
347
|
347
|
|||||
Stockholders’
equity
|
27,190
|
23,046
|
Number
of shares of common
stock
assumed to be issued in stock purchase:
|
Origin
|
Chardan(1)(2)
|
Combined
Company(2) |
|||
Assuming
maximum approval
|
10,000,000
|
4,900,000
|
15,100,000
|
|||
67.55%
|
32.45%
|
100%
|
||||
Assuming
minimum approval
|
10,000,000
|
4,095,402
|
14,295,402
|
|||
71.35%
|
28.65%
|
100%
|
||||
Net
(loss) per share—historical:
|
|
|
|
|||
Year
ended December 31, 2003:
|
$349.80
|
$(0.00)
|
||||
Year
ended December 31, 2004:
|
$790.91
|
$(0.17)
|
|
|||
Net
income per share—pro forma:
|
|
|
|
|||
Year
ended December 31, 2004:
|
|
|
|
|||
Maximum
|
|
$0.51
|
||||
Minimum
|
|
|
$0.53
|
|||
Book
value per share—December 31, 2004
|
$1,654.99
|
$4.03(3)
|
$1.61(3)
|
|||
Cash
dividends declared per share—Year ended December 31, 2004
|
$24.16
|
—
|
$0.02(3)(4)
|
(1)
|
Operations
of Chardan are for the period from December 5, 2003 (inception)
to
December 31, 2004.
|
(2)
|
Historical
per share amounts for Chardan were determined based upon the actual
weighted average shares outstanding at December 31, 2003 and 2004,
respectively, and consolidated pro forma per share amounts for
Chardan and
Origin (a) were determined based upon the assumed number of shares
to be
issued under the two different levels of approval and (b) include
200,000
shares to be issued to Best of the Best upon consummation of the
Stock
Purchase Agreement.
|
(3)
|
Calculated
based on the minimum approval, to record refund of funds ($4,103,450
plus
related interest) to dissenting stockholders.
|
(4)
|
Assumes
no change in the total dividends paid in 2004
(RMB2,000,000).
|
Over-the-Counter
Bulletin Board
|
|||||||||||
Chardan
Common
Stock
|
Chardan
Warrants
|
Chardan
Units
|
|||||||||
High
|
Low
|
High
|
Low
|
High
|
Low
|
||||||
2004
First Quarter
|
N/A
|
N/A
|
N/A
|
N/A
|
$6.25
|
$5.99
|
|||||
2004
Second Quarter
|
$4.85
|
$4.65
|
$1.05
|
$0.64
|
$6.95
|
$6.03
|
|||||
2004
Third Quarter
|
$4.94
|
$4.75
|
$0.85
|
$0.61
|
$6.80
|
$5.70
|
|||||
2004
Fourth Quarter
|
$6.65
|
$4.85
|
$2.03
|
$0.62
|
$10.60
|
$6.00
|
|||||
2005
First Quarter
|
$8.12
|
|
$6.20
|
$3.12
|
$1.60
|
$14.35
|
$9.30
|
||||
2005
Second Quarter
|
$9.10
|
$7.35
|
$3.35
|
$2.00
|
$15.00
|
$12.25
|
· |
uncertain
growth in the market for, and uncertain market acceptance of, its
products
and services;
|
· |
the
evolving nature of the crop seed business in PRC, where significant
consolidation is likely to occur, leading to the formation of companies
better able to compete with Origin than is currently the case; and
|
· |
the
risks of competition, technological change or evolving customer
preferences could harm sales of their products or services.
|
· |
Dr.
Gengchen Han;
|
· |
Dr.
Yasheng Yang; and
|
· |
Liang
Yuan.
|
· |
discuss
future expectations;
|
· |
contain
projections of future results of operations or financial condition;
or
|
· |
state
other “forward-looking” information.
|
· |
the
number and percentage of Chardan stockholders voting against the
stock
purchase proposal;
|
· |
changing
interpretations of generally accepted accounting principles;
|
· |
outcomes
of government reviews, inquiries, investigations and related litigation;
|
· |
continued
compliance with government regulations;
|
· |
legislation
or regulatory environments, requirements or changes adversely affecting
the businesses in which Origin and the Origin Operating Companies
are
engaged;
|
· |
fluctuations
in customer demand;
|
· |
management
of rapid growth;
|
· |
intensity
of competition from other providers of crop seeds;
|
· |
timing
of approval and market acceptance of new products;
|
· |
general
economic conditions; and
|
· |
geopolitical
events and regulatory changes.
|
· |
approve
the stock purchase proposal;
|
· |
approve
the redomestication merger proposal;
and
|
· |
approve
the stock option proposal.
|
· |
has
unanimously determined that the stock purchase proposal, the
redomestication merger proposal and the stock option proposal are
fair to
and in the best interests of Chardan and its stockholders;
|
· |
has
unanimously approved the stock purchase proposal, the redomestication
merger proposal and the stock option
proposal;
|
· |
unanimously
recommends that Chardan common stockholders vote “FOR” the proposal to
adopt the stock purchase agreement,
|
· |
unanimously
recommends that Chardan common stockholders vote “FOR” the proposal to
redomesticate in the British Virgin Islands;
and
|
· |
unanimously
recommends that Chardan common stockholders vote “FOR” the proposal to
adopt the stock option plan.
|
· |
You
can vote by signing and returning the enclosed proxy card
.
If you vote by proxy card, your “proxy,” whose name is listed on the proxy
card, will vote your shares as you instruct on the proxy card. If
you sign
and return the proxy card but do not give instructions on how to
vote your
shares, your shares will be voted as recommended by the Chardan board
“FOR
”
the adoption of the stock purchase proposal, the redomestication
merger
proposal, and the stock option plan proposal.
|
· |
You
can vote by telephone or on the internet by following the telephone
or
Internet voting instructions that are included with your proxy card.
If
you vote by telephone or by the Internet, you should not return the
proxy
card.
|
· |
You
can attend the special meeting and vote in person.
We
will give you a ballot when you arrive. However, if your shares are
held
in the name of your broker, bank or another nominee, you must get
a proxy
from the broker, bank or other nominee. That is the only way we can
be
sure that the broker, bank or nominee has not already voted your
shares.
|
· |
You
may send another proxy card with a later date;
|
· |
You
may notify Dr. Propper, Chardan’s chairman, in writing before the special
meeting that you have revoked your proxy; and
|
· |
You
may attend the special meeting, revoke your proxy, and vote in person,
as
indicated above.
|
· |
the
reorganization of the Origin Operating Companies which was to take
into
account the best tax arrangements for all
parties;
|
· |
the
consideration to be paid for the Origin Operating Companies, which
is
reflected in the stock purchase
agreement;
|
· |
the
terms of the additional purchase price to be paid over time based
on
performance criteria;
|
· |
the
desire for a stock option plan; and
|
· |
the
inclusion of certain Origin Stockholders on the board of directors
of the
surviving corporation.
|
· |
if
the stock purchase is not approved and Chardan fails to consummate
an
alternative transaction within the time allotted pursuant to its
amended
and restated certificate of incorporation, Chardan would be required
to
liquidate. In such event, the shares of common stock held by Chardan’s
directors and officers would be worthless because Chardan’s directors and
officers are not entitled to receive any of the liquidation proceeds
and
any warranty they hold will expire worthless.
|
· |
Chardan’s
executives and directors own a total 689,501 shares of Chardan
common
stock that have a market value of $6,377,884 based on Chardan’s share
price of $9.25 as of September 23, 2005, the record date. However,
as
Chardan’s directors and executives are contractually prohibited from
selling their shares prior to March 16, 2007 (during which time
the value
of the shares may increase or decrease), it is impossible to
determine
what the financial impact of the stock purchase will be on Chardan’s
directors and executives;
|
· |
the
transactions contemplated by the stock purchase agreement provide
that Mr.
Kerry Propper will be a director of Agritech and he will have the
right to
appoint one additional director of the nine members of the board
of
directors of the combined company for three years (which person is
currently Steven Urbach);
|
· |
after
completion of the stock purchase, Dr. Propper will continue to
serve in
the capacity of Vice President, Corporate Development (without
personal
compensation), and Chardan Capital LLC, an affiliate of Dr. Propper,
Mr.
Beharry, Mr. Zhang and Mr. Huang, will provide a variety of ongoing
services to Origin. Such services will be provided on a month-to-month
basis terminable at will by Origin without penalty, at a cost
to Origin of
$30,000 per month. There is no written agreement governing the
services to
be provided, which will be on a non-exclusive basis and include
advice and
help in meeting US public reporting requirements and accounting
standards,
Sarbanes-Oxley compliance, corporate structuring and development,
stockholder relations, corporate finance and operational capitalization
and such other similar services as suggested and agreed to by
Chardan
Capital, LLC;
|
· |
Chardan’s
directors and officers and certain initial stockholders may be
personally
liable for a pro rata share of a termination fee of $1,000,000
that is
payable to the Origin Stockholders if the stock purchase agreement
is
terminated under certain limited conditions;
and
|
· |
if
Chardan is liquidated without having consummated a business combination,
Dr. Richard Propper and Mr. Kerry Propper will be personally
liable to pay
the debts and obligations to vendors to Chardan that are owed
money for
services and products in excess of the proceeds of the initial
public
offering not held in the trust
account.
|
· |
the
existing customers represent a recurring revenue stream;
|
· |
Origin
budgets approximately 5% of its gross revenues to research and
development
activities during the following year. However, because of the revenue
growth experienced by Origin, the amount actually spent has been
approximately 3% of Origin’s gross revenues. Through this research and
development, Origin has developed and Chardan’s board of directors
believes it will continue to develop additional hybrid seed offerings;
|
· |
Origin
places an emphasis on its sales and marketing functions, with over
1,000,000 customers in a database, the production and circulation
of a
newspaper three times a year through their distributor network that
reaches between 1,000,000 and 2,000,000 readers per issue, television
advertising, product demonstrations, and the maintenance of a call
center
for receiving customer service inquiries;
|
· |
the
Chinese crop seed market remains fragmented and consists of large
numbers
of companies that operate at the county and provincial level;
and
|
· |
few
of the competing companies to Chardan’s knowledge have a research and
development program that appears to be as effective as Origin’s, resulting
in what the Chardan board believes will be a continuation of superior
seed
and support offerings by Origin to customers, thereby increasing
its
customer base and sales in the
future.
|
Name
|
Exchange
|
Price
(USD) |
Market
Cap
|
Shares
Outstanding |
Enterprise
Value (MM) |
Price
Earnings Ratio (P/E) |
MONSANTO
CO
|
NYSE
|
35.22
|
9,378,159,365
|
266,273,690
|
6,923.03
|
20.72
|
SYNGENTA
AG
|
SWX
|
88.09
|
9,915,725,588
|
112,564,562
|
5,855.09
|
16.02
|
DELTA
& PINE LAND CO
|
NYSE
|
25.90
|
1,000,224,841
|
38,618,720
|
821.99
|
22.52
|
Tier
1 Average
|
|
19.75
|
||||
BEIJING
SHUNXIN AGRICULT-A
|
SHENZHEN
|
0.76
|
252,362,883
|
332,069,533
|
310.68
|
23.29
|
XINJIANG
TALIMU AGRICUL-A
|
SHANGHAI
|
0.77
|
247,442,850
|
321,000,000
|
337.31
|
26.92
|
HUNAN
JINJIAN CEREALS INDS-A
|
SHANGHAI
|
0.53
|
228,355,675
|
432,500,000
|
352.85
|
145.67
|
HUNAN
YAHUA SEEDS CO LTD-A
|
SHENZHEN
|
0.57
|
154,787,040
|
272,000,000
|
294.56
|
41.41
|
INNER
MONGOLIA JINYU GROUP-A
|
SHANGHAI
|
0.84
|
183,681,831
|
218,427,017
|
248.23
|
34.46
|
Tier
2 Average
|
|
54.35
|
||||
YUAN
LONGPING HIGH-TECH AG-A
|
SHENZHEN
|
1.41
|
147,668,850
|
105,000,000
|
117.37
|
55.43
|
HEFEI
FENGLE SEED CO LTD-A
|
SHENZHEN
|
0.61
|
137,828,250
|
225,000,000
|
182.41
|
75.67
|
XINJIANG
KORLA PEAR CO LTD
|
SHANGHAI
|
0.67
|
107,432,280
|
160,500,000
|
142.69
|
55.40
|
HEILONGJIANG
HUAGUAN SCIEN-A
|
SHANGHAI
|
0.66
|
102,627,050
|
155,000,000
|
142.05
|
49.82
|
YANGLING
QINFENG AGRICUL SCI
|
SHENZHEN
|
0.64
|
81,868,975
|
128,820,000
|
145.06
|
107.35
|
· |
the
name of the combined company will be Origin Agritech Limited;
|
· |
the
corporate headquarters and principal executive officers will be located
at
12 Shangdi Xinxi Lu, Haidian District, Zhongguancun Development Building,
Beijing, PRC, which is currently the Origin Parties’ corporate
headquarters; and
|
· |
the
combined company will cause the common stock, warrants and units
outstanding prior to the stock purchase, which are traded on the
OTC
Bulletin Board, to continue trading on either the OTC Bulletin Board
or
the Nasdaq Stock Market. At the time of the closing, the symbol will
change to one determined by the management or board of directors
and the
trading medium that is reasonably representative of the corporate
name or
business of the combined company.
|
Year
ending June 30,
|
After
Tax Profit
|
2006
|
$11,000,000
|
2007
|
$16,000,000
|
2008
|
$21,000,000
|
2009
|
$29,000,000
|
· |
organization,
standing, power;
|
· |
capital
structure;
|
· |
authorization,
execution, delivery, enforceability of the stock purchase agreement;
|
· |
absence
of conflicts or violations under organizational documents, certain
agreements and applicable laws or decrees, as a result of the contemplated
transaction, receipt of all required consents and approvals;
|
· |
absence
of certain changes or events since September 30, 2004;
|
· |
litigation;
|
· |
compliance
with applicable laws;
|
· |
absence
of brokers;
|
· |
absence
of certain changes;
|
· |
liabilities;
|
· |
related
party transactions;
|
· |
licenses
and permits; and
|
· |
completeness
and truthfulness of the information and provisions in the stock purchase
agreement.
|
· |
accuracy
of the information contained in the financial statements; and absence
of
undisclosed liabilities;
|
· |
labor
relations and employee plans;
|
· |
environmental
liability;
|
· |
taxes,
tax returns and audits;
|
· |
real
and personal property and the title to and condition of
assets;
|
· |
the
absence of illegal or improper
transactions;
|
· |
the
collectibility of accounts
receivable;
|
· |
the
nature and condition of inventory;
|
· |
the
contract to which they are parties;
|
· |
intellectual
property rights;
|
· |
non-real
estate leases;
|
· |
insurance;
|
· |
the
accuracy and completeness of books and records;
and
|
· |
litigation
and certain settled litigation.
|
· |
their
acquisition of Agritech common stock being solely for their own
account;
|
· |
their
status as accredited investors;
|
· |
the
adequacy of the information they received regarding
Chardan;
|
· |
the
restricted nature of the securities that they will receive under
the stock
purchase agreement; and
|
· |
the
placement of legends on the certificates representing the securities
issued to them under the stock purchase
agreement.
|
· |
filings
with the SEC and the accuracy and completeness of the information
contained in those filings, including the financial statements and
the
lack of undisclosed liabilities;
and
|
· |
the
amount of funds contained in the trust
account.
|
· |
will
not declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of their capital stock;
|
· |
will
not pledge, sell, transfer, dispose or otherwise encumber or grant
any
rights or interests to any others in the Origin stock or the Origin
Operating Companies stock;
|
· |
will
not pledge, sell, transfer, lease dispose of or otherwise encumber
any
property of assets of any Origin Operating Company, other than in
accordance with past practice or in the normal course of
business;
|
· |
will
not issue, deliver, sell or grant any shares of its capital stock,
any
securities convertible into or exchangeable for, or any options,
warrants
or rights to acquire, any shares of
capital;
|
· |
will
not make or agree to a general wage or salary increase or enter into
any
employment contract, increase the compensation payable or to become
payable to any officer or employee of any Origin Operating Company
or
adopt or increase the benefits of any bonus, insurance, pension or
other
employee benefit plan, payment or arrangement, except for those increases
consistent with past practices, normally occurring as the result
of
regularly scheduled salary reviews and increases, and except for
increases
directly or indirectly required as a result of changes in applicable
laws;
|
· |
will
not merge or consolidate with, or acquire all or substantially all
the
assets of, or otherwise acquire, and other business operations;
|
· |
will
not make any payments outside the ordinary course of business;
|
· |
will
not make any capital expenditures, except in accordance with prudent
business and operational practices consistent with prior
practice;
|
· |
will
provide Chardan with access to information regarding the business
of
Origin and the Origin Operating
Companies;
|
· |
will
maintain in effect insurance of the types and in the amounts customarily
acquired to protect the assets and business of the Origin Operating
Companies;
|
· |
each
Origin Stockholder will protect the confidential information of Origin
and
the Origin Operating Companies that he has received in the course
of the
negotiations;
|
· |
each
Origin Stockholder will refrain from competing with Origin or the
Origin
Operating Companies;
|
· |
will
refrain from any discussions or negotiations with any other party
regarding the issuance of any capital stock or the sale or transfer
of any
portion of the business of any Origin Operating
Company;
|
· |
each
Origin Stockholder will refrain from engaging in any transaction
involving
the securities of Chardan;
|
· |
will
disclose certain material information that arises or comes to be
known
between the date of the stock purchase agreement and the date of
the
closing;
|
· |
will
use their best efforts to obtain all authorizations, consents, orders
and
approvals that may be or become necessary for their execution and
delivery
of, and the performance of their obligations pursuant to, the stock
purchase agreement;
|
· |
each
Origin Stockholder agrees that it has not acquired any rights to
and will
not use any of the intellectual property of Origin or the Origin
Operating
Companies;
|
· |
each
Origin Stockholder will pay any taxes that become due as a result
of the
issuance to them of Agritech common
stock;
|
· |
will
do all things necessary to effectuate Origin’s acquisition or control of
the Origin Operating Companies stock that Origin does not already
own;
|
· |
will
reorganize Origin as required by the stock purchase
agreement;
|
· |
will
provide to Chardan such information as is necessary regarding Origin
and
the Origin Operating Companies as is required under the rules of
the SEC
for combination proxy statements;
and
|
· |
will
provide to Chardan interim internal financial and management reports
regarding the conduct of the business of the Origin Operating
Companies.
|
· |
conduct
its business in the ordinary course, not sell or issue any capital
securities of Chardan, encumber any of the assets of Chardan or incur
any
debt out of the ordinary course, not declare or pay any dividend,
or make
any general wage increase;
|
· |
not
change its by-laws or articles;
|
· |
call
the stockholders meeting to which this proxy
relates;
|
· |
incorporate
Agritech; and
|
· |
cause
the board of Agritech, at the time of closing, to consist of nine
persons,
of which five persons will be nominated at the suggestion of the
Origin
Parties (including Dr. Han and Messrs. Yang and Yuan) and two persons
will
be Mr. Kerry Propper and one designee of his (currently, Mr. Steven
Urbach), and the remaining persons will be selected on the basis
of their
complying with listing and other legal
requirements.
|
· |
solicit,
initiate or encourage the submission of any acquisition proposal;
|
· |
enter
into any agreement with respect to any acquisition proposal; or
|
· |
participate
in any discussions or negotiations regarding, or furnish to any person
any
information with respect to, or take any other action to facilitate
any
inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any acquisition proposal.
|
· |
the
board of directors determines, in good faith that the acquisition
proposal
constitutes or is reasonably likely to lead to a superior proposal;
and
|
· |
the
board of directors determines in good faith that failure to submit
such
superior proposal to its stockholders would cause the board of directors
to violate its fiduciary duties to the stockholders under applicable
law.
|
· |
solicit,
initiate or encourage discussions regarding or the submission of
any
acquisition proposal;
|
· |
enter
into any agreement with respect to any acquisition proposal; or
|
· |
participate
in any discussions or negotiations regarding, or furnish to any person
any
information with respect to, or take any other action to facilitate
any
inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any acquisition proposal.
|
· |
obtaining
all necessary actions or non-actions, waivers, consents and approvals
from
governmental entities and making all necessary registrations and
filings,
including filings with governmental entities, if any and taking all
reasonable steps as may be necessary to obtain an approval or waiver
from,
or to avoid an action or proceeding by, any governmental entity;
|
· |
obtaining
all necessary consents, approvals or waivers from third parties;
|
· |
defending
any lawsuits or other legal proceedings, whether judicial or
administrative, challenging the stock purchase agreement or any other
agreement contemplated by the stock purchase agreement or the consummation
of the stock purchase or other transactions contemplated by the stock
purchase agreement including seeking to have any stay or temporary
restraining order entered by any court or other governmental entity
vacated or reversed; and
|
· |
executing
and delivering any additional instruments necessary to consummate
the
stock purchase or other transactions contemplated by the stock purchase
agreement and to fully carry out the purposes of the stock purchase
agreement and the transaction agreements contemplated by the stock
purchase agreement.
|
· |
any
representation or warranty made by it or contained in the stock purchase
agreement that is not qualified as to materiality becoming untrue
or
inaccurate in any respect or any representation or warranty that
is
qualified by materiality becoming untrue or inaccurate in any material
respect; or
|
· |
the
failure by it to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied
by it
under the stock purchase agreement.
|
· |
to
consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press release or other
public
statements with respect to the stock purchase and the other transactions
contemplated by the stock purchase agreement; and
|
· |
not
to issue any press release or make any public statement prior to
this
consultation, except as may be required by applicable laws or court
process.
|
· |
Agritech
will be an existing company under the laws of the British Virgin
Islands;
|
· |
Origin
shall have entered into, effective as of the closing, the employment
agreements with the key executives, Dr. Han and Messrs. Yang and
Yuan, the
forms of which are exhibits to the stock purchase agreement;
and
|
· |
disbursement
of funds held in the trust account maintained for Chardan.
|
· |
the
Origin Stockholders will have delivered the Origin
stock;
|
· |
the
stock consignment agreements and technology services agreements will
have
been executed and delivered;
|
· |
at
the closing, there will have been no material adverse change in the
assets, liabilities, financial condition or prospects of Origin,
the
Origin subsidiaries or its business from that shown or reflected
in the
financial statements of Origin at September 30, 2004 and as to be
described in the Chardan proxy statement, and between the date of
the
stock purchase agreement and the closing date, there shall not have
occurred an event which, in the reasonable opinion of Chardan would
have a
material adverse effect on Origin or the subsidiaries of
Origin;
|
· |
at
the closing, Origin and its subsidiaries, on a consolidated basis
immediately prior to closing, will have not less than US $4,000,000
in
cash assets and will have short and long term debt only to the
extent
arising in the ordinary course of business;
|
· |
the
information about Origin and its subsidiaries and its management
provided
for inclusion in the Chardan proxy statement at the time of its
distribution and at the closing, will accurately reflect the business,
Origin, the Origin subsidiaries and the Origin Stockholders, and
not
contain any untrue statement of a material fact or omission;
and
|
· |
each
of Dr. Han and Messrs. Yang and Yuan will have entered into the form
of
voting agreement which is an exhibit to the stock purchase agreement
that
provides for them to vote all of the shares of Agritech over which
they
have direct or beneficial ownership and voting authority in favor
of Kerry
Propper and one of Mr. Propper’s designees (currently Mr. Steven Urbach)
as directors of Agritech for a period of three years after the
closing.
|
· |
Chardan
must have performed all its obligations and all of Chardan’s
representations and warranties must be true and correct;
and
|
· |
the
Origin Parties must have received an opinion, dated as of the closing,
from Guantao Law Firm, counsel to the Origin
Parties.
|
· |
by
mutual written consent of Chardan and
Origin;
|
· |
by
either party if the other party amends a schedule and such amendment
or
supplement reflects a material adverse change in the condition, operations
or prospects of its business;
|
· |
by
either party if the closing has not occurred by November 15,
2005 (unless
such terminating party is in breach of any of its material covenants,
representations or warranties);
|
· |
by
either party if the other party has breached any of its covenants
or
representations and warranties in any material respect and has not
cured
its breach within 10 business days of the notice of an intent to
terminate, provided that the terminating party is itself not in
breach;
|
· |
by
Origin, if the board of directors of Chardan (or any committee thereof)
shall have failed to recommend or withdraw or modify in a manner
adverse
to Origin its approval or recommendation of the stock purchase agreement
and any of the transactions contemplated
thereby;
|
· |
by
Chardan if its board of directors shall have determined in good faith,
based upon the advice of outside legal counsel, that failure to terminate
the stock purchase agreement is reasonably likely to result in the
board
of directors breaching its fiduciary duties to stockholders by reason
of a
pending, unsolicited, bona fide written proposal for a superior
transaction; or
|
· |
by
either party if, at the Chardan stockholder meeting, the stock purchase
agreement and redomestication merger and the transactions contemplated
thereby shall fail to be approved and adopted by the affirmative
vote of
the holders of Chardan’s common stock, or 20% or more of the shares sold
in the initial public offering are presented for conversion into
the pro
rata portion of the trust account in accordance with the Chardan
certificate of incorporation.
|
· |
the
confidentiality obligations set forth in the stock purchase agreement;
and
|
· |
the
provisions described above relating to certain payments to be paid
upon
termination.
|
Consigned
Stock
|
Consigning
Owner
|
%
of Shares
Consigned |
|
Beijing
Origin
|
Han
Gengchen
|
34.4%
|
|
Yang
Yasheng
|
28.675%
|
||
Yuan
Liang
|
25.8%
|
||
Zhao
Yuping
|
3.995%
|
||
Zhang
Weidong
|
3.13%
|
||
Chen
Weicheng
|
1.96%
|
||
97.96%
|
|||
Changchun
Origin
|
Beijing
Origin
|
99.0%
|
|
Han
Gengchen
|
1.0%
|
||
100.0%
|
|||
Henan
Origin
|
Beijing
Origin
|
90.0%
|
|
Zhang
Yingli
|
4.1%
|
||
Yang
Yasheng
|
3.86%
|
||
97.96%
|
· |
Gengchen
Han as the Chairman and Chief Executive Officer,
|
· |
Yasheng
Yang as President and Chief Operating Officer,
|
· |
Liang
Yuan as Executive Vice Chairman,
and
|
· |
Dr.
Richard Propper, Vice President, Corporate
Development.
|
Provision
|
Chardan
|
Agritech
|
||
Authorized
Capital
|
21
million shares of which 20 million are shares of common stock,
$.0001 par
value per share and 1 million are shares of preferred stock, par
value
$.0001 per share
|
61
million shares of which 60 million are ordinary shares; and 1 million
are
preference shares, each with a par value of $.001 per
share
|
||
Par
Value
|
Stated
in United States dollars
Changes
in capital generally require stockholder approval
|
No
par value
Changes
in capital may be made upon resolution of members or
directors
|
||
Preferred
(Preference) Shares
|
Directors
may fix the designations, powers, preferences, rights, qualifications,
limitations and restrictions by resolution
|
Same
as Chardan, but subject to the memorandum
|
||
Registered
Shares
|
Shares
of capital stock of Chardan to be registered shares
|
Same
as Chardan
|
||
Purpose
of Corporation
|
To
engage in any lawful act not prohibited by law
|
Same
as Chardan subject to the prohibition of conducting certain business
activities in the BVI (
i.e.,
banking, insurance and local BVI businesses)
|
||
Amendment
of Certificate of Incorporation
|
Requires
stockholder vote and, except in limited circumstances, by the board
of
directors
|
Requires
vote of the members, being a person that holds shares, or as permitted
by
the IBCA 1984 by the board of directors and articles
|
||
Registered
Office
|
9
East Loockerman Street
Kent
County
Dover,
Delaware
|
P.O.
Box 173
Kingston
Chambers
Road
Town,
Tortola,
British Virgin Islands
|
Provision
|
Chardan
|
Agritech
|
||
Transfer
Agent
|
Continental
Stock Transfer & Trust Company
|
Same
as Chardan
|
||
Voting
Rights
|
Common
stock: one share, one vote on all matters before the holders
of the common
stock
Other
classes of equity may have voting rights as assigned to them
by the board
of directors or as approved by stockholders
Directors
elected by plurality, all other matters either by majority of
issued and
outstanding or majority of those present and entitled to vote
as specified
by law
|
Same
as Chardan
Directors
elected by plurality as provided in memorandum and articles;
all other
matters by a majority of those shares present and entitled to
vote
|
||
Redemption
of Equity
|
Shares
may be repurchased or otherwise acquired, provided the capital
of the
company will not be impaired by the acquisition
Company
may hold or sell treasury shares
|
Same
as Chardan
|
||
Stockholder/Member
consent
|
Permitted
as required for a vote at a meeting
|
Same
as Chardan
|
Provision
|
Chardan
|
Agritech
|
||
Notice
Requirements for Stockholder/Member Nominations and Other
Proposals
|
In
general, to bring a matter before an annual meeting or to nominate
a
candidate for director, a stockholder must give notice of the
proposed
matter or nomination not less than 60 days and not more than
90 days prior
to public disclosure of the date of annual meeting
In
the event that less than 70 days notice or prior public disclosure
of the
date of the meeting is given or made to stockholder, to be
timely, the
notice must be received by the company no later than the close
of business
on the 10
th
day following the day on which such notice of the date of the
meeting was
mailed or public disclosure was made, whichever first
occurs
|
To
bring a matter before an annual meeting or to nominate a candidate
for
director, a member must give notice to the company of not less
than 30
days nor more than 60 days.
If
the member is making a proposal on a matter or nominating a
candidate for
director and there is less than 40 days notice or prior public
disclosure
of the date is given or made to members, to be timely, must
be received no
later than the close of business on the 10th day following
the day on
which such notice of the date of the meeting was mailed or
such public
disclosure was made.
|
||
Meetings
of Stockholders/Members - Presence
|
In
person or by proxy or other appropriate electronic means
|
In
person or by proxy or by any teleconference means where persons
can hear
one another
|
||
Meeting
of Stockholder/Member - Notice
|
Not
less than 10 days or more than 60 days
|
Not
less than seven days; no maximum limit
|
||
Meeting
of Stockholders/Members - Call of Meeting
|
Regular
and annual meetings shall be called by the directors. Special
meetings may
be called only by majority of board of directors, chief executive
officer
or by a majority of the issued and outstanding capital stock
entitled to
vote
|
Meetings
may be called by the directors or by members holding 50 percent
of the
outstanding votes. The articles require an annual meeting of
the members
for the election of directors to be called by the directors
Meetings
on short notice may be called upon waiver or presence of all
the members
holding shares entitled to vote or 90% of the total number
of shares
entitled to vote agree to short
notice
|
Provision
|
Chardan
|
Agritech
|
||
Meeting
of Stockholders /Members- Place
|
Within
or without Delaware
|
Within
or outside the BVI as the directors consider necessary or
desirable
|
||
Meeting
of Stockholders/Members - Quorum
|
Majority
of the capital stock issued and outstanding and entitled
to vote at
meeting. Meeting may be adjourned for up to 30 days without
additional
notice to stockholders.
|
One-half
of the votes of the shares of each class or series entitled
to vote.
Adjournment for such time as directors determine.
|
||
Meeting
of Stockholders/Members - Record Date
|
As
fixed by the directors, no more than 60 days and no less
than 10 days
before the meeting. If not fixed, the day before notice of
meeting is
given
|
As
fixed by the directors
|
||
Directors
- Election
|
By
the stockholders as entitled by their terms, including the
holders of
common stock
|
By
the members as entitled by their terms, including the holders
of common
stock
|
||
Directors
- Term
|
Staggered
board of three classes; for terms of three years
|
Annual
term
|
||
Directors
- Removal
|
By
the stockholders for cause
|
By
resolution of the members for cause or without cause on a
vote of the
members representing 66-2/3 of the shares entitled to vote
or the
directors for any reason on a resolution signed by all the
other directors
absent from meetings for six months without leave of the
board, death or
incapacity
|
||
Directors
- Vacancy
|
May
be filled by majority of remaining directors (unless they
are the result
of the action of stockholders) and newly created vacancies
may be filled
by majority of remaining directors
|
May
be filled by members or the board of directors
|
||
Directors
- Number
|
Unless
established by certificate of incorporation, as determined
by board of
directors, but not less than one
|
Same
as Chardan
|
Provision
|
Chardan
|
Agritech
|
||
Directors
- Quorum and Vote Requirements
|
A
majority of the entire board. The affirmative vote of a
majority of
directors present at a meeting at which there is a quorum
constitutes
action by the board of directors
|
One-half
of the total number of directors, present in person or
by alternate,
except if there are only two or less directors then a quorum
will be all
the directors
|
||
Directors
- Managing Director
|
Not
applicable
|
Provision
for the board to select one or more directors to be managing
directors,
provide for special remuneration and assign such powers
as the board
determines so long as it is not a power that requires board
approval
|
||
Directors
- Powers
|
All
powers to govern the corporation not reserved to the
stockholders
|
Same
as Chardan
|
||
Directors
- Committees
|
Directors
may establish one or more committees with the authority
that the board
determines
|
Same
as Chardan
|
||
Directors
- Consent Action
|
Directors
may take action by written consent of all directors, in
addition to action
by meeting
|
By
written consent in same manner as if at a meeting in persons,
by directors
or by alternate
|
||
Director
- Alternates
|
Not
permitted
|
Directors
may, by written instrument, appoint an alternate who need
not be a
director, who may attend meetings in the absence of the
director and vote
and consent in the place of the directors
|
||
Directors
- Appoint Officers
|
Directors
appoint the officers of the corporation, subject to the
by-laws, with such
powers as they determine
|
Same
as Chardan, subject to the
memorandum
|
Provision
|
Chardan
|
Agritech
|
||
Director
- Limitation of Liability
|
Directors
liability is limited, except for (i) breach of loyalty,
(ii) act not in
good faith or which involves international misconduct or
a knowing
violation of law, (iii) willful violation of law in respect
of payment of
dividend or redeeming shares, or (iv) actions in which
director receives
improper benefit
|
Duty
to act honestly and in good faith with a view to the best
interests of the
company and exercise care, diligence and skill of a reasonably
prudent
person acting in comparable circumstances. No provisions
in the
memorandum, articles or agreement may relieve a director,
officer, or
agent from the duty to act in accordance with the memorandum
or articles
or from personal liability arising from the management
of the business or
affairs of the company.
|
||
Director
- Indemnification Insurance
|
Company
may purchase insurance in relation to any person who is
or was a director
or officer of the company
|
Same
as Chardan, extends to a liquidator of the company
|
||
Amendments
to Organizational Documents
|
Amendments
must be approved by the board of directors and by a majority
of the
outstanding stock entitled to vote on the amendment, and
if applicable, by
a majority of the outstanding stock of each class or series
entitled to
vote on the amendment as a class or series. By-laws may
be amended by the
stockholders entitled to vote at any meeting or, if so
provided by the
certificate of incorporation, by the board of directors
|
Amendments
to the memorandum and articles may be made by resolution
of the members or
by the directors
|
||
Sale
of Assets
|
The
sale of all or substantially all the assets of the company
requires
stockholder approval
|
The
sale of more than 50% of the assets of the company requires
member
approval
|
||
Dissenters
Rights
|
Provision
is made under Delaware corporate law to dissent and obtain
fair value of
shares in connection with certain corporate actions that
require
stockholder approval or consent
|
Provision
is made under the IBCA to dissent and obtain fair value
of shares in
connection with certain corporate actions that require
member approval or
consent
|
· |
stock
options;
|
· |
stock
appreciation rights;
|
· |
restricted
stock;
|
· |
deferred
stock;
|
· |
stock
reload options; and
|
· |
other
stock-based awards.
|
· |
are
intended to qualify as “incentive stock options” within the meaning of
Section 422 of the Code; or
|
· |
are
not intended to be so qualified.
|
· |
for
three months after termination or for the balance of the stock
option’s
exercise period, which ever is shorter;
or
|
· |
for
a greater or lesser period as may be specified by the compensation
committee in the grant.
|
· |
accepts
employment with any competitor of, or otherwise engages in competition
with, our business;
|
· |
solicits
any of our or our subsidiaries’ customers or employees to do business with
or render services to the person or any business with which the
person
becomes affiliated or to which the person renders services; or
|
· |
discloses
to anyone outside our company or uses any of our or our subsidiaries’
confidential information or material in violation of our policies
or any
agreement between the person and us or any of our subsidiaries,
|
· |
expressly
provided in the plan,
|
· |
expressly
provided in the grant of an award, or
|
· |
discussed
above with respect to the transferability of stock options in certain
limited exceptions,
|
· |
by
gift, for no consideration, or pursuant to a domestic relations
order, in
either case, to or for the benefit of the participant’s immediate family;
or
|
· |
to
an entity in which the participant or members of the participant’s
immediate family own more than fifty percent of the voting interest,
in
exchange for an interest in that entity.
|
· |
the
participant will recognize ordinary compensation income in the taxable
year of disposition in an amount equal to the excess, if any, of
the
lesser of the fair market value of the shares on the date of exercise
or
the amount realized on the disposition of the shares, over the exercise
price paid for the shares; and
|
· |
we
will qualify for a deduction equal to any amount recognized, subject
to
the limitation that the compensation be
reasonable.
|
· |
upon
grant of the stock option, the participant will recognize no income
provided that the exercise price was not less than the fair market
value
of our common stock on the date of
grant;
|
· |
upon
exercise of the stock option, if the shares of common stock are not
subject to a substantial risk of forfeiture, the participant will
recognize ordinary compensation income in an amount equal to the
excess,
if any, of the fair market value of the shares on the date of exercise
over the exercise price, and we will qualify for a deduction in the
same
amount, subject to the requirement that the compensation be reasonable;
and
|
· |
we
will be required to comply with applicable federal income tax withholding
requirements with respect to the amount of ordinary compensation
income
recognized by the participant.
|
Seed
|
LinAol
|
CAN
19990108.2
|
Beijing
Origin Seed Limited
|
March
1, 2003 to February 28,
2018
|
*
|
Effective
period means the period from approval of the patent until its
expiration.
|
**
|
Henan
Agricultural University and Origin share this patent relating to
a
proprietary method of producing hybrid corn seed. Both parties may
use the
method to produce seed and are not required to pay any sum to the
other.
Neither party has the right to allow a third party to use the patent.
Those provisions are embodied in the patent and not in a separate
agreement.
|
Name
of Seed
|
Applicant
|
Date
Filed
|
Date
of
Announcement |
Filing
Number
|
OS
3101
|
Beijing
Origin Seed Limited
|
January
13, 2004
|
May
1, 2004
|
20040020.7
|
OS
3102
|
Beijing
Origin Seed Limited
|
January
13, 2004
|
July
1, 2004
|
20040021.5
|
Zhongyou
85 (rice seed)
|
Beijing
Origin Seed Limited
|
August
24, 2004
|
January
1, 2005
|
20040347.8
|
OS
(silage com) 5102
|
Beijing
Origin Seed Limited
|
April
7, 2005
|
September
1, 2005
|
20050215.8
|
OS
3108
|
Beijing
Origin Seed Limited
|
April
7, 2005
|
July
1, 2005
|
20050214.X
|
OS
3202
|
Beijing
Origin Seed Limited
|
April
7, 2005
|
July
1, 2005
|
20050213.1
|
OS
3111
|
Beijing
Origin Seed Limited
|
April
7, 2005
|
July
1, 2005
|
20050212.3
|
Seed
Name
|
Percentage
of
2003
Sales
|
Percentage
of
2004
Sales
|
||
Liao
No. 1
|
49.0%
|
50.50%
|
||
OS
17
|
1.14%
|
7.44%
|
||
Liyu
16
|
-0-
|
.11%
|
||
OS
19
|
.09%
|
.57%
|
||
Liyu
26
|
-0-
|
.02%
|
||
Total
|
50.23%
|
58.64%
|
· |
To
obtain a national distribution license, the licensee must have registered
capital of at least RMB 30 million (approximately
$3,750,000);
|
· |
To
obtain a provincial license to distribute hybrid seeds, the licensee
requires registered capital of not less than RMB 5 million (approximately
$645,000); and
|
· |
To
obtain a provincial license to distribute non-hybrid seed varieties,
the
licensee requires registered capital of not less than RMB 1 million
(approximately $125,000).
|
Year
ended December 31,
|
|||||||||||||
2002
(RMB)
|
2003
(RMB)
|
2004
(RMB)
|
2004
|
||||||||||
(US
Dollars)
|
|||||||||||||
Net
cash (used in) provided by operating activities
|
55,976,315
|
(14,961,297
|
)
|
42,744,534
|
5,164,566
|
||||||||
Net
cash used in investing activities
|
(24,585,920
|
)
|
(32,961,133
|
)
|
(27,200,560
|
)
|
(3,286,480
|
)
|
|||||
Net
cash provided by financing activities
|
10,000,000
|
18,445,872
|
4,082,765
|
493,296
|
|||||||||
Net
increase(decrease) in cash and cash equivalents
|
41,390,395
|
(29,476,558
|
)
|
19,626,739
|
2,371,382
|
||||||||
Cash
and cash equivalents, beginning of year
|
37,307,578
|
78,697,973
|
49,221,415
|
5,947,129
|
|||||||||
Cash
and cash equivalents, end of year
|
78,697,973
|
49,221,415
|
68,848,154
|
8,318,511
|
Payment
Due by Period
|
||||||||||||||||||||||
Total
|
Within
1 Year |
2006
|
2007
|
2008
|
2009
|
Thereafter
|
||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
||||||||||||||||
Operating
lease commitments
|
13,078,930
|
1,252,087
|
1,138,594
|
1,152,956
|
438,761
|
418,541
|
8,677,991
|
|||||||||||||||
Other
contractual obligations
|
23,558,444
|
23,558,444
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Total
contractual obligations
|
36,637,374
|
24,810,531
|
1,138,594
|
1,152,956
|
438,761
|
418,541
|
8,677,991
|
|||||||||||||||
Equivalent
US$
|
4,426,675
|
2,997,708
|
137,570
|
139,305
|
53,013
|
50,570
|
RMB
|
US$
|
||||||
Plant
and building construction
|
16,255,074
|
1,964,003
|
|||||
Land
use rights
|
1,200,000
|
144,989
|
|||||
Equipment
|
503,370
|
60,819
|
|||||
Total
|
17,958,444
|
2,169,811
|
· |
amounts
paid to stockholders of Chardan who do not approve the stock purchase
and
elect to convert their shares of common stock into their pro-rata
share of
the trust account; and
|
· |
the
$9,750,000 ($10,000,000, less the $250,000 holdback) being paid to
Origin
and the Origin Stockholders in the stock purchase.
|
· |
Payment
of the accrued expenses of the Company and loans outstanding as
of the
date of the closing of the
transaction;
|
· |
To
support internal expansion of the Company’s operations, including
increased hiring expansion of existing facilities or the acquisition
or
construction of new facilities, expenditures to increase the geographic
markets within China in which the Company operates and expansion
of the
production and distribution networks needed to accomplish that geographic
market extension; and
|
· |
To
increase research and development to enable the Company to expand
its
product offering, including the development of additional hybrids
for
corn, cotton and rice, as well as expansion of efforts with regard
to
genetically-engineered products to position the company to enter
that
market as acceptance of those product
increases.
|
· |
Assuming
Maximum Approval: This presentation assumes that 100% of Chardan
stockholders approve the Transaction;
and
|
· |
Assuming
Minimal Approval: This presentation assumes that only 80.1% of Chardan
stockholders approve the
Transaction.
|
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
|
||||||||||||||||
ASSUMING
MAXIMUM APPROVAL
|
||||||||||||||||
DECEMBER
31, 2004
|
||||||||||||||||
Pro
Forma
|
Pro
forma
|
|||||||||||||||
Origin
|
Chardan
|
Adjustments
|
Combined
|
|||||||||||||
ASSETS
|
||||||||||||||||
Current
Assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
8,318,511
|
$
|
99,231
|
$
|
20,735,328
|
(a)
|
|
$
|
19,403,070
|
||||||
(9,750,000
|
)
|
(b)
|
|
|||||||||||||
Investments
held in trust
|
20,735,328
|
(20,735,328
|
)
|
(a)
|
|
|||||||||||
Due
from related parties
|
94,792
|
94,792
|
||||||||||||||
Advances
to suppliers
|
198,594
|
198,594
|
||||||||||||||
Inventories
|
28,492,922
|
28,492,922
|
||||||||||||||
Income
tax receivable
|
909,996
|
909,996
|
||||||||||||||
Prepaid
expenses and other current assets
|
1,240,803
|
49,532
|
1,290,335
|
|||||||||||||
Total
Current Assets
|
39,255,618
|
20,884,091
|
(9,750,000
|
)
|
50,389,709
|
|||||||||||
Land
use rights, net
|
1,365,553
|
1,365,553
|
||||||||||||||
Plant
and equipment, net
|
7,974,611
|
7,974,611
|
||||||||||||||
Equity
investment
|
1,241,419
|
1,241,419
|
||||||||||||||
Acquired
intangible assets, net
|
347,062
|
347,062
|
||||||||||||||
Deferred
income tax assets
|
50,623
|
50,623
|
||||||||||||||
Other
assets
|
74,252
|
74,252
|
||||||||||||||
Total
assets
|
$
|
50,309,138
|
$
|
20,884,091
|
$
|
(9,750,000
|
)
|
$
|
61,443,229
|
|||||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||||||||||
Current
Liabilities:
|
||||||||||||||||
Short
term borrowings
|
$
|
4,953,785
|
$
|
4,953,785
|
||||||||||||
Accounts
payable
|
2,747,727
|
$
|
243,357
|
2,991,084
|
||||||||||||
Due
to growers
|
10,071,516
|
10,071,516
|
||||||||||||||
Due
to officers and related parties
|
170,753
|
$
|
250,000
|
(b
)
|
|
420,753
|
||||||||||
Advances
from customers
|
9,506,856
|
9,506,856
|
||||||||||||||
Deferred
revenue
|
4,581,714
|
4,581,714
|
||||||||||||||
Deferred
interest
|
41,545
|
(41,545
|
)
|
(c1)
|
|
—
|
||||||||||
Income
tax payable
|
139,187
|
139,187
|
||||||||||||||
Other
payables and accrued expenses
|
813,694
|
813,694
|
||||||||||||||
Total
Current Liabilities
|
32,985,232
|
284,902
|
208,455
|
33,478,589
|
||||||||||||
Other
long-term liabilities
|
346,982
|
346,982
|
||||||||||||||
Total
Liabilities
|
33,332,214
|
284,902
|
208,455
|
33,825,571
|
||||||||||||
Common
stock subject to conversion
|
4,103,450
|
(4,103,450
|
)
|
(c1)
|
|
—
|
||||||||||
Minority
Interests
|
427,004
|
427,004
|
||||||||||||||
Shareholders’
equity (deficiency):
|
||||||||||||||||
Common
stock
|
10,000
|
490
|
(10,000
|
)
|
(d)
|
|
1,510
|
|||||||||
1,020
|
(d)
|
|
||||||||||||||
Additional
paid-in capital
|
12,082,402
|
17,163,483
|
4,103,450
|
(c1)
|
|
22,731,626
|
||||||||||
(12,082,402
|
)
|
(d)
|
|
|||||||||||||
|
1,464,693
|
(b)(d)(e)
|
|
|||||||||||||
Retained
earnings (accumulated deficit)
|
4,457,518
|
(668,234
|
)
|
41,545
|
(c1)
|
|
4,457,518
|
|||||||||
626,689
|
(e)
|
|
||||||||||||||
Total
stockholders’ equity
|
16,549,920
|
16,495,739
|
(5,855,005
|
)
|
27,190,654
|
|||||||||||
Total
liabilities and stockholders’ equity
|
$
|
50,309,138
|
$
|
20,884,091
|
$
|
(9,750,000
|
)
|
$
|
61,443,229
|
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
|
||||||||||||||||
ASSUMING
MINIMUM APPROVAL
|
||||||||||||||||
DECEMBER
31, 2004
|
||||||||||||||||
Pro
Forma
|
Pro
forma
|
|||||||||||||||
Origin
|
Chardan
|
Adjustments
|
Combined
|
|||||||||||||
ASSETS
|
||||||||||||||||
Current
Assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
8,318,511
|
$
|
99,231
|
$
|
20,735,328
|
(a
)
|
|
$
|
15,258,075
|
||||||
(9,750,000
|
)
|
(b)
|
|
|||||||||||||
(4,144,995
|
)
|
(c2)
|
|
|||||||||||||
Investments
held in trust
|
20,735,328
|
(20,735,328
|
)
|
(a)
|
|
—
|
||||||||||
Due
from related parties
|
94,792
|
94,792
|
||||||||||||||
Advances
to suppliers
|
198,594
|
198,594
|
||||||||||||||
Inventories
|
28,492,922
|
28,492,922
|
||||||||||||||
Income
tax receivable
|
909,996
|
909,996
|
||||||||||||||
Prepaid
expenses and other current assets
|
1,240,803
|
49,532
|
1,290,335
|
|||||||||||||
Total
Current Assets
|
39,255,618
|
20,884,091
|
(13,894,995
|
)
|
46,244,714
|
|||||||||||
Land
use rights, net
|
1,365,553
|
1,365,553
|
||||||||||||||
Plant
and equipment, net
|
7,974,611
|
7,974,611
|
||||||||||||||
Equity
investment
|
1,241,419
|
1,241,419
|
||||||||||||||
Acquired
intangible assets, net
|
347,062
|
347,062
|
||||||||||||||
Deferred
income tax assets
|
50,623
|
50,623
|
||||||||||||||
Other
assets
|
74,252
|
74,252
|
||||||||||||||
Total
assets
|
$
|
50,309,138
|
$
|
20,884,091
|
$
|
(13,894,995
|
)
|
$
|
57,298,234
|
|||||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||||||||||
Current
Liabilities:
|
||||||||||||||||
Short
term borrowings
|
$
|
4,953,785
|
$
|
4,953,785
|
||||||||||||
Accounts
payable
|
2,747,727
|
$
|
243,357
|
2,991,084
|
||||||||||||
Due
to growers
|
10,071,516
|
10,071,516
|
||||||||||||||
Due
to officers and related parties
|
170,753
|
$
|
250,000
|
(b)
|
|
420,753
|
||||||||||
Advances
from customers
|
9,506,856
|
9,506,856
|
||||||||||||||
Deferred
revenue
|
4,581,714
|
4,581,714
|
||||||||||||||
Deferred
interest
|
41,545
|
(41,545
|
)
|
(c2)
|
|
—
|
||||||||||
Income
tax payable
|
139,187
|
139,187
|
||||||||||||||
Other
payables and accrued expenses
|
813,694
|
813,694
|
||||||||||||||
Total
Current Liabilities
|
32,985,232
|
284,902
|
208,455
|
33,478,589
|
||||||||||||
Other
long-term liabilities
|
346,982
|
346,982
|
||||||||||||||
Total
Liabilities
|
33,332,214
|
284,902
|
208,455
|
33,825,571
|
||||||||||||
Common
stock subject to conversion
|
4,103,450
|
(4,103,450
|
)
|
(c2)
|
|
—
|
||||||||||
Minority
Interests
|
427,004
|
427,004
|
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Continued)
|
|||||||||||||||||||||||||
ASSUMING
MINIMUM APPROVAL
|
|||||||||||||||||||||||||
DECEMBER
31, 2004
|
Origin
|
Chardan
|
Pro
Forma
Adjustments
|
Pro
forma
Combined
|
|||||||||||||
Shareholders’
equity (deficiency):
|
||||||||||||||||
Common
stock
|
10,000
|
490
|
(10,000
|
)
|
(d)
|
|
1,510
|
|||||||||
1,020
|
(d)
|
|
||||||||||||||
Additional
paid-in capital
|
12,082,402
|
17,163,483
|
(12,082,042
|
)
|
(d)
|
|
18,586,631
|
|||||||||
1,422,788
|
(b)(d)(e)
|
|
||||||||||||||
Retained
earnings (accumulated deficit)
|
4,457,518
|
(668,234
|
)
|
668,234
|
(e)
|
|
4,457,518
|
|||||||||
Total
stockholders’ equity
|
16,549,920
|
16,495,739
|
(10,000,000
|
)
|
23,045,659
|
|||||||||||
Total
liabilities and stockholders’ equity
|
$
|
50,309,138
|
$
|
20,884,091
|
$
|
(13,894,995
|
)
|
$
|
57,298,234
|
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
ASSUMING
MAXIMUM APPROVAL
|
||||||||||||||||
FOR
THE YEAR ENDED DECEMBER 31, 2004
|
||||||||||||||||
Pro
Forma
|
Pro
forma
|
|||||||||||||||
Origin
|
Chardan
|
Adjustments
|
Combined
|
|||||||||||||
Revenues
|
$
|
36,430,799
|
$
|
36,430,799
|
||||||||||||
Cost
of revenues
|
21,544,457
|
21,544,457
|
||||||||||||||
Gross
Profit
|
14,886,342
|
14,886,342
|
||||||||||||||
Operating
expenses
|
||||||||||||||||
Selling
and marketing expenses
|
2,463,576
|
2,463,576
|
||||||||||||||
General
and administrative expenses
|
2,917,851
|
$
|
834,182
|
3,752,033
|
||||||||||||
Research
and development expenses
|
818,416
|
818,416
|
||||||||||||||
Total
operating expenses
|
6,199,843
|
834,182
|
7,034,025
|
|||||||||||||
Income
from operations
|
8,686,499
|
(834,182
|
)
|
7,852,317
|
||||||||||||
Interest
expense
|
(100,425
|
)
|
(100,425
|
)
|
||||||||||||
Interest
income
|
44,948
|
166,483
|
$
|
41,545
|
(c1)
|
|
252,976
|
|||||||||
Equity
in earnings of associated company
|
232,538
|
232,538
|
||||||||||||||
Other
income
|
18,017
|
18,017
|
||||||||||||||
Income
before income taxes and minority
|
||||||||||||||||
Interests
|
8,881,577
|
(667,699
|
)
|
41,545
|
8,255,423
|
|||||||||||
Income
taxes
|
930,162
|
930,162
|
||||||||||||||
Income
before minority interests
|
7,951,415
|
(667,699
|
)
|
41,545
|
7,325,261
|
|||||||||||
Minority
interests
|
(42,339
|
)
|
(42,339
|
)
|
||||||||||||
Net
income (loss)
|
$
|
7,909,076
|
$
|
(667,699
|
)
|
$
|
(41,545
|
)
|
$
|
7,282,922
|
||||||
Net
income per share -
primary
and diluted
|
$
|
790.91
|
$
|
(0.17
|
)
|
(f)
|
$
|
0.51
|
UNAUDITED
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|||||||||||||
ASSUMING
MINIMUM APPROVAL
|
|||||||||||||
FOR
THE YEAR ENDED DECEMBER 31, 2004
|
|||||||||||||
Pro
Forma
|
Pro
forma
|
||||||||||||
Origin
|
Chardan
|
Adjustments
|
Combined
|
||||||||||
Revenues
|
$
|
36,430,799
|
$
|
36,430,799
|
|||||||||
Cost
of revenues
|
21,544,457
|
21,544,457
|
|||||||||||
Gross
Profit
|
14,886,342
|
14,886,342
|
|||||||||||
Operating
expenses
|
|||||||||||||
Selling
and marketing expenses
|
2,463,576
|
2,463,576
|
|||||||||||
General
and administrative expenses
|
2,917,851
|
$
|
834,182
|
3,752,033
|
|||||||||
Research
and development expenses
|
818,416
|
818,416
|
|||||||||||
Total
operating expenses
|
6,199,843
|
834,182
|
7,034,025
|
||||||||||
Income
from operations
|
8,686,499
|
(834,182
|
)
|
7,852,317
|
|||||||||
Interest
expense
|
(100,425
|
)
|
(100,425
|
)
|
|||||||||
Interest
income
|
44,948
|
166,483
|
211,431
|
||||||||||
Equity
in earnings of associated company
|
232,538
|
232,538
|
|||||||||||
Other
income
|
18,017
|
18,017
|
|||||||||||
Income
before income taxes and minority
|
|||||||||||||
Interests
|
8,881,577
|
(667,699
|
)
|
—
|
8,213,878
|
||||||||
Income
taxes
|
930,162
|
930,162
|
|||||||||||
Income
before minority interests
|
7,951,415
|
(667,699
|
)
|
—
|
7,283,716
|
||||||||
Minority
interests
|
(42,339
|
)
|
(42,339
|
)
|
|||||||||
Net
income (loss)
|
$
|
7,909,076
|
$
|
(667,699
|
)
|
$
|
—
|
$
|
7,241,377
|
||||
Net
income per share -
primary
and diluted
|
$
|
790.91
|
$
|
(0.17
|
)
|
(f)
|
$
|
0.53
|
(a)
|
to
record the release of funds held in trust by Chardan
|
(b)
|
to
record the payment of the $10,000,000 initial cash payment, net
of
$250,000 hold back to secure indemnification
obligations
|
(c1)
|
assuming
maximum approval, to reclassify common stock held in trust to permanent
equity and to record related deferred interest as
income
|
(c2)
|
assuming
minimum approval, to record refund of funds to dissenting
stockholders
|
(d)
|
to
record the issuance of 10,000,000 shares of Chardan common stock
for all
the shares of Origin and 200,000 shares of Chardan common stock
to Best of
the Best in connection with the
transaction
|
(e)
|
to
eliminate the accumulated deficit (as adjusted when assuming
maximum
approval) of Chardan as Origin will be the continuing entity
for
accounting purposes
|
(f)
|
Pro
forma net income per share was calculated by dividing pro forma
net income
by the weighted average number of shares outstanding as
follows:
|
Year
ended December 31, 2004
|
|||||||
Assuming
Maximum Approval
(100%)
|
Assuming
Minimum Approval
(80%)
|
||||||
Shares
issued to the shareholders of Origin in the Transaction
|
10,000,000
|
10,000,000
|
|||||
Shares
issued to Best of the Best in connection with the
Transaction
|
200,000
|
200,000
|
|||||
Chardan
weighted average shares
|
4,039,000
|
3,409,364
|
|||||
14,239,000
|
13,609,364
|
Name
|
Age
|
Position
|
|
Gengchen
Han
|
49
|
Chairman
of the Board and Chief Executive Officer
|
|
Yasheng
Yang
|
41
|
Director
and President, Treasurer and Chief Operating
Officer
|
|
Liang
Yuan
|
47
|
Director
and Executive Vice Chairman
|
|
Bailiang
Zhang
|
63
|
Director
|
|
Da
Fang Huang
|
63
|
Director
|
|
Kerry
S. Propper
|
30
|
Director
|
|
Steven
Urbach
|
29
|
Director
|
|
Michael
D. Chermak
|
45
|
Director
|
|
Remo
Richli
|
42
|
Director
|
|
|
Richard
D. Propper, M.D.
|
58
|
Vice
President for Corporate Development
|
Annual
Compensation
|
|||||||
Name
|
Year
|
Salary
($
)
|
Bonus
($)
|
||||
Gengchen
Han
|
2002
2003
2004
|
50,051
52,920
—
|
0
66,672
—
|
||||
Liang
Yuan
|
2002
2003
2004
|
21,140
18,663
—
|
0
50,004
—
|
||||
Yasheng
Yang
|
2002
2003
2004
|
33,739
36,612
—
|
0
55,576
—
|
Name
|
Number
of
Shares
|
Relationship
to Us
|
|
Dr.
Richard D. Propper
|
244,125
|
Chairman
of the Board
|
|
Jiangnan
Huang
|
134,167
|
Director,
Chief Executive Officer
|
|
Zhang
Li
|
134,167
|
Director,
Chief Financial Officer
|
|
Kerry
S. Propper
|
177,042
|
Director,
Executive Vice President
|
|
Daniel
P. Beharry
|
83,417
|
Shareholder
|
|
Steven
Urbach
|
72,917
|
Shareholder
|
|
Anthony
D. Errico, Jr.
|
23,333
|
Shareholder
|
|
Michael
Urbach
|
5,832
|
Shareholder
|
RMB
2003
|
US$
2004
|
||||||
Yang
Yasheng
|
300,000
|
$
|
39,174
|
||||
Zhao
Yuping
|
200,000
|
$
|
24,573
|
||||
Han
Gengchen
|
—
|
$
|
3,512
|
||||
Yuan
Liang
|
—
|
$
|
2,633
|
||||
Zhang
Weidong
|
—
|
$
|
319
|
||||
Chen
WieQiang
|
—
|
$
|
200
|
||||
500,000
|
$
|
70,411
|
Name
and Address
of
Beneficial Owner(1)
|
Shares
of
Chardan Common Stock |
Approximate
Percentage
of
Outstanding
Common
Stock
|
Richard
D. Propper, M.D.(2)
|
244,125
|
5.0%
|
Sapling,
LLC(3)
|
480,000
|
9.8%
|
Barry
Rubenstein(4)
|
250,000
|
5.1%
|
Jack
Silver(5)
|
250,000
|
5.1%
|
First
New York Securities LLC(6)
|
94,950
|
1.9%
|
Judy
Finger(6)
|
222,325
|
4.5%
|
Douglas
Topkes(6)
|
222,325
|
4.5%
|
Haystack
Capital L.P.(6)
|
116,200
|
2.4%
|
Jeffrey
L. Feinberg(7)
|
716,400
|
14.6%
|
(1)
|
Beneficial
ownership has been determined in accordance with Rule 13d-3
under the
Securities Exchange Act of 1934. Unless otherwise noted, we
believe that
all persons named in the table have sole voting and investment
power with
respect to all shares of our common stock beneficially owned
by them.
|
(2)
|
The
business address of Dr. Propper is 625 Broadway, Suite 1111,
San Diego,
California 92101. Does not include 271,250 shares of common
stock issuable
upon exercise of warrants that are not currently exercisable
and will not
become exercisable within the next 60 days.
|
(3)
|
The
business address of Sapling, LLC is 535 Fifth Avenue, 31st
Floor, New
York, New York 10017. Fir Tree Value Master Fund, LP, a Cayman
Islands
exempted limited partnership, is the sole member of Sapling,
LLC and Fir
Tree, Inc., a New York corporation, is the manager of Sapling,
LLC. The
foregoing information is derived from a Schedule 13G filed
by such entity
with the Securities and Exchange Commission on December 23,
2004. Mr.
Jeffrey Tannenbaum has dispositive and voting authority of
the shares of
common stock held by Sapling, LLC.
|
(4)
|
The
business address of Woodland Partners, Barry Rubenstein and
Marilyn
Rubenstein is 68 Wheatley Road, Brookville, New York 11545.
Mr. Rubenstein
has sole power to vote and dispose of 130,000 shares of common
stock and
shared voting and dispositive authority for 70,000 shares of
common stock
with his spouse, Marilyn Rubenstein, held through Woodland
Partners of
which they are general partners. The amounts reported above
do not include
120,000 shares underlying warrants held by Woodland Partners
and 160,000
shares underlying warrants held by Barry Rubenstein Rollover
IRA Account,
none of which are currently exercisable and which will not
become
exercisable within the next 60 days. The information is derived
from a
Schedule 13G filed by the above persons with the SEC on February
8,
2005.
|
(5)
|
The
business address of Jack Silver is c/o Sherleigh Associates
LLC (d/b/a
Star Capital), 660 Madison Avenue, New York, New York 10021.
Does not
include 500,000 shares of common stock issuable upon exercise
of warrants
held by Mr. Mr. Silver which are not currently exercisable
and which will
not become exercisable within the next 60 days. The foregoing
information
was derived from a Schedule 13G filed with the SEC on March
26,
2004.
|
(6)
|
The
business address of First New York Securities L.L.C., Ms. Judy
Finger, Mr.
Douglas Topkes and Haystack Capital L.P. is 850 Third Avenue,
17th Floor,
New York, New York 10022. Ms. Finder and Mr. Topkes are employed
by and
trade securities for the proprietary account of First New York
Securities
and are managing members of Haystack Capital L.L.C., which
is the general
partner of Haystack Capital L.P., a hedge fund. First New York
Securities
LLC has sole power to vote and dispose of 94,950 shares and
Haystack
Capital LP has sole power to vote and dispose of 116,200 shares.
Each of
Judy Finger and Douglas Topkis have shared power to vote 174,850
shares
and each of Judy Finger and Douglas Topkis have shared power
to dispose of
222,325 shares. The amounts reported above do not include 168,000
shares
underlying warrants which are not currently exercisable and
which will not
become exercisable within the next 60 days. The information
is derived
from a Schedule 13G filed by the above persons with the SEC
on February 8,
2005.
|
(7)
|
The
securities reported as held by Mr. Feinberg represent shares
of common
stock and are held by (i) a separately managed account
managed by Jeffrey
L. Feinberg, and (ii) JLF Partners I, L.P., JLF Partners
II, L.P. and JLF
Offshore Fund, Ltd., to which JLF Asset Management, L.L.C.
serves as the
management company and/or investment manager. Jeffrey L.
Feinberg is the
managing member of JLF Asset Management, L.L.C. The address
is 2775 Via de
la Valle, Suite 204, Del Mar, California 92014. The amounts
reported above
do not include 910,100 shares underlying warrants which
are not currently
exercisable and which will not become exercisable within
the next 60 days.
The information is derived from a Schedule 13G filed by
the above persons
with the SEC on March 23, 2005 and Form 4 filed on September
13,
2005.
|
· |
each
director and executive officer; and
|
· |
all
directors and officers as a group.
|
Name(1)
|
Shares
of
Chardan Common Stock |
Approximate
Percentage
of
Outstanding
Common
Stock(2)
|
Richard
D. Propper, M.D.
Chairman
of the Board
|
244,125
|
5.0%
|
Kerry
Propper
Executive
Vice President and Director
|
177,042
|
3.6%
|
Jiangnan
Huang
Chief
Executive Officer and Director
|
134,167
|
2.7%
|
Zhang
Li
Chief
Financial Officer and Director
|
134,167
|
2.7%
|
Michael
D. Chermak
Director
|
-0-
|
-0-
|
Directors
and officers as a group (five persons)
|
689,501
|
14.1%
|
· |
each
director and executive officer; and
|
· |
all
directors and officers as a group.
|
Name
|
Shares
of
Chardan Common Stock |
Approximate
Percentage
of
Outstanding
Common
Stock(*)
|
||
Gengchen
Han(1)
Chairman
of the Board and Chief Executive Officer
|
3,336,400
|
22.0%
|
||
Yasheng
Yang(1)
President,
Treasurer and Chief Operating Officer and Director
|
1,946,550
|
12.9%
|
||
Name
|
Shares
of
Chardan Common Stock |
Approximate
Percentage
of
Outstanding
Common
Stock(*)
|
Liang
Yuan(1)
Executive
Vice Chairman and Director
|
3,336,400
|
22.0%
|
||
Bailiang
Zhang(1)
Director
|
-0-
|
-0-
|
||
Da
Fang Huang(1)
Director
|
-0-
|
-0-
|
||
Kerry
Proper(2)
Director
|
177,042
|
1.2%
|
||
Steven
Urbach(2)
Director
|
72,917
|
0.5%
|
||
Michael
D. Chermak(2)
Director
|
-0-
|
-0-
|
||
Remo
Richli(2)
Director
|
-0-
|
-0-
|
||
Richard
D. Propper, M.D.(2)(3)
Vice
President for Corporate Development
|
515,375
|
3.4%
|
||
Directors
and officers as a group (10 persons)(3)
|
9,384,684
|
61.1%
|
* |
Beneficial
ownership and percentage has been determined in accordance with
Rule 13d-3
under the Securities Exchange Act of 1934.
|
(1) |
Unless
otherwise indicated, the business address of each of the individuals
is
c/o E201 Zhongguancun Development Building, 12 Shangdi Xinxi Lu,
Haidian
District, Beijing, 1000085.
|
(2) |
Unless
otherwise indicated, the business address of each of the individuals
is
c/o 625 Broadway, Suite 1111, San Diego, CA 92101.
|
(3) |
I
nclude
271,250 shares of common stock issuable upon exercise of publicly
traded
common stock purchase warrants that are exercisable upon consummation
of
the acquisition of
Origin.
|
Over-the-Counter
Bulletin Board
|
|||||||||||
Chardan
Common
Stock
|
Chardan
Warrants
|
Chardan
Units
|
|||||||||
High
|
Low
|
High
|
Low
|
High
|
Low
|
||||||
2004
First Quarter
|
N/A
|
N/A
|
N/A
|
N/A
|
$6.25
|
$5.99
|
|||||
2004
Second Quarter
|
$5.00
|
$4.65
|
$1.05
|
$0.64
|
$6.95
|
$6.03
|
|||||
2004
Third Quarter
|
$4.94
|
$4.75
|
$0.85
|
|
$0.61
|
$6.80
|
$5.70
|
||||
2004
Fourth Quarter
|
$6.65
|
$4.85
|
$2.03
|
$0.62
|
$10.60
|
$6.00
|
|||||
2005
First Quarter
|
$8.12
|
$6.20
|
$3.21
|
$1.60
|
$14.35
|
$9.30
|
|||||
2005
Second Quarter
|
$9.10
|
$7.35
|
$3.35
|
$2.00
|
$15.50
|
$12.25
|
· |
the
completion of the stock purchase; or
|
· |
March
16, 2005.
|
· |
in
whole and not in part;
|
· |
at
a price of $.01 per warrant at any time after the warrants become
exercisable;
|
· |
upon
not less than 30 days’ prior written notice of redemption to each
warrantholder; and
|
· |
if,
and only if, the reported last sale price of the common stock equals
or
exceeds $8.50 per share, for any 20 trading days within a 30 trading
day
period ending on the third business day prior to the notice of redemption
to warrantholders.
|
At
December 31,
|
|||||||||||||
2002
|
2003
|
2004
|
2004
|
||||||||||
Assets
|
RMB
|
RMB
|
RMB
|
US$
|
|||||||||
Current
assets:
|
|||||||||||||
Cash
and cash equivalents
|
78,697,973
|
49,221,415
|
68,848,154
|
$
|
8,318,511
|
||||||||
Accounts
receivable, net of allowance of
|
|||||||||||||
RMB50,850,
nil, nil for
|
|||||||||||||
2002,
2003 and 2004 respectively
|
5,274,006
|
-
|
-
|
-
|
|||||||||
Due
from related parties
|
420,000
|
520,000
|
784,547
|
94,792
|
|||||||||
Advances
to suppliers
|
1,810,529
|
7,371,122
|
1,643,666
|
198,594
|
|||||||||
Inventories
|
114,903,721
|
170,887,988
|
235,821,671
|
28,492,922
|
|||||||||
Income
tax receivable
|
9,795,564
|
1,449,676
|
7,531,581
|
909,996
|
|||||||||
Prepaid
expenses and other current assets
|
7,038,563
|
8,504,254
|
10,269,502
|
1,240,803
|
|||||||||
Total
current assets
|
217,940,356
|
237,954,455
|
324,899,121
|
39,255,618
|
|||||||||
Land
use rights, net
|
5,177,677
|
10,988,736
|
11,301,997
|
1,365,553
|
|||||||||
Plant
and equipment, net
|
31,652,831
|
55,400,693
|
66,001,864
|
7,974,611
|
|||||||||
Long-term
investment
|
-
|
-
|
10,274,604
|
1,241,419
|
|||||||||
Acquired
intangible assets, net
|
570,319
|
237,956
|
2,872,463
|
347,062
|
|||||||||
Deferred
income tax assets
|
1,573,084
|
2,142,148
|
418,981
|
50,623
|
|||||||||
Other
assets
|
473,261
|
532,771
|
614,550
|
74,252
|
|||||||||
Total
assets
|
257,387,528
|
307,256,759
|
416,383,580
|
$
|
50,309,138
|
||||||||
Liabilities
and shareholders’ equity
|
|||||||||||||
Current
liabilities:
|
|||||||||||||
Short-term
borrowings
|
15,000,000
|
35,000,000
|
41,000,000
|
$
|
4,953,785
|
||||||||
Accounts
payable
|
12,069,243
|
14,474,266
|
22,741,562
|
2,747,727
|
|||||||||
Due
to growers
|
42,552,299
|
35,411,109
|
83,356,902
|
10,071,516
|
|||||||||
Due
to related parties
|
-
|
-
|
1,413,234
|
170,753
|
|||||||||
Advances
from customers
|
57,285,612
|
73,419,263
|
78,683,497
|
9,506,856
|
|||||||||
Deferred
revenues
|
74,764,068
|
65,295,950
|
37,920,553
|
4,581,714
|
|||||||||
Income
tax payable
|
-
|
-
|
1,151,985
|
139,187
|
|||||||||
Other
payables and accrued expenses
|
3,487,187
|
4,167,510
|
6,734,536
|
813,694
|
|||||||||
Total
current liabilities
|
205,158,409
|
227,768,098
|
273,002,269
|
32,985,232
|
|||||||||
Other
long-term liabilities
|
2,871,801
|
2,871,801
|
2,871,801
|
346,982
|
|||||||||
Minority
interests
|
3,271,218
|
3,183,679
|
3,534,095
|
427,004
|
|||||||||
Commitments
and contingencies (Note 16)
|
|||||||||||||
Shareholders’
equity:
|
|||||||||||||
Common
shares (nil for 2002 and 2003;
|
|||||||||||||
US$
1 par value; 10,000 shares
|
|||||||||||||
authorized,
issued and outstanding in 2004)
|
-
|
-
|
82,765
|
10,000
|
|||||||||
Additional
paid-in capital
|
3,671,500
|
100,000,000
|
100,000,000
|
12,082,402
|
|||||||||
Retained
earnings (accumulated deficit)
|
42,414,600
|
(26,566,819
|
)
|
36,892,650
|
4,457,518
|
||||||||
Total
stockholders’ equity
|
46,086,100
|
73,433,181
|
136,975,415
|
16,549,920
|
|||||||||
Total
liabilities and stockholders’ equity
|
257,387,528
|
307,256,759
|
416,383,580
|
$
|
50,309,138
|
Year
Ended December 31,
|
|||||||||||||
2002
|
2003
|
2004
|
2004
|
||||||||||
RMB
|
RMB
|
RMB
|
US$
|
||||||||||
Revenues
|
98,717,316
|
191,645,454
|
301,519,504
|
$
|
36,430,799
|
||||||||
Cost
of revenues
|
(46,006,510
|
)
|
(118,976,611
|
)
|
(178,312,702
|
)
|
(21,544,457
|
)
|
|||||
Gross
profit
|
52,710,806
|
72,668,843
|
123,206,802
|
14,886,342
|
|||||||||
Operating
expenses:
|
|||||||||||||
Selling
and marketing
|
(6,480,427
|
)
|
(13,310,899
|
)
|
(20,389,786
|
)
|
(2,463,576
|
)
|
|||||
General
and administrative
|
(9,641,490
|
)
|
(18,947,787
|
)
|
(24,149,592
|
)
|
(2,917,851
|
)
|
|||||
Research
and development
|
(5,371,954
|
)
|
(5,287,964
|
)
|
(6,773,621
|
)
|
(818,416
|
)
|
|||||
Total
operating expenses
|
(21,493,871
|
)
|
(37,546,650
|
)
|
(51,312,999
|
)
|
(6,199,843
|
)
|
|||||
Income
from operations
|
31,216,935
|
35,122,193
|
71,893,802
|
8,686,499
|
|||||||||
Interest
expense
|
(416,934
|
)
|
(483,314
|
)
|
(831,166
|
)
|
(100,425
|
)
|
|||||
Equity
in earning of associated company
|
-
|
-
|
1,924,604
|
232,538
|
|||||||||
Interest
income
|
440,254
|
845,448
|
372,010
|
44,948
|
|||||||||
Other
income
|
2,265,862
|
1,137,140
|
149,119
|
18,017
|
|||||||||
Provision
for litigation
|
(2,871,801
|
)
|
-
|
-
|
-
|
||||||||
Income
before income taxes and minority
|
|||||||||||||
interests
|
30,634,316
|
36,621,467
|
73,508,369
|
8,881,577
|
|||||||||
Income
taxes
|
(1,498,312
|
)
|
(7,807,797
|
)
|
(7,698,484
|
)
|
(930,162
|
)
|
|||||
Income
before minority interests
|
29,136,004
|
28,813,670
|
65,809,885
|
7,951,415
|
|||||||||
Minority
interests
|
(2,574,818
|
)
|
137,539
|
(350,416
|
)
|
(42,339
|
)
|
||||||
Net
income
|
26,561,186
|
28,951,209
|
65,459,469
|
$
|
7,909,076
|
||||||||
Net
Income per share:
|
|||||||||||||
Basic
and diluted
|
RMB 2,656.12
|
RMB
2,895.12
|
RMB
6,545.95
|
$
|
US
790.91
|
||||||||
Shares
used in computation:
|
|||||||||||||
Basic
and diluted
|
10,000
|
10,000
|
10,000
|
10,000
|
|
Retained
|
|||||||||||||||
|
|
Additional
|
earnings
|
Total
|
||||||||||||
Common
shares
|
paid-in
|
(accumulated
|
shareholders’
|
|||||||||||||
Shares
|
Amount
|
capital
|
deficit)
|
equity
|
||||||||||||
|
(RMB)
|
(RMB)
|
(RMB)
|
(RMB)
|
||||||||||||
Balance
as of January 1, 2001
|
-
|
-
|
3,671,500
|
7,925,167
|
11,596,667
|
|||||||||||
Net
income
|
-
|
-
|
-
|
8,115,010
|
8,115,010
|
|||||||||||
Balance
as of December 31, 2001
|
-
|
-
|
3,671,500
|
16,040,177
|
19,711,677
|
|||||||||||
Capital
contribution to minority interest
|
-
|
-
|
-
|
(186,763
|
)
|
(186,763
|
)
|
|||||||||
Net
income
|
-
|
-
|
-
|
26,561,186
|
26,561,186
|
|||||||||||
Balance
as of December 31, 2002
|
-
|
-
|
3,671,500
|
42,414,600
|
46,086,100
|
|||||||||||
Net
income
|
-
|
-
|
-
|
28,951,209
|
28,951,209
|
|||||||||||
Capital
restructuring
|
-
|
-
|
96,328,500
|
|
(96,328,500
|
)
|
-
|
|||||||||
Cash
dividend
|
-
|
-
|
-
|
(1,604,128
|
)
|
(1,604,128
|
)
|
|||||||||
Balance
as of December 31, 2003
|
-
|
-
|
100,000,000
|
(26,566,819
|
)
|
73,433,181
|
||||||||||
Net
income
|
-
|
-
|
-
|
65,459,469
|
65,459,469
|
|||||||||||
Capital
contribution
|
10,000
|
82,765
|
-
|
-
|
82,765
|
|||||||||||
Cash
dividend
|
-
|
-
|
-
|
(2,000,000
|
)
|
(2,000,000
|
)
|
|||||||||
Balance
as of December 31, 2004
|
10,000
|
82,765
|
100,000,000
|
36,892,650
|
136,975,415
|
|||||||||||
In
USD
|
10,000
|
$
|
10,000
|
$
|
12,082,402
|
$
|
4,457,518
|
$
|
16,549,920
|
Year
Ended December 31,
|
|||||||||||||
2002
|
2003
|
2004
|
2004
|
||||||||||
Operating
activities:
|
RMB
|
RMB
|
RMB
|
US$
|
|||||||||
Net
income
|
26,561,186
|
28,951,209
|
65,459,469
|
$
|
7,909,076
|
||||||||
Adjustments
to reconcile net income to net
|
|||||||||||||
cash
(used in) provided by operating activities:
|
|||||||||||||
Depreciation
and amortization
|
1,555,976
|
3,260,788
|
5,225,135
|
631,322
|
|||||||||
Loss
on disposal of plant and equipment
|
-
|
473,787
|
76,486
|
9,241
|
|||||||||
Bad
debt provision
|
30,228
|
(50,850
|
)
|
-
|
-
|
||||||||
Minority
interests
|
2,574,818
|
(137,539
|
)
|
350,416
|
42,339
|
||||||||
Equity
in earnings of associated company
|
-
|
-
|
(1,924,604
|
)
|
(232,538
|
)
|
|||||||
Changes
in operating assets and liabilities:
|
|||||||||||||
Accounts
receivable
|
(5,272,000
|
)
|
5,324,856
|
-
|
-
|
||||||||
Due
from related parties
|
(400,000
|
)
|
(100,000
|
)
|
(264,547
|
)
|
(31,964
|
)
|
|||||
Advances
to suppliers
|
963,469
|
(5,560,593
|
)
|
5,727,456
|
692,014
|
||||||||
Inventories
|
(76,787,563
|
)
|
(55,984,267
|
)
|
(64,933,683
|
)
|
(7,845,549
|
)
|
|||||
Income
tax receivable
|
(9,062,281
|
)
|
8,345,888
|
(6,081,905
|
)
|
(734,840
|
)
|
||||||
Prepaid
expenses and other current assets
|
(3,476,476
|
)
|
(1,465,691
|
)
|
(1,765,248
|
)
|
(213,284
|
)
|
|||||
Deferred
tax assets
|
(1,161,113
|
)
|
(569,064
|
)
|
1,723,167
|
208,200
|
|||||||
Other
assets
|
(367,396
|
)
|
(59,510
|
)
|
(81,779
|
)
|
(9,881
|
)
|
|||||
Accounts
payable
|
11,061,592
|
2,405,023
|
8,267,296
|
998,888
|
|||||||||
Due
to growers
|
35,777,069
|
(7,141,190
|
)
|
47,945,793
|
5,793,003
|
||||||||
Due
to related parties
|
-
|
-
|
1,413,234
|
170,753
|
|||||||||
Advances
from customers
|
2,883,343
|
16,133,651
|
5,264,234
|
636,046
|
|||||||||
Deferred
revenues
|
69,979,599
|
(9,468,118
|
)
|
(27,375,397
|
)
|
(3,307,606
|
)
|
||||||
Income
tax payable
|
-
|
-
|
1,151,985
|
139,187
|
|||||||||
Other
payables and accrued expenses
|
(1,755,937
|
)
|
680,323
|
2,567,026
|
310,159
|
||||||||
Other
long-term liabilities
|
2,871,801
|
-
|
-
|
-
|
|||||||||
Net
cash (used in) provided by operating activities
|
55,976,315
|
(14,961,297
|
)
|
42,744,534
|
5,164,566
|
||||||||
Investing
activities:
|
|||||||||||||
Purchase
of plant and equipment
|
(20,011,477
|
)
|
(26,995,374
|
)
|
(15,469,658
|
)
|
(1,869,106
|
)
|
|||||
Purchase
of land use rights
|
(4,574,443
|
)
|
(5,956,759
|
)
|
(535,810
|
)
|
(64,739
|
)
|
|||||
Acquisition
of cost method investment
|
-
|
-
|
(8,320,000
|
)
|
(1,005,256
|
)
|
|||||||
Acquisition
of equity method investment
|
-
|
-
|
(30,000
|
)
|
(3,625
|
)
|
|||||||
Purchase
of intangible assets
|
-
|
(9,000
|
)
|
(3,100,000
|
)
|
(374,554
|
)
|
||||||
Proceeds
on disposal of plant and equipment
|
-
|
-
|
254,908
|
30,800
|
|||||||||
Net
cash used in investing activities
|
(24,585,920
|
)
|
(32,961,133
|
)
|
(27,200,560
|
)
|
(3,286,480
|
)
|
|||||
Financing
activities:
|
|||||||||||||
Proceeds
from short-term borrowings
|
15,000,000
|
35,000,000
|
41,000,000
|
4,953,785
|
|||||||||
Repayment
of short-term borrowings
|
(5,000,000
|
)
|
(15,000,000
|
)
|
(35,000,000
|
)
|
(4,228,841
|
)
|
|||||
Dividend
paid
|
-
|
(1,604,128
|
)
|
(2,000,000
|
)
|
(241,648
|
)
|
||||||
Issuance
of Share capital
|
-
|
-
|
82,765
|
10,000
|
|||||||||
Contribution
from minority stockholders
|
-
|
50,000
|
-
|
-
|
|||||||||
Net
cash (used in) provided by financing activities
|
10,000,000
|
18,445,872
|
4,082,765
|
493,296
|
|||||||||
Net
increase (decrease) in cash and cash equivalents
|
41,390,395
|
(29,476,558
|
)
|
19,626,739
|
2,371,382
|
||||||||
Cash
and cash equivalents, beginning of year
|
37,307,578
|
78,697,973
|
49,221,415
|
5,947,129
|
|||||||||
Cash
and cash equivalents, end of year
|
78,697,973
|
49,221,415
|
68,848,154
|
$
|
8,318,511
|
||||||||
Supplemental
disclosure of cash flow information:
|
|||||||||||||
Income
taxes paid
|
9,821,705
|
2,355,531
|
10,905,237
|
$
|
1,131,144
|
||||||||
Interest
paid
|
416,934
|
483,314
|
831,166
|
$
|
100,425
|
1. |
ORGANIZATION
AND PRINCIPAL ACTIVITIES
|
1. |
ORGANIZATION
AND PRINCIPAL ACTIVITIES -
continued
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
continued
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
continued
|
Leasehold
improvements
|
Shorter
of the useful lives or the lease term
|
Plant
and building
|
20-40
years
|
Machinery
and equipment
|
10-15
years
|
Furniture
and office equipment
|
5
years
|
Motor
vehicles
|
5
years
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
continued
|
(a)
|
The
Company received RMB610,000, RMB1,137,139 and RMB 70,960, to fund
research
and development activities for the years ended December 31, 2002,
2003 and
2004, respectively.
|
(b)
|
The
Company received a government incentive of RMB 5,005,148 and RMB3,719,940
for the year ended December 31, 2003 and 2004, respectively, in the
form
of a reduction in the cost of land use
rights.
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
continued
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
continued
|
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES -
continued
|
3. |
RELATED
PARTY BALANCES AND
TRANSACTIONS
|
(1)
|
Amounts
due from shareholders, recorded in due from related parties on
the
consolidated balance sheet, as of December 31, 2002, 2003 and 2004
are as
follow:
|
December
31,
|
||||||||||||||
Name
of Shareholders
|
2002
|
2003
|
2004
|
2004
|
||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||
Yang
Ya Sheng
|
-
|
300,000
|
324,226
|
39,174
|
||||||||||
Zhao
Yu Ping
|
200,000
|
200,000
|
203,377
|
24,573
|
||||||||||
Han
Geng Chen
|
-
|
-
|
29,067
|
3,512
|
||||||||||
Yuan
Liang
|
-
|
-
|
21,792
|
2,633
|
||||||||||
Zhang
Wei Dong
|
-
|
-
|
2,640
|
319
|
||||||||||
Chen
Wei Qiang
|
-
|
-
|
1,655
|
200
|
||||||||||
200,000
|
500,000
|
582,757
|
70,411
|
(2)
|
Amounts
due from related parties as of December 31, 2002, 2003 and 2004 are
as
follow:
|
|
|
|
|||||||||||||||
Name
of
related party |
Shareholder
interested
|
December
31,
|
|||||||||||||||
2002
|
2003
|
2004
|
2004
|
||||||||||||||
RMB
|
|
RMB
|
RMB
|
US$
|
|||||||||||||
Li
Xian Corn
|
*
|
||||||||||||||||
Research
Center
|
220,000
|
20,000
|
-
|
-
|
|||||||||||||
He
Nan Agriculture
|
|||||||||||||||||
University
|
***
|
-
|
-
|
201,790
|
24,381
|
||||||||||||
|
220,000
|
20,000
|
201,790
|
24,381
|
3.
|
RELATED
PARTY BALANCES AND TRANSACTIONS -
continued
|
(3)
|
Amounts
due to related parties as of December 31, 2002, 2003 and 2004 are
as
follows:
|
Name
of
related party
|
Shareholder
interested |
December
31,
|
|||||||||||||||
2002
|
2003
|
2004
|
2004
|
||||||||||||||
RMB
|
|
RMB
|
RMB
|
US$
|
|||||||||||||
Shijiazhuang
Li Yu
|
|||||||||||||||||
Technology
|
**
|
||||||||||||||||
Development
|
|||||||||||||||||
Co.,
Ltd.
|
-
|
-
|
1,413,234
|
170,753
|
|||||||||||||
|
-
|
-
|
1,413,234
|
170,753
|
(4)
|
Transactions
with related parties for the years ended December 31, 2002, 2003
and 2004
are follows:
|
Name
of
related party
|
Shareholder
interested |
December
31,
|
|||||||||||||||
2002
|
2003
|
|
2004
|
|
2004
|
||||||||||||
RMB
|
RMB
|
RMB
|
US$
|
||||||||||||||
Li
Xian Corn
|
*
|
||||||||||||||||
Research
Center
|
1,443,754
|
4,495,617
|
-
|
-
|
|||||||||||||
Shijiazhuang
Li Yu
|
|||||||||||||||||
Technology
|
|||||||||||||||||
Development
|
**
|
|
|||||||||||||||
Co.,
Ltd.
|
-
|
-
|
8,242,939
|
995,945
|
|||||||||||||
He
Nan Agriculture
|
***
|
|
|||||||||||||||
University
|
371,000
|
687,502
|
1,104,098
|
253,736
|
|||||||||||||
1,814,754
|
5,183,119
|
9,347,037
|
1,249,681
|
*
|
Li
Xian Corn Research Center was previously owned by one of the
Company’s
principal shareholders, Yang Ya Sheng.
|
**
|
Shijiazhuang
Li Yu Technology Development Co., Ltd. was previously owned by
one of the
Company’s principal shareholders, Yang Ya Sheng, and from September 2004
onwards, it became the Company’s equity method
investment.
|
***
|
He
Nan Agriculture University is one of the shareholders of Beijing
Origin.
|
4. |
INVENTORIES
|
As
of December 31,
|
||||||||||||||
2002
|
2003
|
2004
|
2004
|
|||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||
Work
in progress and supplies
|
58,517,975
|
98,469,190
|
131,457,368
|
15,883,207
|
||||||||||
Finished
goods
|
56,385,746
|
72,418,798
|
104,364,303
|
12,609,715
|
||||||||||
114,903,721
|
170,887,988
|
235,821,671
|
28,492,922
|
5. |
PREPAID
EXPENSES AND OTHER CURRENT
ASSETS
|
As
of December 31,
|
||||||||||||||
2002
|
2003
|
|
2004
|
2004
|
||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||
Employee
travel allowance
|
3,048,877
|
4,174,814
|
3,108,682
|
375,604
|
||||||||||
Deposit
for land use rights
|
2,781,200
|
-
|
1,200,000
|
144,989
|
||||||||||
Deposit
for technology usage fee
|
-
|
3,100,000
|
1,000,000
|
120,824
|
||||||||||
Professional
fee
|
-
|
-
|
4,544,699
|
549,109
|
||||||||||
Other
prepaid expenses
|
1,208,486
|
1,229,440
|
416,121
|
50,277
|
||||||||||
7,038,563
|
8,504,254
|
10,269,502
|
1,240,803
|
6. |
LAND
USE RIGHTS, NET
|
As
of December 31,
|
||||||||||||||
2002
|
2003
|
2004
|
2004
|
|||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||
Land
use rights
|
5,293,882
|
11,250,641
|
11,786,451
|
1,424,086
|
||||||||||
Less:
accumulated amortization
|
116,205
|
261,905
|
484,454
|
58,533
|
||||||||||
Land
use rights, net
|
5,177,677
|
10,988,736
|
11,301,997
|
1,365,553
|
7. |
PLANT
AND EQUIPMENT, NET
|
As
of December 31,
|
||||||||||||||
2002
|
2003
|
2004
|
2004
|
|||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||
Plant
and building
|
16,606,445
|
28,117,697
|
30,814,063
|
3,723,079
|
||||||||||
Machinery
and equipment
|
10,015,765
|
17,414,532
|
19,225,819
|
2,322,941
|
||||||||||
Furniture
and office equipment
|
3,032,484
|
4,675,017
|
5,549,536
|
670,518
|
||||||||||
Motor
vehicles
|
5,372,341
|
6,944,417
|
8,923,270
|
1,078,145
|
||||||||||
Leasehold
improvements
|
55,398
|
55,398
|
127,899
|
15,453
|
||||||||||
Total
|
35,082,433
|
57,207,061
|
64,640,587
|
7,810,136
|
||||||||||
Less:
accumulated depreciation
|
||||||||||||||
and
amortization
|
3,450,118
|
6,223,843
|
10,760,936
|
1,300,180
|
||||||||||
Construction
in progress
|
20,516
|
4,417,475
|
12,122,213
|
1,464,655
|
||||||||||
Plant
and equipment, net
|
31,652,831
|
55,400,693
|
66,001,864
|
7,974,611
|
8. |
LONG-TERM
INVESTMENTS
|
As
of December 31,
|
||||||||||||||
2002
|
2003
|
2004
|
2004
|
|||||||||||
RMB |
RMB
|
RMB
|
US$ | |||||||||||
Equity
method investment
|
-
|
-
|
1,954,604
|
236,163
|
||||||||||
Cost
method investment
|
-
|
-
|
8,320,000
|
1,005,256
|
||||||||||
Total
|
-
|
-
|
10,274,604
|
1,241,419
|
9. |
ACQUISITIONS
|
10. |
ACQUIRED
INTANGIBLE ASSETS, NET
|
As
of December 31,
|
||||||||||||||
2002
|
2003
|
2004
|
2004
|
|||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||
Technology
usage agreements
|
991,559
|
991,559
|
4,091,559
|
494,359
|
||||||||||
Others
|
-
|
9,000
|
9,000
|
1,087
|
||||||||||
991,559
|
1,000,559
|
4,100,559
|
495,446
|
|||||||||||
Accumulated
amortization
|
421,240
|
762,603
|
1,228,096
|
148,384
|
||||||||||
Acquired
intangible assets, net
|
570,319
|
237,956
|
2,872,463
|
347,062
|
RMB
|
|||||
Year
ending December 31,
|
|||||
2005
|
772,524
|
||||
2006
|
652,461
|
||||
2007
|
626,753
|
||||
2008
|
626,753
|
||||
2009
|
349,188
|
||||
Total
|
3,027,679
|
11. |
SHORT-TERM
BORROWINGS
|
As
of December 31,
|
||||||||||||||
2002
|
2003
|
2004
|
2004
|
|||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||
Short-term
borrowings
|
15,000,000
|
35,000,000
|
41,000,000
|
4,953,785
|
12. |
OTHER
PAYABLES AND ACCRUED
EXPENSES
|
As
of December 31,
|
||||||||||||||
2002
|
2003
|
2004
|
2004
|
|||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||
Other
payables
|
2,101,366
|
1,981,097
|
2,325,164
|
280,936
|
||||||||||
Accrued
welfare benefits
|
1,333,060
|
2,054,223
|
4,022,614
|
486,028
|
||||||||||
Other
taxes payable
|
48,561
|
132,190
|
359,312
|
43,414
|
||||||||||
Other
accrued expenses
|
4,200
|
-
|
27,446
|
3,316
|
||||||||||
3,487,187
|
4,167,510
|
6,734,536
|
813,694
|
13. |
SHAREHOLDERS
’
EQUITY
|
14. |
INCOME
TAXES
|
14. |
INCOME
TAXES - continued
|
Year
ended December 31,
|
||||||||||||||
2002
|
2003
|
2004
|
2004
|
|||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||
Current
|
2,659,425
|
8,376,861
|
5,975,317
|
721,962
|
||||||||||
Deferred
|
(1,161,113
|
)
|
(569,064
|
)
|
1,723,167
|
208,200
|
||||||||
1,498,312
|
7,807,797
|
7,698,484
|
930,162
|
14.
|
INCOME
TAXES - continued
|
As
of December 31,
|
||||||||||||||
2002
|
2003
|
2004
|
2004
|
|||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||
Noncurrent
deferred tax assets:
|
||||||||||||||
Net
operating loss
|
||||||||||||||
carry
forward
|
1,571,920
|
2,288,779
|
4,325,150
|
522,582
|
||||||||||
Others
|
157,833
|
261,116
|
418,981
|
50,623
|
||||||||||
Noncurrent
deferred tax assets
|
1,729,753
|
2,549,895
|
4,744,131
|
573,205
|
||||||||||
Valuation
allowances
|
(156,669
|
)
|
(407,747
|
)
|
(4,325,150
|
)
|
(522,582
|
)
|
||||||
Net
noncurrent deferred
|
||||||||||||||
tax
assets
|
1,573,084
|
2,142,148
|
418,981
|
50,623
|
Year
ended December 31,
|
|||||||||||
2002
|
2003
|
2004
|
|||||||||
%
|
%
|
%
|
|||||||||
Statutory
rate
|
33
|
33
|
33
|
||||||||
Effect
of preferential tax treatment
|
(32
)
|
|
(19
)
|
|
(31)
|
|
|||||
Permanent
book-tax difference
|
3
|
6
|
4
|
||||||||
Change
in valuation allowance
|
1
|
1
|
5
|
||||||||
Effective
income tax rate
|
5
|
21
|
11
|
15. |
EMPLOYEE
BENEFIT PLANS AND PROFIT
APPROPRIATION
|
16. |
COMMITMENTS
AND CONTINGENCIES
|
(a) |
Capital
commitments
|
RMB
|
|||||
Plant
and building construction
|
|||||
-
related to Zhongguancun life science
|
|||||
park
land development project
|
15,558,150
|
||||
-
related to building projects in Lin Ze branch
|
|||||
and
Chang Chun Origin
|
696,924
|
||||
16,255,074
|
|||||
Land
use right
|
1,200,000
|
||||
Equipment
|
503,370
|
||||
|
17,958,444
|
16.
|
COMMITMENTS
AND CONTINGENCIES-
continued
|
Year
ended December 31,
|
|||||
2005
|
1,252,087
|
||||
2006
|
1,138,594
|
||||
2007
|
1,152,956
|
||||
2008
|
438,761
|
||||
2009
|
418,541
|
||||
Thereafter
|
8,677,991
|
||||
13,078,930
|
17. |
SEGMENT
AND GEOGRAPHIC INFORMATION
|
18.
|
REORGANIZATION
|
December
31,
|
|||||||
2004
|
2003
|
||||||
Assets
Current assets:
|
|||||||
Cash
|
$
|
99,231
|
$
|
59,988
|
|||
Investments
held in trust
|
20,735,328
|
—
|
|||||
Prepaid
expenses
|
49,532
|
—
|
|||||
Total
current assets
|
20,884,091
|
59,988
|
|||||
Deferred
offering costs
|
—
|
25,000
|
|||||
Total
assets
|
$
|
20,884,091
|
$
|
84,988
|
|||
Liabilities
and Stockholders’ Equity
|
|||||||
Current
liabilities:
|
|||||||
Notes
payable, stockholder
|
$
|
—
|
$
|
60,000
|
|||
Accrued
expenses
|
243,357
|
523
|
|||||
Deferred
interest
|
41,545
|
—
|
|||||
Total
current liabilities
|
284,902
|
60,523
|
|||||
Common
stock, subject to possible conversion, 804,598 shares at conversion
value
|
4,103,450
|
—
|
|||||
Commitment
|
|||||||
Stockholders’
equity
|
|||||||
Preferred
stock, $.0001 par value, Authorized 1,000,000 shares; none issued
|
|||||||
Common
stock, $.0001 par value
|
|||||||
Authorized
20,000,000 shares Issued and outstanding 4,900,000 shares (which
includes
804,598 subject to possible conversion) and 875,000 shares in 2004
and
2003, respectively
|
490
|
87
|
|||||
Additional
paid-in capital
|
17,163,483
|
24,913
|
|||||
Deficit
accumulated during development stage
|
(668,234
|
)
|
(535
|
)
|
|||
|
|||||||
Stockholders’
equity
|
16,495,739
|
24,465
|
|||||
|
|||||||
Total
liabilities and stockholders’ equity
|
$
|
20,884,091
|
$
|
84,988
|
For
the Period
from December 5, 2003 (inception) to December 31, 2004 |
Year
Ended
December 31, 2004 |
For
the Period
from December 5, 2003 (inception) to December 31, 2003 |
||||||||
Operating
Expenses:
|
||||||||||
Consulting
fees
|
$
|
232,304
|
$
|
232,304
|
$
|
—
|
||||
Insurance
|
91,567
|
91,567
|
—
|
|||||||
Other
operating costs
|
2,143
|
1,608
|
535
|
|||||||
Professional
fees
|
174,999
|
174,999
|
—
|
|||||||
Rent
and office support
|
71,371
|
71,371
|
—
|
|||||||
State
franchise taxes
|
24,171
|
24,171
|
—
|
|||||||
Transfer
agent fees
|
13,964
|
13,964
|
—
|
|||||||
Travel
|
224,198
|
224,198
|
—
|
|||||||
Operating
loss
|
(834,717
|
)
|
(834,182
|
)
|
(535
|
)
|
||||
Interest
income on trust account
|
166,483
|
166,483
|
—
|
|||||||
Net
loss
|
$
|
(668,234
|
)
|
$
|
(667,699
|
)
|
$
|
(535
|
)
|
|
Per
share data:
|
||||||||||
Basic
and diluted loss per share
|
$
|
(0.17
|
)
|
$
|
(0.00
|
)
|
||||
Basic
and diluted weighted average
common shares outstanding |
4,039,000
|
875,000
|
Common
Stock
|
|
|||||||||||||||
Shares
|
Amount
|
Additional
Paid-In
Capital
|
Deficit
accumulated
during
the
development stage |
Total
Stockholders’ Equity
|
||||||||||||
Sale
of 875,000 shares of common stock to initial stockholders as
of December
5, 2003 (244,125 at $.141 per share and 630,875 at $.001 per
share
|
875,000
|
87
|
24,913
|
—
|
25,000
|
|||||||||||
Net
loss for the period
|
—
|
—
|
—
|
(535
|
)
|
(535
|
)
|
|||||||||
Balance,
December 31, 2003
|
875,000
|
87
|
24,913
|
(535
|
)
|
24,465
|
||||||||||
Sale
of 4,025,000 units, net of underwriters’ discount and offering expenses
(includes 804,598 shares subject to possible conversion)
|
4,025,000
|
403
|
21,241,920
|
—
|
21,242,323
|
|||||||||||
Proceeds
subject to possible conversion of 804,598 shares
|
—
|
—
|
(4,103,450
|
)
|
—
|
(4,103,450
|
)
|
|||||||||
Proceeds
from issuance of an underwriter’s option
|
—
|
—
|
100
|
—
|
100
|
|||||||||||
Net
loss for the period
|
—
|
—
|
—
|
(667,699
|
)
|
(667,699
|
)
|
|||||||||
Balance,
December 31, 2004
|
4,900,000
|
$
|
490
|
$
|
17,163,483
|
$
|
(668,234
|
)
|
$
|
16,495,739
|
For
the Period from December 5, 2003 (inception) to December 31,
2004
|
Year
Ended
December 31, 2004 |
For
the Period from December 5, 2003 (inception) to December 31,
2003
|
||||||||
Cash
Flows from Operating Activities:
|
||||||||||
Net
loss
|
$
|
(668,234
|
)
|
$
|
(667,699
|
)
|
$
|
(535
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
||||||||||
Accrued
interest on Treasury Bills
|
(194,390
|
)
|
(194,390
|
)
|
—
|
|||||
Increase
in prepaid assets
|
(49,532
|
)
|
(49,532
|
)
|
—
|
|||||
Increase
in deferred interest
|
41,545
|
41,545
|
—
|
|||||||
Increase
in accrued expenses
|
243,357
|
242,834
|
523
|
|||||||
Total
adjustments
|
40,980
|
40,457
|
523
|
|||||||
Net
Cash Used in Operating Activities
|
(627,254
|
)
|
(627,242
|
)
|
(12
|
)
|
||||
Cash
Flows from Investing Activities
|
||||||||||
Purchase
of Treasury Bills
|
(61,847,938
|
)
|
(61,847,938
|
)
|
—
|
|||||
Maturity
of Treasury Bills
|
41,307,000
|
41,307,000
|
—
|
|||||||
Net
Cash Used in Investing Activities
|
(20,540,938
|
)
|
(20,540,938
|
)
|
—
|
|||||
Cash
Flows from Financing Activities
|
||||||||||
Proceeds
from issuance of common stock
|
24,175,000
|
24,150,000
|
25,000
|
|||||||
Proceeds
from issuance of underwriters option
|
100
|
100
|
—
|
|||||||
Proceeds
from notes payable, stockholders
|
70,000
|
10,000
|
60,000
|
|||||||
Repayment
of notes payable, stockholders
|
(70,000
|
)
|
(70,000
|
)
|
—
|
|||||
Payment
of stock issuance costs
|
(2,907,677
|
)
|
(2,882,677
|
)
|
(25,000
|
)
|
||||
Net
cash Provided by Financing Activities
|
21,267,423
|
21,207,423
|
60,000
|
|||||||
NET
INCREASE IN CASH
|
99,231
|
39,243
|
59,988
|
|||||||
CASH
— BEGINNING
|
—
|
59,988
|
—
|
|||||||
CASH
— END
|
$
|
99,231
|
$
|
99,231
|
$
|
59,988
|
1. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
1. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
1. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
1. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
|
2. |
INCOME
TAXES
|
2004
|
2003
|
|||||||
Net
operating loss carry forwards
|
$
|
227,000
|
$
|
182
|
||||
Less:
Valuation allowance
|
227,000
|
182
|
||||||
Net
deferred income tax asset
|
$
|
--
|
$
|
--
|
3. |
RELATED
PARTY TRANSACTIONS
|
4. |
COMMITMENTS
AND CONTINGENCIES
|
5. |
PURCHASE
AGREEMENT FOR PROPOSED BUSINESS
COMBINATION
|
ASSETS
|
|||||||
June
30,
2005
(Unaudited)
|
December
31, 2004
|
||||||
CURRENT
ASSETS
|
|||||||
Cash
|
$
|
9,116
|
$
|
99,231
|
|||
Investments
held in trust
|
20,974,761
|
20,735,328
|
|||||
Prepaid
expenses
|
9,369
|
49,532
|
|||||
Total
Assets
|
$
|
20,993,246
|
$
|
20,884,091
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Advances
from stockholder
|
$
|
55,950
|
$
|
—
|
|||
Accrued
expenses
|
520,644
|
243,357
|
|||||
Due
to affiliate
|
10,170
|
—
|
|||||
Deferred
interest
|
89,688
|
41,545
|
|||||
Total
Current Liabilities
|
676,452
|
284,902
|
|||||
Common
stock, subject to possible conversion, 804,598 shares at conversion
value
|
4,103,450
|
4,103,450
|
|||||
COMMITMENT
|
|||||||
STOCKHOLDERS’
EQUITY
|
|||||||
Preferred
stock, $.0001 par value, authorized 1,000,000 shares; none
issued
|
|||||||
Common
stock, $.0001 par value, authorized 20,000,000 shares
|
|||||||
Issued
and outstanding 4,900,000 shares (which includes 804,598 subject
to
possible conversion)
|
490
|
490
|
|||||
Additional
paid-in capital
|
17,163,483
|
17,163,483
|
|||||
Deficit
accumulated during development stage
|
(950,629
|
)
|
(668,234
|
)
|
|||
Total
Stockholders’ Equity
|
16,213,344
|
16,495,739
|
|||||
Total
Liabilities and Stockholders’ Equity
|
$
|
20,993,246
|
$
|
20,884,091
|
For
the Period from
December
5, 2003
(inception)
to
June
30, 2005
|
Six
months ended
June
30, 2005
|
Six
months ended
June
30, 2004
|
||||||||
Operating
Expenses:
|
||||||||||
Consulting
fees
|
$
|
317,664
|
$
|
85,360
|
$
|
87,500
|
||||
Insurance
|
135,122
|
43,555
|
33,492
|
|||||||
Other
operating costs
|
39,709
|
37,566
|
2,172
|
|||||||
Professional
fees
|
404,077
|
229,078
|
19,549
|
|||||||
Rent
and office support
|
116,371
|
45,000
|
26,371
|
|||||||
State
franchise taxes
|
36,371
|
12,200
|
—
|
|||||||
Transfer
agent fees
|
22,333
|
8,369
|
3,051
|
|||||||
Travel
|
236,756
|
12,558
|
120,827
|
|||||||
Operating
loss
|
(1,308,403
|
)
|
(473,686
|
)
|
(292,962
|
)
|
||||
Interest
income on trust fund
|
357,774
|
191,291
|
37,088
|
|||||||
Net
loss
|
$
|
(950,629
|
)
|
$
|
(282,395
|
)
|
$
|
(255,874
|
)
|
|
Per
share data:
|
||||||||||
Basic
and diluted loss per share
|
$
|
(0.06
|
)
|
(0.08
|
)
|
|||||
Basic
and diluted weighted-average common shares outstanding
|
4,900,000
|
3,108,654
|
Three
months ended
June
30, 2005
|
Three
months ended
June
30, 2004
|
||||||
Operating
Expenses:
|
|||||||
Consulting
fees
|
$
|
30,638
|
$
|
87,500
|
|||
Insurance
|
14,527
|
29,037
|
|||||
Other
operating costs
|
21,858
|
407
|
|||||
Professional
fees
|
131,524
|
16,517
|
|||||
Rent
and office support
|
22,500
|
22,500
|
|||||
State
franchise taxes
|
6,100
|
—
|
|||||
Transfer
agent fees
|
2,895
|
2,750
|
|||||
Travel
|
—
|
112,919
|
|||||
Operating
loss
|
(230,042
|
)
|
(271,630
|
)
|
|||
Interest
income on trust fund
|
104,170
|
33,365
|
|||||
Net
loss
|
$
|
(125,872
|
)
|
$
|
(238,265
|
)
|
|
Per
share data:
|
|||||||
Basic
and diluted loss per share
|
$
|
(0.03
|
)
|
(0.05
|
)
|
||
Basic
and diluted weighted-average common shares outstanding
|
4,900,000
|
4,900,000
|
Shares
|
Amount
|
Additional
Paid-in
Capital
|
Deficit
Accumulated During Development
Stage |
Total
Stockholders’ Equity |
||||||||||||
Sale
of 875,000 shares of common stock to initial stockholders as
of December
5, 2003 (244,125 at $1.41 per share and 630,875 at $.0001 per
share)
|
875,000
|
$
|
87
|
$
|
24,913
|
$
|
—
|
$
|
25,000
|
|||||||
Net
loss for the period
|
—
|
—
|
—
|
(535
|
)
|
(535
|
)
|
|||||||||
Balance
of December 31, 2003
|
875,000
|
87
|
24,913
|
(535
|
)
|
24,465
|
||||||||||
Sales
of 4,025,000 units, net of underwriters’ discount and offering expenses
(includes 804,598 shares subject to possible conversion)
|
4,025,000
|
403
|
21,241,920
|
—
|
21,242,323
|
|||||||||||
Proceeds
subject to possible conversion of 804,598 shares
|
—
|
—
|
(4,103,450
|
)
|
—
|
(4,103,450
|
)
|
|||||||||
Proceeds
from issuance of an underwriters’ option
|
—
|
—
|
100
|
—
|
100
|
|||||||||||
Net
loss for the period
|
—
|
—
|
—
|
(667,699
|
)
|
(667,699
|
)
|
|||||||||
Balance
at December 31, 2004
|
4,900,000
|
490
|
17,163,483
|
(668,234
|
)
|
16,495,739
|
||||||||||
Unaudited:
|
||||||||||||||||
Net
loss for the period
|
—
|
—
|
—
|
(282,395
|
)
|
(282,395
|
)
|
|||||||||
Balance
at June 30, 2005
|
4,900,000
|
$
|
490
|
$
|
17,163,483
|
$
|
(950,629
|
)
|
$
|
16,213,344
|
For
the Period from
December
5, 2003
(inception)
to
June
30, 2005
|
Six
months
ended
June
30, 2005
|
Six
months
ended
June
30, 2004
|
||||||||
Cash
Flows from Operating Activities
|
||||||||||
Net
loss
|
$
|
(950,629
|
)
|
$
|
(282,395
|
)
|
$
|
(255,874
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities
|
||||||||||
Accrued
interest on Treasury Bill
|
(34,409
|
)
|
(34,409
|
)
|
(30,856
|
)
|
||||
Increase
in deferred interest
|
89,688
|
48,143
|
9,213
|
|||||||
(Increase)
decrease in prepaid assets
|
(9,369
|
)
|
40,163
|
(98,107
|
)
|
|||||
Increase
in accrued expenses
|
520,644
|
277,287
|
16,996
|
|||||||
Increase
due to officers and directors
|
—
|
—
|
34,145
|
|||||||
Total
adjustments
|
566,554
|
331,184
|
(68,609
|
)
|
||||||
Net
Cash Provided by (Used in) Operating Activities
|
(384,075
|
)
|
48,789
|
(324,483
|
)
|
|||||
Cash
Flows from Investing Activities
|
||||||||||
Proceeds
from disposal of securities
|
||||||||||
Maturity
of Treasury Bills
|
145,071,947
|
103,959,337
|
—
|
|||||||
Purchase
of Treasury Bills
|
(166,012,299
|
)
|
(104,164,361
|
)
|
(20,542,748
|
)
|
||||
Net
Cash Used in Investing Activities
|
(20,940,352
|
)
|
(205,024
|
)
|
(20,542,748
|
)
|
||||
Cash
Flows from Financing Activities
|
||||||||||
Proceeds
from public offering
|
24,175,000
|
—
|
24,150,000
|
|||||||
Proceeds
from issuance of option
|
100
|
—
|
100
|
|||||||
Payment
of costs of public offering
|
(2,907,677
|
)
|
—
|
(2,882,677
|
)
|
|||||
Proceeds
of loan from affiliate
|
10,170
|
10,170
|
||||||||
Proceeds
from notes payable, stockholder
|
125,950
|
55,950
|
10,000
|
|||||||
Repayment
of notes payable, stockholder
|
(70,000
|
)
|
—
|
(70,000
|
)
|
|||||
Net
Cash Provided by Financing Activities
|
21,333,543
|
66,120
|
21,207,423
|
|||||||
NET
INCREASE (DECREASE) IN CASH
|
9,116
|
(90,115
|
)
|
340,192
|
||||||
CASH
AT BEGINNING OF PERIOD
|
—
|
99,231
|
59,988
|
|||||||
CASH
AT END OF PERIOD
|
$
|
9,116
|
$
|
9,116
|
$
|
400,180
|
1. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
1. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
1. |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
|
2. |
INCOME
TAXES
|
Net
operating loss carryforward
|
$
|
323,000
|
||
Less:
Valuation allowance
|
323,000
|
|||
Net
deferred income tax asset
|
$
|
—
|
3. |
RELATED
PARTY TRANSACTIONS
|
4. |
COMMITMENTS
AND CONTINGENCIES
|
4. |
COMMITMENTS
AND CONTINGENCIES
(Continued)
|
5. |
PURCHASE
AGREEMENT FOR PROPOSED BUSINESS
COMBINATION
|
Annex A STOCK PURCHASE AGREEMENT AMONG CHARDAN CHINA ACQUISITION CORP., DR. RICHARD D. PROPPER, KERRY PROPPER, JIANGNAN HUANG, LI ZHANG, DAN BEHARRY, STEVEN URBACH, STATE HARVEST HOLDINGS LIMITED, DR.HAN GENGCHEN, MR.YANG YASHENG, MR.YUAN LIANG, MS.ZHAO YUPING, MR.ZHANG WEIDONG, MR.CHEN WEICHENG, MS. BO LUXIA, MR. HUANG XILIN, and Mr. HUO QINGTAO ------------------------ Dated: December 20, 2004 ------------------------
TABLE OF CONTENTS Page ---- ARTICLE I THE ORIGIN STOCK PURCHASE...................................................2 SECTION 1.01 Purchase and Sale...........................................................2 SECTION 1.02 Purchase Price..............................................................2 SECTION 1.03 Earn-Out Agreement..........................................................4 SECTION 1.04 Allocation of Purchase Price................................................5 ARTICLE II THE CLOSING.................................................................5 SECTION 2.01 The Closing.................................................................5 SECTION 2.02 Deliveries..................................................................5 SECTION 2.03 Additional Agreements.......................................................6 SECTION 2.04 Further Assurances..........................................................7 ARTICLE III REPRESENTATIONS AND WARRANTIES..............................................7 OF ORIGIN AND THE ORIGIN STOCKHOLDERS.......................................7 SECTION 3.01 The Origin Stock............................................................7 SECTION 3.02 Organization of Origin......................................................7 SECTION 3.03 Authority and Corporate Action; No Conflict.................................8 SECTION 3.04 Brokers....................................................................11 SECTION 3.05 Disclosure.................................................................11 SECTION 3.06 Survival of Representations and Warranties.................................11 ARTICLE IV REPRESENTATION AND WARRANTS OF THE ORIGIN SUBSIDIARIES...............................................................12 SECTION 4.01 The Origin Subsidiary Stock................................................12 SECTION 4.02 Organization of the Origin Subsidiaries....................................12 SECTION 4.03 Authority and Corporate Action; No Conflict................................13 SECTION 4.04 Consents and Approvals.....................................................14 SECTION 4.05 Financial Statements.......................................................14 SECTION 4.06 No Undisclosed Liabilities.................................................14 SECTION 4.07 Real Property..............................................................15 SECTION 4.08 Certain Personal Property..................................................15 SECTION 4.09 Non-Real Estate Leases.....................................................15 SECTION 4.10 Accounts Receivable........................................................15 SECTION 4.11 Inventory..................................................................16 SECTION 4.12 Contracts, Obligations and Commitments.....................................16 SECTION 4.13 Licenses, Permits, Etc.....................................................17 SECTION 4.14 Intellectual Property Rights...............................................18 SECTION 4.15 Title to and Condition of Assets...........................................20 SECTION 4.16 Taxes, Tax Returns and Audits..............................................22 SECTION 4.17 Absence of Certain Changes.................................................23 SECTION 4.18 Employee Plans; Labor Matters..............................................25 SECTION 4.19 Compliance with Law........................................................25 SECTION 4.20 No Illegal or Improper Transactions........................................25 SECTION 4.21 Related Transactions.......................................................26 SECTION 4.22 Records....................................................................26 SECTION 4.23 Insurance..................................................................26 i
SECTION 4.24 Litigation.................................................................26 SECTION 4.25 Settled Litigation.........................................................27 SECTION 4.26 Brokers....................................................................27 SECTION 4.27 Disclosure.................................................................27 SECTION 4.28 Survival of Representations and Warranties.................................27 ARTICLE V REPRESENTATIONS AND WARRANTIES OF CCAC.....................................27 SECTION 5.01 Organization...............................................................28 SECTION 5.02 Capitalization.............................................................28 SECTION 5.03 Authority and Corporate Action; No Conflict................................29 SECTION 5.04 Consents and Approvals.....................................................30 SECTION 5.05 Valid Issuance of Chardan Sub Stock........................................30 SECTION 5.06 Financial Statements.......................................................30 SECTION 5.07 SEC Reports................................................................31 SECTION 5.08 Trust Fund.................................................................31 SECTION 5.09 No Undisclosed Liabilities.................................................32 SECTION 5.10 Absence of Certain Changes.................................................32 SECTION 5.11 Compliance with Law........................................................33 SECTION 5.12 Litigation.................................................................33 SECTION 5.13 Brokers....................................................................33 SECTION 5.14 Survival of Representations and Warranties.................................34 SECTION 5.15 Records....................................................................34 SECTION 5.16 Disclosure.................................................................34 ARTICLE VI COVENANTS OF ORIGIN, THE ORIGIN SUBSIDIARIES...............................34 SECTION 6.01 Conduct of the Business....................................................34 SECTION 6.02 Access to Information......................................................36 SECTION 6.03 Insurance..................................................................36 SECTION 6.04 Protection of Confidential Information; Non-Competition....................36 SECTION 6.05 Post-Closing Assurances....................................................39 SECTION 6.06 No Other Negotiations......................................................39 SECTION 6.07 No Securities Transactions.................................................39 SECTION 6.08 Fulfillment of Conditions..................................................40 SECTION 6.09 Disclosure of Certain Matters..............................................40 SECTION 6.10 Regulatory and Other Authorizations; Notices and Consents..................40 SECTION 6.11 Use of Intellectual Property...............................................41 SECTION 6.12 Related Tax................................................................41 SECTION 6.13 Origin Acquisition.........................................................41 SECTION 6.14 Origin Merger Reorganization...............................................41 SECTION 6.15 Origin Proxy Information...................................................42 SECTION 6.16 Interim Financial Information..............................................42 ARTICLE VII COVENANTS OF CCAC..........................................................42 SECTION 7.01 Conduct of the Business....................................................42 SECTION 7.02 Stockholder Meeting........................................................44 SECTION 7.03 Fulfillment of Conditions..................................................45 SECTION 7.04 Disclosure of Certain Matters..............................................45 SECTION 7.05 Chardan Sub Incorporation..................................................45 SECTION 7.06 Post-Closing Assurances....................................................45 SECTION 7.07 Regulatory and Other Authorizations; Notices and Consents..................46 SECTION 7.08 Books and Records..........................................................46 ii
ARTICLE VIII ADDITIONAL COVENANTS OF THE PARTIES........................................47 SECTION 8.01 Other Information..........................................................47 SECTION 8.02 Mail Received After Closing................................................47 SECTION 8.03 Further Action.............................................................47 SECTION 8.04 Schedules..................................................................48 SECTION 8.05 Execution of Agreements....................................................48 SECTION 8.06 Confidentiality............................................................48 SECTION 8.07 Public Announcements.......................................................48 SECTION 8.08 Board of CCAC - Chardan Sub................................................49 SECTION 8.09 Nominations of Directors...................................................50 SECTION 8.10 CCAC or Chardan Sub........................................................50 ARTICLE IX CONDITIONS TO CLOSING......................................................50 SECTION 9.01 Conditions to Each Party's Obligations.....................................50 SECTION 9.02 Conditions to Obligations of Origin, the Origin Subsidiaries and the Origin Stockholders................................................51 SECTION 9.03 Conditions to Obligations of CCAC..........................................53 ARTICLE X INDEMNIFICATION............................................................57 SECTION 10.01 Indemnification by Origin Stockholders.....................................57 SECTION 10.02 Indemnification by CCAC....................................................57 SECTION 10.03 Notice, Etc................................................................58 SECTION 10.04 Limitations................................................................59 SECTION 10.05 Adjustment to Purchase Price; Setoff.......................................59 SECTION 10.06 Claims on behalf or in right of CCAC and Chardan Sub.......................60 ARTICLE XI TERMINATION AND ABANDONMENT................................................60 SECTION 11.01 Methods of Termination.....................................................60 SECTION 11.02 Effect of Termination......................................................62 SECTION 11.03 No Claim Against Trust Fund................................................63 ARTICLE XII DEFINITIONS................................................................64 SECTION 12.01 Certain Defined Terms......................................................64 ARTICLE XIII GENERAL PROVISIONS.........................................................67 SECTION 13.01 Expenses...................................................................67 SECTION 13.02 Notices....................................................................68 SECTION 13.03 Amendment..................................................................68 SECTION 13.04 Waiver.....................................................................69 SECTION 13.05 Headings...................................................................69 SECTION 13.06 Severability...............................................................69 SECTION 13.07 Entire Agreement...........................................................69 SECTION 13.08 Benefit....................................................................69 SECTION 13.09 Governing Law..............................................................69 SECTION 13.10 Counterparts...............................................................70 iii
STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated December 20, 2004, among CHARDAN CHINA ACQUISITION CORP., a Delaware corporation ("CCAC"), KERRY PROPPER, an individual, DR. RICHARD D. PROPPER, an individual, JIANGNAN HUANG, an individual, LI ZHANG, an individual, DAN BEHARRY, an individual, STEVEN URBACH, an individual, STATE HARVEST HOLDINGS LIMITED, a British Virgin Islands corporation ("Origin"), and D.HAN GENGCHEN, an individual, MR.YANG YASHENG, an individual, MR.YUAN LIANG, an individual, MS.ZHAO YUPING, an individual, MR.ZHANG WEIDONG, an individual, MR.CHEN WEICHENG, an individual, MS. BO LUXIA, an individual, Mr. HUANG XILIN, an individual, and MR. HUO QINGTAO, an individual. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed to them in Article XII hereof. WHEREAS, Origin, through the companies listed on Schedule A hereto ("Origin Subsidiaries"), which include the manner and ownership amounts of such companies by Origin, owns and operates in the Peoples Republic of China ("PRC") the Business, as hereinafter defined; and WHEREAS, the Origin Stockholders listed on Schedule B hereto ("Origin Stockholders") are the direct and beneficial owners of all of the outstanding capital stock of Origin (including by means of nominee arrangements, trust, stock power or similar arrangement) (together all stock and other rights or arrangements are referred to as the "Origin Stock"); and WHEREAS, subject to the terms and conditions of this Agreement, CCAC will form a wholly owned subsidiary pursuant to the corporate laws of the British Virgin Islands ("Chardan Sub") and consummate a plan of merger ("Plan of Merger") pursuant to which CCAC will be merged with and into Chardan Sub (the "Chardan Merger") at the Closing (as defined in Article II); and WHEREAS, subject to the terms and conditions of this Agreement, Origin, either directly or through operational contracts and stock consignment agreement, owns all of the shares of capital stock of the Origin Subsidiaries, other than the 2.04% of each of Beijing Origin Seed Limited Incorporated and Henan Origin Cotton Technical Limited Company held by Henan Agricultural University and Mr. Gu Dengbin, respectively ("Origin Subsidiary Stock") and through such ownership and contractual arrangements have full right and title to use and benefit from the assets of the Origin Subsidiaries; and 1
WHEREAS, subject to the terms and conditions of this Agreement, Chardan Sub at the Closing, shall acquire by an issuance of its capital stock and payment of cash, all of the Origin Stock from the Origin Stockholders ("Origin Stock Purchase"). IT IS AGREED: ARTICLE I THE ORIGIN STOCK PURCHASE SECTION 1.01 Purchase and Sale. Upon the terms and subject to the conditions hereof, at the Closing, the Origin Stockholders shall sell, transfer, assign and convey to Chardan Sub, and Chardan Sub shall purchase from the Origin Stockholders, all of the right, title and interest of the Origin Stockholders in and to the Origin Stock representing all of the issued and outstanding Origin Stock. SECTION 1.02 Purchase Price. (a) Subject to adjustment and the holdbacks as hereinafter set forth, the aggregate purchase price ("Purchase Price") to be paid by Chardan Sub to Origin Stockholders or its designees for the Origin Stock shall be the following: (i) $25,000,000 as set forth in Section 1.02 (b) below; (ii) certificates representing, in the aggregate, 10,200,000 shares of Chardan Sub's common stock, par value $0.0001 per share ("Chardan Sub Stock"), which will represents no less than 65% of the total outstanding equity capital of the succeeding listing corporation after the Chardan Merger is accomplished, to be delivered to the Origin Stockholders and their designees; (b) Payments. (i) Initial Payment. At the Closing, the sum of $10,000,000 (the "Initial Payment"), less the Holdback Amount, will be paid by wire transfer of immediately available United States dollars to Origin Stockholders or their designees as specified in a written notice given to CCAC or Chardan Sub, no later than two business days prior to the Closing, for the purpose of the acquisition of the Origin Stock. 2
(ii) Additional Payments. In the event that any of the following events occur any year after the Closing Date and ending the fiscal year ending December 31, 2008 (or June 30, 2009 if the fiscal year of the combined entity is changed), Chardan Sub shall promptly pay in aggregate to the Origin Stockholders or their designees, as an addition to the Purchase Price, the amounts set forth below in cash by wire transfer to the accounts of the Origin Stockholders as specified on Schedule 1.02(a) in respect of the Origin Stock ownership: (a) If Chardan Sub receives at least $40,000,000 in gross proceeds in additional financing ("Financing Adjustment") as a result of (1) the call of CCAC's presently outstanding public warrants (which such warrants will be assumed by Chardan Sub at the Closing), (2) Chardan Sub's successful completion of a secondary offering, or (3) the private investment into Chardan Sub by a strategic investor, then the Origin Stockholders or their designees shall be entitled to receive an additional $15,000,000; or (b) If Origin generates a net positive cash flow of not less than $2,000,000 in any fiscal year ending December 31, or June 30, beginning December 31, 2005 or June 30, 2006, respectively depending on the fiscal year ("Earnings Adjustment"), the Origin Stockholders shall be entitled to receive 75% of the net positive cash flow of such fiscal year up to $7,500,000 per year until a total of $15,000,000 has been received; provided that the board of directors of the surviving corporation, solely on the basis of a proposal by Dr. Han, as a director, may reduce the amount to be paid in any one year. (iii) In the event that both an Earnings Adjustment and a Financing Adjustment occurs, the maximum amount to be paid to the Origin Stockholders shall be $15,000,000. For purposes of example only, if Earnings Adjustments have occurred such that the Origin Stockholders are entitled to receive $5,000,000 (in one or more installments) and a Financing Adjustment subsequently occurs, only the balance of $10,000,000 shall be paid to the Origin Stockholders as a result of a Financing Adjustment for a total of $15,000,000. (iv) If any amount is to be paid on either a Financing Adjustment or Earnings Adjustment, then such amount will be paid to the Origin Stockholders pursuant to the original payment instructions received from Origin's Shareholders prior to the Closing as set forth on Schedule C. 3
(c) Holdback. The sum of $250,000 ("Holdback Amount") to be withheld from the Initial Payment, representing a portion of the cash portion of the Purchase Price will be retained by Chardan Sub for a period of 12 months. The Holdback Amount will be security for the indemnification obligations of the Origin Stockholders set forth in Article X. Subject to this section and Article X, on the 12 month anniversary of the Closing, or the first business day thereafter, Chardan Sub shall deliver the Holdback Amount pro rata to the Origin Stockholders (or their designees) in the same proportions as the Initial Payment was allocated among them. Chardan Sub may withhold from the Holdback Amount the equivalent of any amount then in dispute related to the Origin Stockholders indemnification obligations arising pursuant to Article X or for which Chardan Sub has notified the Origin Stockholders of an indemnification Claim. Any withheld Holdback Amount, to the extent not applied in satisfaction of an indemnification Claim, will be paid by Chardan Sub promptly on resolution of the dispute or Claim. Nothing in this section shall be construed as limiting the liability of the Origin Stockholders for indemnification claims or any other claim by Chardan, Chardan Sub or any other rightful claimant, and the Holdback Amount shall not be considered liquidated damages for any breach of this Agreement or any other matter related hereto. SECTION 1.03 Earn-Out Agreement. So long as CCAC, following the Closing, on a consolidated basis, achieves or exceeds the after tax profits (excluding any after tax operating profits from any acquisition by Origin that was for the issuance of securities that has a dilutive effect on the holders of common stock of CCAC, or Chardan Sub after the Closing, and before the expenses of the transaction contemplated by this Agreement and the expenses of director and employee options in each of the fiscal years) calculated for the period of July 1 to the succeeding June 30, ending on June 30 in each of 2006, 2007, 2008 and 2009 as set forth below, the Origin Stockholders shall receive after the Closing the number of shares of Chardan Sub Stock set forth below. Such additional shares shall be issued within 90 days after June 30. 4
Number of Shares of Consolidated Company to be earned By each shareholder in the 12-month period ending --------------------------------------------------------------------------------Name June 30, 2006 June 30, 2007 June 30, 2008 June 30, 2009 ------------------------ ---------------- ---------------- ---------------- ---------------- A Plus Resources Limited 270,000 270,000 270,000 270,000 HAN Gengchen 431,976 431,976 431,976 431,976 YUAN Liang 431,976 431,976 431,976 431,976 YANG Yasheng 252,027 252,027 252,027 252,027 ZHANG Weidong 39,237 39,237 39,237 39,237 CHEN Weicheng 24,600 24,600 24,600 24,600 BO Luxia 20,739 20,739 20,739 20,739 ZHAO Yuping 15,619 15,619 15,619 15,619 HUANG Xilin 6,913 6,913 6,913 6,913 HUO Qingtao 6,913 6,913 6,913 6,913 ---------------- ---------------- ---------------- ---------------- Total 1,500,000 shares 1,500,000 shares 1,500,000 shares 1,500,000 shares After Tax Profit Targets for 12 Months Ending -------------------------------------------------------------------------------- June 30, 2006 June 30, 2007 June 30, 2008 June 30, 2009 $11,000,000 $16,000,000 $21,000,000 $29,000,000 SECTION 1.04 Allocation of Purchase Price. All payments of the Purchase Price shall be made in proportion as requested by the Origin Stockholders as set forth on Schedule C. ARTICLE II THE CLOSING ----------- SECTION 2.01 The Closing. Subject to the terms and conditions of this Agreement, the consummation of the Origin Stock Purchase and the transactions contemplated by this Agreement shall take place at a closing ("Closing") to be held at 10:00 a.m., local time, on the fourth business day after the date on which the last of the conditions to Closing set forth in Article IX is fulfilled, at the offices of Graubard Miller, 600 Third Avenue, New York, New York 10016, or at such other time, date or place as the Parties may agree upon in writing. The date on which the Closing occurs is referred to herein as the "Closing Date." SECTION 2.02 Deliveries. (a) Origin Stockholders. At the Closing, each Origin Stockholder will (i) assign and transfer to Chardan Sub all of such Origin Stockholder's right, title and interest in and to his, her or its 5
respective portion of the Origin Stock by delivering to Chardan Sub the certificates representing such Origin Stock, duly endorsed for transfer and free and clear of all liens and (ii) deliver to Chardan Sub the certificates, opinions and other agreements contemplated by Article IX hereof and the other provisions of this Agreement. (b) Chardan Sub. At the Closing, Chardan Sub shall deliver to the Origin Stockholders (i) the cash and shares of Chardan Sub Stock representing the Purchase Price to which each of the Origin Stockholders is entitled pursuant to Sections 1.02 and (ii) the certificates, opinions and other agreements and instruments contemplated by Article IX hereof and the other provisions of this Agreement. SECTION 2.03 Additional Agreements. At the Closing, the following agreements will have been executed and delivered (collectively, the "Transaction Documents"), the effectiveness of each of which is subject to the Closing: (a) a Merger Agreement between CCAC and Chardan Sub in a form to be attached as Schedule D hereto; (b) the Stock Consignment Agreements in the forms attached hereto as Schedules E, F and G between Origin and the following parties: (1) all shareholders of Beijing Origin Seed Limited ("Beijing Origin") holding 97.96% of the total equity shares of Beijing Origin, except for the Henan Agriculture University who is holding 2.04% of the Beijing Origin's shares; (2) all shareholders holding 100% of the equity shares of the Changchun Origin Seed Technical Development Limited ("Changchun Company"); and (3) all shareholders of the Henan Origin Cotton Technology Development Limited ("Henan Company") holding 97.96% of the total equity shares of the Henan Company, except for Mr. Gu Dengbin, who is holding 2.04% of the Henan Company shares; and (c) the Technology Service Agreements between Beijing Origin State Harvest Biotechnology Limited ("Biotechnology Company") and each of Changchun Company, Henan Company and Beijing Origin in the form of Schedule H attached hereto. 6
SECTION 2.04 Further Assurances. Subject to the terms and conditions of this Agreement, at any time or from time to time after the Closing, each of the Parties hereto shall execute and deliver such other documents and instruments, provide such materials and information and take such other actions as may reasonably be necessary, proper or advisable, to the extent permitted by law, to fulfill its obligations under this Agreement and the other Transaction Documents to which it is a party. ARTICLE III REPRESENTATIONS AND WARRANTIES OF ORIGIN AND THE ORIGIN STOCKHOLDERS ------------------------------------- Except for the representations and warranties set forth in Sections 3.7 through 3.12, which are made solely by the Origin Stockholders, severally and not jointly, to CCAC, Origin and the Origin Stockholders, jointly and severally, represent and warrant to CCAC and Chardan Sub (as of the Closing) as follows: SECTION 3.01 The Origin Stock. (a) Ownership. The Origin Stockholders are the registered and beneficial owners of all of the shares of Origin Stock in the amounts set forth in Schedule 3.01(a), free and clear of all Liens, except as set forth in Schedule 3.01(a), which shares constitute all of the outstanding shares of capital stock of Origin. There are no options, warrants or other contractual rights outstanding which give any Person the right to acquire shares of Origin Stock owned by the Origin Stockholders, whether or not such rights are presently exercisable. (b) Capitalization. The authorized capital stock of Origin is set forth in Schedule 3.01(b). All of the outstanding shares of Origin Stock are validly issued, fully paid and non-assessable. There are no options, warrants or other contractual rights outstanding which give any Person the right to require the issuance of any capital stock of Origin, whether or not such rights are presently exercisable. SECTION 3.02 Organization of Origin. Origin is an international business company duly organized, validly existing and in good standing under the law of the British Virgin Islands. Origin is duly qualified to do business as a foreign corporation and is in good standing in each of the jurisdictions in which the property owned, leased or operated by Origin or the nature of the business which it conducts requires qualification (which jurisdictions are listed in Schedule 3.02), or if not so qualified, such failure or failures, singly or in the aggregate, would not have a material adverse effect on the Business, assets, operations, financial condition, liquidity or prospects of Origin and the Origin Subsidiaries, separately and as a whole ("Origin Material Adverse Effect"). Origin has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted and as presently contemplated to be conducted. 7
SECTION 3.03 Authority and Corporate Action; No Conflict. ------------------------------------------- (a) Origin and each of the Origin Stockholders has all necessary power and authority to enter into this Agreement and the other Transaction Documents to which it is a party and to consummate the Origin Stock Purchase and other transactions contemplated hereby and thereby. All action, corporate and otherwise, necessary to be taken by Origin to authorize the execution, delivery and performance of this Agreement, the Transaction Documents and all other agreements and instruments delivered by Origin and the Origin Stockholders in connection with the Origin Stock Purchase has been duly and validly taken. This Agreement and the Transaction Documents to which Origin and each Origin Stockholder is a party has been duly executed and delivered by Origin and each Origin Stockholder and constitutes the valid, binding, and enforceable obligation of Origin and each Origin Stockholder, enforceable in accordance with its terms, except (i) as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and (ii) as enforceability of any indemnification provision may be limited by federal and state securities laws and public policy of the United States, BVI and PRC. (b) Neither the execution and delivery of this Agreement or any of the other Transaction Documents contemplated hereby by Origin or each Origin Stockholder nor the consummation of the transactions contemplated hereby or thereby will (i) except as set forth in Schedule 3.03, conflict with, result in a breach or violation of or constitute (or with notice of lapse of time or both constitute) a default under, (A) the Memorandum and Articles of Association of Origin or (B) any law, statute, regulation, order, judgment or decree or any instrument, contract or other agreement to which Origin or an Origin Stockholder is a party or by which it (or any of its properties or assets) is subject or 8
bound; (ii) result in the creation of, or give any party the right to create, any lien, charge, option, security interest or other encumbrance upon the assets of Origin or an Origin Stockholder; (iii) terminate or modify, or give any third party the right to terminate or modify, the provisions or terms of any contract to which Origin or an Origin Stockholder is a party; or (iv) result in any suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, qualification, authorization or approval applicable to Origin or an Origin Stockholder. (c) Consents and Approvals. Other than as set forth on Schedule 3.04, the execution and delivery of this Agreement and the Transaction Documents by Origin and each Origin Stockholder does not, and the performance of this Agreement and the Transaction Documents by it will not, require any consent, approval, authorization or other action by, or filing with or notification to, any Governmental Authority, except where failure to obtain such consents, approvals, authorizations or actions, or to make such filings or notifications, would not prevent it from performing any of its material obligations under this Agreement and the Transaction Documents and would not have an Origin Material Adverse Effect. (d) Licenses, Permits, Etc. To the best of the knowledge of each Origin Stockholder, Origin possesses or will possess prior to the Closing all Permits necessary, in all material respects, to own and operate the Business through the Origin Subsidiaries, which necessary Permits are described or are as set forth on Schedule 3.05 hereto. True, complete and correct copies of Permits issued to Origin have previously been delivered to CCAC. To the best of the knowledge of Origin and each Origin Stockholder, Origin is not in default in any material respect under any of such Permits and no event has occurred and no condition exists which, with the giving of notice, the passage of time, or both, would constitute a default thereunder. Neither the execution and delivery of this Agreement, the Transaction Documents or any of the other documents contemplated hereby nor the consummation of the transactions contemplated hereby or thereby nor, to the best of the knowledge of Origin and each Origin Stockholder, compliance by Origin with any of the provisions hereof or thereof will result in any suspension, revocation, impairment, forfeiture or nonrenewal of any Permit applicable to the Business. (e) Taxes, Tax Returns and Audits. Except as specifically set forth in Schedule 3.09, (a) Origin has filed on a timely basis (taking into account any 9
extensions received from the relevant taxing authorities) all returns and reports pertaining to all Taxes that are or were required to be filed by Origin with the appropriate taxing authorities in all jurisdictions in which such returns and reports are or were required to be filed, and all such returns and reports are true, correct and complete in all material respects, (b) all Taxes that are due from or may be asserted against Origin (including deferred Taxes) in respect of or attributable to all periods ending on or before the Closing Date have been or will be fully paid, deposited or adequately provided for on the books and financial statements of Origin or are being contested in good faith by appropriate proceedings, (c) no issues have been raised (or are currently pending) by any taxing authority in connection with any of the returns and reports referred to in clause (a) which might be determined adversely to Origin and which could have an Origin Material Adverse Effect, (d) Origin has not given or requested to give waivers or extensions of any statute of limitations with respect to the payment of Taxes, and (e) no tax liens which have not been satisfied or discharged by payment or concession by the relevant taxing authority or as to which sufficient reserves have not been established on the books and financial statements of Origin are in force as of the date hereof. (f) Acquisition Entirely for Own Account. The Chardan Sub Stock to be acquired by each Origin Stockholder will be acquired for investment for such Origin Stockholder's own account and not with a view to the resale or distribution of any part thereof. (g) Disclosure of Information. Each Origin Stockholder acknowledges that all of the SEC Reports (defined in Section 5.06) were fully available to it, and it has reviewed and understands them. Each Origin Stockholder acknowledges that it has received all the information that it has required relating to CCAC and the acquisition of the Chardan Sub Stock. Each Origin Stockholder further represents that it has had an opportunity to ask questions and receive answers from CCAC regarding the terms and conditions of its acquisition of the Chardan Sub Stock. (h) Accredited Investor. Each Origin Stockholder is an "accredited investor" within the meaning of Rule 501 of Regulation D under the Securities Act. (i) Restricted Securities. Each Origin Stockholder understands that it will acquire constitutes "restricted securities" from Chardan Sub under the United States federal securities laws and that under such laws and applicable regulations such securities may only be sold in the United States pursuant to an effective registration statement or an available exemption from registration. 10
(j) Legends. It is understood that the certificates evidencing the Chardan Sub Stock shall bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES REPRESENTED HEREBY MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER, OR DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT." SECTION 3.04 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Origin, any Origin Subsidiary or any Origin Stockholder. SECTION 3.05 Disclosure. No representation or warranty by Origin or any Origin Stockholder contained in this Agreement and no information contained in any Schedule or other instrument furnished or to be furnished to CCAC pursuant to this Agreement or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein not misleading. SECTION 3.06 Survival of Representations and Warranties. The representations and warranties of Origin and each Origin Stockholder set forth in this Agreement shall survive the Closing for a period of four years, except that the representations and warranties set forth in Sections 3.01, 3.02 and 3.03 shall survive without limitation as to time and the representations and warranties set forth in Section 3.06 shall survive until the expiration of the statute of limitations with respect to each respective Tax. 11
ARTICLE IV REPRESENTATION AND WARRANTS OF THE ORIGIN SUBSIDIARIES ------------------------------------------------------ Origin and the Origin Stockholders, jointly and severally, represent and warrant to CCAC and Chardan Sub as of the Closing, as follows: SECTION 4.01 The Origin Subsidiary Stock. (a) Ownership. Origin, either directly or through the Stock Consignment Agreements and/or the Technology Service Agreement set forth in Section 2.03 is the actual controller of the shares of the Origin Subsidiary Stock, free and clear of all Lien which, except for 2.04% of each of Beijing Origin and Henan Company owned by other parties, shares constitute all of the outstanding shares of capital stock of the Origin Subsidiaries. Except as indicated in the preceding sentence, there are no consignment, operational contracts and/or equity transfer arrangements, options, warrants or other contractual rights (oral or written), trusts or other arrangements of any nature which give any Person (other than Origin) the right to acquire or control any capital stock of the Origin Subsidiaries, whether or not such rights are presently exercisable. Except as indicated in the preceding sentence, there are no operational contracts and/or equity transfer arrangements, options, warrants or other contractual rights (oral or written), trusts or other arrangements of any nature which give any Person (other than Origin) the right to any asset, income, dividend, distribution, property interest or direct or beneficial interest in any, or from any, of the Origin Subsidiaries. (b) Capitalization. The authorized capital stock of each Origin Subsidiary is set forth on Schedule A. Except for Beijing Origin State Harvest Biotechnology Limited, the capital of which will be paid in the amount of $1,000,000 at closing by CCAC or Chardan Sub but for which the capital is committed, all of the outstanding shares of capital stock of each Origin Subsidiary are validly issued, fully paid and non-assessable. SECTION 4.02 Organization of the Origin Subsidiaries. Each Origin Subsidiary is a corporate entity duly organized, validly existing and in good standing under the law of its jurisdiction of incorporation as set forth on Schedule 4.02. Each Origin Subsidiary is duly qualified to do business in each of the jurisdictions in which the property owned, leased or operated by such Origin Subsidiary or the nature of the business which it conducts requires qualification (which jurisdictions are listed in Schedule 4.02), or if not so qualified, such failure or failures, in the aggregate, would not have an Origin Material Adverse Effect. No Origin Subsidiary owns, directly or indirectly, any capital stock or any other securities of any issuer or any equity interest in any other entity and is not a party to any agreement to acquire any such securities or interest, except as set forth on Schedule 4.02. Each Origin Subsidiary has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted and as presently contemplated to be conducted. 12
SECTION 4.03 Authority and Corporate Action; No Conflict. -------------------------------------------- (a) Each Origin Subsidiary has all necessary power and authority to enter into the Transaction Documents to which it is a party and to consummate the transactions contemplated thereby. All action, corporate and otherwise, necessary to be taken by each Origin Subsidiary to authorize the execution, delivery and performance of the Transaction Documents in connection with the Origin Stock Purchase has been duly and validly taken. The Transaction Documents have been duly executed and delivered by each Origin Subsidiary party to such agreements and constitute the valid, binding, and enforceable obligation of each of them, enforceable in accordance with their terms, except (i) as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity) and (ii) as enforceability of any indemnification provision may be limited by the law and public policy of the PRC. (b) Neither the execution nor delivery of the Transaction Documents or any of the other documents contemplated thereby by any Origin Subsidiary nor the consummation of the transactions contemplated thereby will (i) except as set forth in Schedule 4.03, conflict with, result in a breach or violation of or constitute (or with notice of lapse of time or both constitute) a default under, (A) the charter documents of any Origin Subsidiary or (B) any law, statute, regulation, order, judgment or decree or any instrument, contract or other agreement to which any Origin Subsidiary is a party or by which any of them (or any of the properties or assets of Origin) is subject or bound; (ii) result in the creation of, or give any party the right to create, any lien, charge, option, security interest or other encumbrance upon the assets of such Origin Subsidiary; (iii) terminate or modify, or give any third party the right to terminate or modify, the provisions or terms of any contract to which any Origin Subsidiary is a party, or (iv) result in any suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, qualification, authorization or approval applicable to any Origin Subsidiary. 13
SECTION 4.04 Consents and Approvals. Except as listed and described on Schedule 4.04, the execution and delivery of the Transaction Documents by each Origin Subsidiary do not, and the performance of the Transaction Documents by each of them will not, require any consent, approval, authorization or other action by, or filing with or notification to, any Governmental Authority, except where failure to obtain such consents, approvals, authorizations or actions, or to make such filings or notifications, would not prevent any of them from performing any of their material obligations under the Transaction Documents and would not cause an Origin Material Adverse Effect. SECTION 4.05 Financial Statements. Prior to the execution of this Agreement, Origin has delivered to CCAC consolidated balance sheets as at December 31, 2001, 2002 and 2003, and related consolidated statements of income and source and application of funds for the three years ended December 31, 2003, audited by Origin's Accountants, and the notes, comments, schedules, and supplemental data therein (collectively, the "2003 Financial Statements") and an interim consolidated balance sheet as of September 30, 2004, and related consolidated statements of income and source and application of funds for the nine months then ended, reviewed by Origin's accountants (collectively, the "September Financial Statements"). The 2003 Financial Statements and September Financial Statements will be prepared in accordance with PRC GAAP reconciled to US GAAP or prepared in accordance with US GAAP throughout the periods indicated and fairly present the consolidated financial condition of Origin at their respective dates and the consolidated results of the operations of Origin for the periods covered thereby in accordance with PRC GAAP reconciled to US GAAP or in accordance with US GAAP. The 2003 Financial Statements and September Financial Statements are included in Schedule 4.05 to this Agreement. SECTION 4.06 No Undisclosed Liabilities. No Origin Subsidiary has any liabilities, whether known or unknown, absolute, accrued, contingent or otherwise, except (a) as and to the extent reflected or reserved against on the September Financial Statements, and (b) those since September 30, 2004, incurred in the ordinary course of business and consistent with prior practice. The September Financial Statements and Schedule 4.06 together contain an accurate and complete list and description and all liabilities of the Origin Subsidiaries whether or not reflected or reserved against on the September Financial Statements which individually exceeds US $75,000 or, if related liabilities, exceed $75,000 (or the equivalent of US $75,000). 14
SECTION 4.07 Real Property. The September Financial Statements and Schedule 4.07 together contain an accurate and complete list and description of all real estate owned by each Origin Subsidiary as well as any other real estate that is in the possession of or leased by each Origin Subsidiary and the improvements (including buildings and other structures) located on such real estate (collectively, the "Real Property"), and lists and accurately describes any leases under which any such Real Property is possessed (the "Real Estate Leases"). No Origin Subsidiary is in default under any of the Real Estate Leases, and no Origin Subsidiary is aware of any default by any of the lessors thereunder. SECTION 4.08 Certain Personal Property. The September Financial Statements and Schedule 4.08 together contain an accurate and complete list and description of the material fixed assets of each Origin Subsidiary specifying the location of all material items of tangible personal property of each Origin Subsidiary that were included in its respective September Financial Statements. SECTION 4.09 Non-Real Estate Leases. The September Financial Statements and Schedule 4.09 together contain an accurate and complete list and description of all assets and property (other than Real Property and Real Estate Leases) that are used as of the date of this Agreement in the operation of the Business and that are possessed by any Origin Subsidiary under an existing lease. All of such leases are referred to herein as the "Non-Real Estate Leases." No Origin Subsidiary is in default under any of the Non-Real Estate Leases, and no Origin Subsidiary is aware of any default by any of the lessors hereunder. SECTION 4.10 Accounts Receivable. The accounts receivable of each Origin Subsidiary reflected on the September Financial Statements and created after September 30, 2004, are bona fide accounts receivable, created in the ordinary course of business and subject to historical rates of uncollected liabilities, as reserved against on the Origin financial statements, are good and collectible within periods of time normally prevailing in the industry at the aggregate recorded amounts thereof. 15
SECTION 4.11 Inventory. The inventory of each Origin Subsidiary consists of items of quality and quantity useable or saleable in the ordinary course of business at regular sales prices, subject to (a) changes in price levels as a result of economic and market conditions and (b) reserves reflected in the respective September Financial Statements for spoiled and discontinued items. Schedule 4.11 sets forth an estimate of the inventory of each Origin Subsidiary as of the date of this Agreement, but it is understood that any material or intentional inaccuracy in the Schedule 4.11 estimates will not be a breach of this representation and warranty. SECTION 4.12 Contracts, Obligations and Commitments. Except as set forth in the September Financial Statements and on Schedule 4.12 together, other than the Real Estate Leases and the Non-Real Estate Leases, no Origin Subsidiary has any existing contract, obligation or commitment (written or oral) of any nature (other than obligations involving payments of less than $150,000 individually or $150,000 in the aggregate), including without limitation the following: (a) Employment, bonus, severance or consulting agreements, retirement, stock bonus, stock option, or similar plans; (b) Loans or other agreements, notes, indentures or instruments relating to or evidencing indebtedness for borrowed money or mortgaging, pledging or granting or creating a lien or security interest or other encumbrance on any of the assets of Origin or such Origin Subsidiary or any agreement or instrument evidencing any guaranty by Origin or such Origin Subsidiary of payment or performance by any other Person; (c) Agreements of any kind relating to employment matters such as labor agreements or agreements providing for benefits under any plan; (d) Any contract or series of contracts with the same Person for the furnishing or purchase of equipment, goods or services, except for purchase and sales orders in the ordinary course of business; 16
(e) Any joint venture contract or arrangement or other agreement involving a sharing of profits or expenses to which the Origin Subsidiary is a party or by which it is bound; (f) Agreements which limit the freedom of any Origin Subsidiary to compete in any line of business or in any geographic area or with any Person; (g) Agreements providing for disposition of the assets, businesses or a direct or indirect ownership interest in Origin or any Origin Subsidiary; (h) Any contract, commitment or arrangement not made in the ordinary course of business of such Origin Subsidiary; or (i) Agreements with any Governmental Authority. Except as set forth on Schedule 4.12, each Contract to which any Origin Subsidiary is a party is a valid and binding obligation of such Origin Subsidiary and, to the best of the knowledge of each Origin Subsidiary and the Origin Stockholders, enforceable in accordance with its terms (except as the enforceability thereof may be limited by any applicable bankruptcy, insolvency or other laws affecting creditors' rights generally or by general principles of equity, regardless of whether such enforceability is considered in equity or at law), and is in full force and effect (except for any Contracts which by their terms expire after the date hereof or are terminated after the date hereof in accordance with the terms thereof, provided, however, that no Origin Subsidiary will terminate any Contract after the date hereof without the prior written consent of CCAC, which consent shall not be unreasonably withheld or delayed), and no Origin Subsidiary has breached any material provision of, nor is in default in any material respect under the terms of any of the Contracts. SECTION 4.13 Licenses, Permits, Etc. Schedule 4.13 contains an accurate and complete list and description of all material Permits used in or necessary for the ownership and operation of the Business, and true, complete and accurate copies of all Permits previously have been delivered to CCAC. Each Origin Subsidiary possesses all Permits necessary, in all material respects, to own and operate its portion of the Business. All such Permits are in full force and effect and each Origin Subsidiary and the officers, directors and employees of such Origin Subsidiary have complied and each Origin Subsidiary will comply, and 17
each Origin Subsidiary shall cause its respective officers, directors and employees to comply, in all material respects with all terms of such Permits and will take any and all actions necessary to ensure that all such Permits remain in full force and effect and that the terms of such Permits are not violated through the Closing Date. No Origin Subsidiary is in default in any material respect under any of such Permits and no event has occurred and no condition exists which, with the giving of notice, the passage of time, or both, would constitute a default thereunder. Neither the execution and delivery of this Agreement, the Transaction Documents or any of the other documents contemplated hereby nor the consummation of the transactions contemplated hereby or thereby nor compliance by any Origin Subsidiary with any of the provisions hereof or thereof will result in any suspension, revocation, impairment, forfeiture or nonrenewal of any Permit applicable to the Business. SECTION 4.14 Intellectual Property Rights. (a) Intellectual Property. Schedule 4.14(a) contains an accurate and complete list and description of all Intellectual Property used by each Origin Subsidiary in connection with the Business, specifying as to each (i) the nature of such right, (ii) the ownership thereof, (iii) the Governmental Authority that has issued or recorded a registration or certificate or similar document with respect thereto or with which an application for such a registration, certificate or similar document is pending and (iv) any applicable registration, certificate or application number. Each Origin Subsidiary has provided CCAC with complete and accurate copies of all registered Intellectual Property of such Origin Subsidiary relating to the Business. (b) Other Intellectual Property Rights. Schedule 4.14(b) includes an accurate and complete list and description of all material inventions and trade secrets that each Origin Subsidiary has formally documented and that are owned, used, controlled, authorized for use or held by, or licensed to, such Origin Subsidiary that relate to or are necessary to the Business, including as conducted at or prior to Closing or as proposed to be conducted by each Origin Subsidiary, together with a designation of the ownership thereof. (c) Software. Schedule 4.14(c) includes an accurate and complete list and description of all Software used by each Origin Subsidiary in connection with the Business, including as conducted at or prior to Closing or as proposed to be conducted by each Origin Subsidiary, together with a designation of ownership. 18
(d) Out-Bound Licenses. Schedule 4.14(d) includes an accurate and complete list and description of all licenses, sublicenses, and other Contracts pursuant to which (i) any Person is authorized to use any Intellectual Property rights used in connection with the Business or (ii) any right of any Origin Subsidiary in, or such Origin Subsidiary's use of, any Intellectual Property right used in connection with the Business is otherwise materially affected. (e) In-Bound Licenses. Schedule 4.14(e) includes an accurate and complete list and description of all licenses, sublicenses, and other Contracts pursuant to which each Origin Subsidiary is authorized to use, or can be authorized to use (through, for example, the grant of a sublicense), any Intellectual Property owned by any other Person (including any rights enjoyed by any Origin Subsidiary by reason of its relationship with one of its affiliates) in connection with the Business. (f) Ownership. As of the date hereof, each Origin Subsidiary owns, and at the Closing Date, will own all right, title and interest in and to all Intellectual Property rights used in connection with the Business, and those Intellectual Property rights were developed and created solely by employees of such Origin Subsidiary acting within the scope of their employment or by third parties (all of which employees and third parties have validly and irrevocably assigned all of their rights therein to such Origin Subsidiary) and each Origin Subsidiary is duly and validly licensed to use all other Intellectual Property used in connection with the Business, free and clear of royalties (except as otherwise set forth in Schedule 4.14(g)). No Origin Subsidiary has assigned or transferred ownership of, agreed to so assign or transfer ownership of, or granted any exclusive license of or exclusive right to use, any Intellectual Property used in connection with the Business. (g) Royalties. Except for licenses listed and accurately and completely described on the September Financial Statements or Schedule 4.14(g) as royalty-bearing, there are (and will be upon Closing) no royalties, honoraria, fees, or other payments payable by any Origin Subsidiary to any Person by reason of the ownership, use, license, sale, or disposition of any Intellectual Property used in connection with the Business. (h) Infringement. The Intellectual Property used in connection with the Business by each Origin Subsidiary does not infringe or misappropriate any Intellectual Property rights of any Person under the laws of any jurisdiction. 19
To the best of its knowledge, no notice, claim or other communication (in writing or otherwise) has been received from any Person: (A) asserting any ownership interest in any material Intellectual Property used in connection with the Business; (B) of any actual, alleged, possible or potential infringement, misappropriation or unauthorized use or disclosure of any Intellectual Property used in connection with the Business, defamation of any Person, or violation of any other right of any Person (including any right to privacy or publicity) by any Origin Subsidiary or relating to the Intellectual Property used in connection with the Business; or (C) suggesting or inviting any Origin Subsidiary to take a license or otherwise obtain the right to use any Intellectual Property in connection with the Business. To the best of its knowledge, no Person is infringing, misappropriating, using or disclosing in an unauthorized manner any Intellectual Property used in connection with the Business owned by, exclusively licensed to, held by or for the benefit of, or otherwise controlled by such Origin Subsidiary. (i) Proceedings. Except as set forth on Schedule 4.14(i), there are no current or, to the best of its knowledge, threatened Proceedings (including but not limited to any interference, reexamination, cancellation, or opposition proceedings) arising out of a right or claimed right of any person before any Governmental Authority anywhere in the world related to any Intellectual Property used in connection with the Business owned by, exclusively licensed to, held by or for the benefit of, or otherwise controlled by any Origin Subsidiary. SECTION 4.15 Title to and Condition of Assets. --------------------------------- (a) Each Origin Subsidiary has good and marketable title to all the properties and assets owned by it. Except as set forth in the September Financial Statements and Schedule 4.15 together, none of such properties and assets is subject to any Lien, option to purchase or lease, easement, restriction, covenant, condition or imperfection of title or adverse claim of any nature whatsoever, direct or indirect, whether accrued, absolute, contingent or otherwise. (b) To the best of its knowledge, except as set forth in Schedule 4.15, all buildings, structures, improvements, fixtures, facilities, equipment, all components of all buildings, structures and other improvements included within the Real Property, including but not limited to the roofs and structural elements thereof and the heating, ventilation, air conditioning, plumbing, electrical, mechanical, sewer, waste water, storm water, paving and parking equipment, systems and facilities included therein conform in all material respects to all applicable Laws of every Governmental Authority having 20
jurisdiction over any of the Real Property, and every instrumentality or agency thereof. There are no unsatisfied requests for any repairs, restorations or improvements to the Real Property from any Person, including without limitation any Governmental Authority, except such requests of employees as have been denied in the exercise of prudent business and operational practices. There are no outstanding contracts made by any Origin Subsidiary for any improvements to the Real Property which have not been fully paid for. No person, other than each Origin Subsidiary, owns any equipment or other tangible assets or properties situated on the Real Property or necessary to the operation of the Business, except for leased items disclosed in Schedule 4.09 hereto. (c) To the best of its knowledge, the use and operation of the Real Property is in full compliance in all material respects with all Laws, covenants, conditions, restrictions, easements, disposition agreements and similar matters affecting the Real Property and, effective as of the Closing, each Origin Subsidiary shall have the right under all Laws to continue the use and operation of the Real Property in the conduct of the Business. No Origin Subsidiary has received any notice of any violation (or claimed violation) of or investigation regarding any Laws. (d) To the best its knowledge, none of the buildings, structures and other improvements located on the Real Property, the appurtenances thereto or the equipment therein or the operation or maintenance thereof violates any restrictive covenant or encroaches on any property owned by others or any easement, right of way or other encumbrance or restriction affecting or burdening such Real Property in any manner which would have an Origin Material Adverse Effect on the condition (financial or otherwise), assets, operations or results of operations of such Origin Subsidiary, nor does any building or structure of any third party encroach upon the Real Property or any easement or right of way benefiting the Real Property. To the best its knowledge, the Real Property and its continued use, occupancy and operation as used, occupied and operated in the conduct of the Business does not constitute a nonconforming use under any Law. (e) No Origin Subsidiary has received written notice of, or otherwise had knowledge of, any condemnation, fire, health, safety, building, environmental, hazardous substances, pollution control, zoning or other land use regulatory proceedings, either instituted or planned to be instituted, which would have an effect on the ownership, use and operation of any portion of the Real Property for its intended purpose or the value of any material portion of the Real Property, nor has any Origin Subsidiary received written notice of any special assessment proceedings affecting any of the Real Property. 21
(f) To the best of its knowledge, all water, sewer, gas, electric, telephone and drainage facilities, and all other utilities required by any applicable law are installed to the property lines of the Real Property, are connected pursuant to valid permits to municipal or public utility services or proper drainage facilities to permit full compliance with the requirement of all Laws. To the best its knowledge, no fact or condition exists which could result in the termination or reduction of the current access from the Real Property to existing roads or to sewer or other utility services presently serving the Real Property. (g) All Permits, certificates, easements and rights of way, including proof of dedication, required from all governmental entities having jurisdiction over the Real Property for the use and operation of the Real Property in the conduct of the Business and to ensure vehicular and pedestrian ingress to and egress from the Real Property have been obtained. (h) No Origin Subsidiary has received written notice and has any knowledge of any pending or threatened condemnation proceeding affecting the Real Property or any part thereof or of any sale or other disposition of the Real Property or any part thereof in lieu of condemnation. (i) No portion of the Real Property has suffered any material damage by fire or other casualty which has not heretofore been completely repaired and restored to its original condition. (j) There are no encroachments or other facts or conditions affecting the Real Property that would be revealed by an accurate survey thereof which would, individually or in the aggregate, interfere in any material respect with the use, occupancy or operation thereof as used, occupied and operated in the conduct of the Business. SECTION 4.16 Taxes, Tax Returns and Audits. Except as specifically set forth in the September Financial Statements or Schedule 4.16, (a) each Origin Subsidiary has filed on a timely basis (taking into account any extensions 22
received from the relevant taxing authorities) all returns and reports pertaining to all Taxes that are or were required to be filed by such Origin Subsidiary with the appropriate taxing authorities in all jurisdictions in which such returns and reports are or were required to be filed, and all such returns and reports are true, correct and complete in all material respects, (b) all Taxes that are due from or may be asserted against each Origin Subsidiary (including deferred Taxes) in respect of or attributable to all periods ending on or before the Closing Date have been or will be fully paid, deposited or adequately provided for on the books and financial statements of each Origin Subsidiary or are being contested in good faith by appropriate proceedings, (c) no issues have been raised (or are currently pending) by any taxing authority in connection with any of the returns and reports referred to in clause (a) which might be determined adversely to any Origin Subsidiary and which could have an Origin Material adverse effect, (d) no Origin Subsidiary has given or requested to give waivers or extensions of any statute of limitations with respect to the payment of Taxes and (e) no tax liens which have not been satisfied or discharged by payment or concession by the relevant taxing authority or as to which sufficient reserves have not been established on the books and financial statements of each Origin Subsidiary are in force as of the date hereof. Schedule 4.16 sets forth all accurate and complete list of each taxing authority to which the Origin Subsidiaries are required or may be required to file notices, returns or payments, with a brief description of the tax or exemption applicable to the Origin Subsidiary. SECTION 4.17 Absence of Certain Changes. Except as set forth on Schedule 4.17 or agreed by CCAC in advance and incurred in ordinary business in compliance with past practice, no Origin Subsidiary has, since September 30, 2004: (a) issued, delivered or agreed to issue or deliver any stock, bonds or other corporate securities (whether authorized and unissued or held in the treasury), or granted or agreed to grant any options (including employee stock options), warrants or other rights for the issue thereof; (b) borrowed or agreed to borrow any funds exceeding $200,000 (or other currency equivalent) except current bank borrowings not in excess of the amount thereof shown on the September Financial Statements; (c) incurred any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due exceeding $200,000 (or other currency equivalent), except current liabilities for trade obligations incurred in the ordinary course of business and consistent with prior practice; 23
(d) discharged or satisfied any encumbrance exceeding $200,000 (or other currency equivalent) other than those then required to be discharged or satisfied, or paid any obligation or liability other than current liabilities shown on the September Financial Statements and liabilities incurred since September 30, 2004 in the ordinary course of business and consistent with prior practice; (e) sold, transferred, leased to others or otherwise disposed of any assets exceeding $100,000 (or other currency equivalent), except for inventories sold in the ordinary course of business and assets no longer used or useful in the conduct of its business, or canceled or compromised any debt or claim, or waived or released any right of substantial value; (f) received any notice of termination of any Contract, Lease or other agreement, or suffered any damage, destruction or loss exceeding $100,000 (or other currency equivalent) (whether or not covered by insurance) which, in any case or in the aggregate, has had, or might reasonably be expected to have, an Origin Material Adverse Effect; (g) had any material change in its relations with its employees or agents, clients or insurance carriers which has had or might reasonably be expected to have an Origin Material Adverse Effect; (h) transferred or granted any rights under, or entered into any settlement regarding the breach or infringement of, any Intellectual Property or modified any existing rights with respect thereto; (i) declared or made, or agreed to declare or make, any payment of dividends or distributions of any assets of any kind whatsoever to any shareholder of any Origin Subsidiary or any affiliate of any shareholder of any Origin Subsidiary, or purchased or redeemed, or agreed to purchase or redeem, any of its capital stock, or made or agreed to make any payment to any shareholder of any Origin Subsidiary or any affiliate of any shareholder of any Origin Subsidiary, whether on account of debt, management fees or otherwise; (j) suffered any other material adverse effect in its assets, liabilities, financial condition, results of operations or business; or 24
(k) entered into any agreement or made any commitment to take any of the types of action described in any of the foregoing clauses (other than clauses (f), (g) or (j)). SECTION 4.18 Employee Plans; Labor Matters. The September Financial Statements and Schedule 4.18 together contain an accurate and complete list and description of all employee benefits, including without limitation pension, medical insurance, work related injury insurance, birth and nursery insurance, unemployment insurance and educational benefits, which the Origin Subsidiaries are obligated to pay, including amounts and recipients of such payments. Except as disclosed in the September Financial Statements or Schedule 4.18, each Origin Subsidiary has complied with all applicable Laws relating to employment benefits, including, without limitation, pension, medical insurance, work-related injury insurance, birth and nursery insurance, unemployment insurance and educational benefits. All contributions or payments required to be made by each Origin Subsidiary with respect to employee benefits have been made on or before their due dates. Except as disclosed in the September Financial Statements or Schedule 4.18, all such contributions and payments required to be made by any employees of any Origin Subsidiary with respect to the employee benefits have been fully deducted and paid to the relevant Governmental Authorities on or before their due dates, and no such deductions have been challenged or disallowed by any Governmental Authority or any employee of any Origin Subsidiary. SECTION 4.19 Compliance with Law. To the best of its knowledge, the Business has been conducted, and is now being conducted, by each Origin Subsidiary in compliance in all material respects with all applicable Laws. No Origin Subsidiary and no officers, directors and employees of any Origin Subsidiary (i) is, and during the past five years was, in violation of, or not in compliance with, in any material respect all such applicable Laws with respect to the conduct of the Business; and (ii) has received any notice from any Governmental Authority, and to the best of its knowledge, no Action is threatened which alleges that such Origin Subsidiary has violated, or not complied with, any of the above. SECTION 4.20 No Illegal or Improper Transactions. No Origin Subsidiary nor any other officer, director, employee, agent or affiliate of any Origin Subsidiary has offered, paid or agreed to pay to any Person or entity (including any governmental official) or solicited, received or agreed to receive from any such Person or entity, directly or indirectly, in any manner which is in violation of any applicable policy of such Origin Subsidiary, ordinance, regulation or law, any money or anything of value for the purpose or with the intent of (i) obtaining or maintaining business for such Origin Subsidiary, (ii) facilitating the purchase or sale of any product or service, or (iii) avoiding the imposition of any fine or penalty. 25
SECTION 4.21 Related Transactions. Except as set forth in the September Financial Statements or Schedule 4.21, and except for compensation to employees for services rendered, no Origin Subsidiary and no other current or former director, officer, employee or shareholder or any associate (as defined in the rules promulgated under the Exchange Act) of any Origin Subsidiary is presently, or during the last three fiscal years has been, (a) a party to any transaction with any Origin Subsidiary (including, but not limited to, any Contract providing for the furnishing of services by, or rental of real or personal property from, or otherwise requiring payments to, any such director, officer, employee or shareholder or such associate), or (b) the direct or indirect owner of an interest in any corporation, firm, association or business organization which is a present (or potential) competitor, supplier or customer of any Origin Subsidiary nor does any such Person receive income from any source other than such Origin Subsidiary which relates to the business of, or should properly accrue to, such Origin Subsidiary. SECTION 4.22 Records. The books of account, minute books, stock certificate books and stock transfer ledgers of each Origin Subsidiary are complete and correct in all material respects, and there have been no material transactions involving any Origin Subsidiary which are required to be set forth therein and which have not been so set forth. SECTION 4.23 Insurance. The September Financial Statements and Schedule 4.23 together set forth a complete list and complete and accurate description of all insurance policies maintained by each Origin Subsidiary which are in force as of the date hereof and the amounts of coverage thereunder. During the past three years, no Origin Subsidiary has been refused insurance in connection with the Business, nor has any claim in excess of $10,000 been made in respect of any such agreements or policies, except as set forth in the September Financial Statements and Schedule 4.23 hereto. Such insurance is adequate to protect each Origin Subsidiary and its financial condition against the risks involved in the conduct of the Business. SECTION 4.24 Litigation. Except as set forth in Schedule 4.24, there are no Actions by any Governmental Authority or Person by or against any Origin Subsidiary, nor to the best of its knowledge, any threatened Action by any Governmental Authority or Person against any Origin Subsidiary. No Origin Subsidiary or any of their respective property is subject to any Action by a Governmental Authority or Person which would cause an Origin Material Adverse Effect. 26
SECTION 4.25 Settled Litigation. Schedule 4.25 sets forth a description of all threatened, withdrawn, settled or litigated claims against the Origin Subsidiaries during the last three years. SECTION 4.26 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of any Origin Subsidiary or Origin Stockholder. SECTION 4.27 Disclosure. No representation or warranty by any Origin Subsidiary or Origin Stockholder contained in this Agreement and no information contained in any Schedule or other instrument furnished or to be furnished to CCAC pursuant to this Agreement or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein not misleading. SECTION 4.28 Survival of Representations and Warranties. The representations and warranties of each Origin Subsidiary set forth in this Agreement shall survive the Closing for a period of four years, except that the representations and warranties set forth in Sections 4.01, 4.02 and 4.03 shall survive without limitation as to time and the representations and warranties set forth in Section 4.16 shall survive until the expiration of the statute of limitations with respect to each respective Tax. ARTICLE V REPRESENTATIONS AND WARRANTIES OF CCAC -------------------------------------- CCAC represents and warrants to Origin, each Origin Subsidiary and each Origin Stockholder as follows: SECTION 5.01 Organization. CCAC is a corporation duly organized, validly existing and in good standing under the law of Delaware and Chardan Sub will be organized under the laws of the BVI, respectively. 27
SECTION 5.02 Capitalization. (a) Capitalization. (i) The authorized capital stock of CCAC includes 20,000,000 shares of common stock and 1,000,000 shares of preferred stock of which 4,906,000 shares of common stock are issued and outstanding and no shares of preferred stock are issued and outstanding. There are 8,050,000 warrants outstanding to purchase up to 8,050,000 shares of common stock at a current exercise price of $5.00 per share (the number and price subject to adjustment), expiring March 22, 2009 and 350,000 warrants exercisable at $9.90 to purchase 350,000 shares of common stock and 700,000 underlying warrants, each exercisable for one share at $6.40 per underlying warrant. Except as set forth on Schedule 5.02(a), there are no other options, warrants or rights (other than as contemplated by this Agreement) to acquire any capital stock of CCAC. (ii) The authorized capital stock of Chardan Sub will include 20,000,000 shares of common stock and 1,000,000 shares of preferred stock, of which 100 shares of common stock will be issued and outstanding solely to CCAC and no shares of preferred stock will be issued and outstanding. There will be no options, warrants or rights (other than as contemplated by this Agreement) to acquire any capital stock of Chardan Sub. (iii) Upon the merger of CCAC with and into Chardan Sub, for the purpose of re-domestication into the BVI, (i) there will be issued 4,906,000 shares of common stock to the current shareholders of CCAC, and the existing 100 shares of Chardan Sub Stock issued and outstanding shares of Chardan Sub Stock will be extinguished as a contribution to capital and (ii) there will be assumed the obligation to issue up to 9,100,000 shares of common stock upon exercise of the currently outstanding CCAC warrants and options set forth herein and on Schedule 5.02(a). (iv) Upon the acquisition of Origin as contemplated by this Agreement, there will be issued the shares of Chardan Sub Stock as set forth elsewhere in this Agreement. 28
(b) Ownership. CCAC will be the registered and sole beneficial owner of all the currently issued and outstanding shares of Chardan Sub Stock, aggregating 100 shares. (c) Disputes. There are no disputes, arbitrations or litigation proceedings involving CCAC with respect to the common stock and outstanding warrants, options and other rights relating to the capital stock of CCAC. (d) Issuances. Except for the issuance of common stock, warrants and options as set forth in the SEC Reports of Chardan and the Registration Statement on Form SB-2, SEC Registration Statement No. 333-111970, there have not been any issuances of capital securities or options, warrants or rights to acquire the capital securities of CCAC. SECTION 5.03 Authority and Corporate Action; No Conflict. -------------------------------------------- (a) CCAC has all necessary corporate power and authority to enter this Agreement and, subject to the requirement to obtain stockholder approval, to consummate the transactions contemplated hereby. Except for the actions required to redomesticate CCAC in the British Virgin Islands, all board of directors action necessary to be taken by CCAC to authorize the execution, delivery and performance of this Agreement, the Transaction Documents and all other agreements delivered in connection with this transaction has been duly and validly taken. This Agreement has been duly executed and delivered by CCAC and constitutes the valid, binding, and enforceable obligation of CCAC, enforceable in accordance with its terms, except (i) as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or similar laws of general application now or hereafter in effect affecting the rights and remedies of creditors and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity), (ii) as enforceability of any indemnification provision may be limited by federal and state securities laws and public policy and (iii) as enforceability may be limited by the absence of stockholder approval. (b) Neither the execution and delivery of this Agreement or any of the other documents contemplated hereby by CCAC nor (assuming receipt of stockholder approval) the consummation of the transactions contemplated hereby or thereby will (i) conflict with, result in a breach or violation of or constitute (or with notice of lapse of time or both constitute) a default under, (A) the Certificate of Incorporation or By-Laws of CCAC or (B) any law, statute, regulation, order, judgment or decree or any instrument contract or other 29
agreement to which CCAC is a party or by which CCAC (or any of the properties or assets of CCAC) is subject or bound; (ii) result in the creation of, or give any party the right to create, any lien, charge, option, security interest or other encumbrance upon the assets of CCAC; (iii) terminate or modify, or give any third party the right to terminate or modify, the provisions or terms of any contract to which CCAC is a party; or (iv) result in any suspension, revocation, impairment, forfeiture or nonrenewal of any permit, license, qualification, authorization or approval applicable to CCAC. SECTION 5.04 Consents and Approvals. Other than the requirement to obtain stockholder approval, satisfy the redomestication and merger requirements of Delaware and the British Virgin Islands or as set forth on Schedule 5.04, the execution and delivery of this Agreement and the Transaction Documents by CCAC does not, and the performance of this Agreement and the Transaction Documents by each will not, require any consent, approval, authorization or other action by, or filing with or notification to, any Governmental Authority, except where failure to obtain such consents, approvals, authorizations or actions, or to make such filings or notifications, would not prevent it from performing any of its material obligations under this Agreement and the Transaction Documents. SECTION 5.05 Valid Issuance of Chardan Sub Stock. At the Closing, the shares of Chardan Sub Stock to be issued to the Origin Stockholders hereunder will be duly and validly authorized and, when issued and delivered in accordance with the terms hereof for the consideration provided for herein, will be validly issued and will constitute legally binding obligations of Chardan Sub in accordance with their terms and will have been issued in compliance with all applicable federal and state securities laws. SECTION 5.06 Financial Statements. (a) The audited consolidated financial statements and the unaudited consolidated financial statements of CCAC included in CCAC's Annual Report on Form 10-KSB and its Quarterly Reports on Form 10-QSB that are referred to in Section 5.06 fairly present in conformity with GAAP applied on a consistent basis the financial position and assets and liabilities of CCAC as of the dates thereof and CCAC's results of operations and cash flows for the periods then ended (subject, in the case of any unaudited interim financial statement, to normal, recurring year-end adjustments which were not or are not expected to be material in amount). The balance sheet of CCAC as of September 30, 2004 that is included in such financial statements is referred to herein as "CCAC's Balance Sheet." 30
(b) Attached hereto as Schedule 5.06(b) is an unaudited, unreviewed balance sheet prepared by management of CCAC as of a date within seven days prior to the date of this Agreement of CCAC, prepared in accordance with GAAP, applied on a consistent basis with prior practice of CCAC. SECTION 5.07 SEC Reports. (a) CCAC has delivered to Origin or there have been available by public means (i) CCAC's Annual Report on Form 10-KSB for the period ended December 31, 2003, (ii) CCAC's Quarterly Reports on Form 10-QSB for the quarters ended March 31, 2004 and June 30, 2004 and September 30,2004 (iii) CCAC's prospectus, dated March 16, 2004, relating to its initial public offering of securities, and (iv) all other reports filed by CCAC under the Exchange Act (all of such materials, together with any amendments thereto and documents incorporated by reference therein, are referred to herein as the "SEC Reports"). (b) As of its filing date or, if applicable, its effective date, each SEC Report complied in all material respects with the requirements of the Laws applicable to CCAC for such SEC Report, including the Securities Act and the Exchange Act. (c) Each SEC Report as of its filing date and the prospectus referred to in clause (iii) of Section 5.07(a), as of its effective date, did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. CCAC has filed all reports under the Exchange Act that were required to be filed as of the date hereof and will have filed all such reports required to have been filed through the Closing Date and has otherwise materially complied with all requirements of the Securities Act and the Exchange Act. SECTION 5.08 Trust Fund. As of the date hereof and at the Closing Date, CCAC has and will have no less than $20,527,500 invested in Government Securities in a trust account with JPMorgan Chase NY Bank, administered by Continental Stock Transfer & Trust Company, less such amounts, if any, as CCAC is required to pay to stockholders who elect to have their shares redeemed in accordance with the provisions of CCAC's Certificate of Incorporation. 31
SECTION 5.09 No Undisclosed Liabilities. CCAC does not have any liabilities, debts or cash contingencies, pledges in any form, obligations, undertakings or arrangements, whether known or unknown, absolute, accrued, contingent or otherwise, except (a) as and to the extent reflected or reserved against on CCAC's Balance Sheet; and (b) those incurred since September 30, 2004 in the ordinary course of business and consistent with prior practice. SECTION 5.10 Absence of Certain Changes. Except as set forth on Schedule 5.10 or as contemplated by this Agreement and those incurred in ordinary business consistent with past practice, CCAC has not, since September 30, 2004: (a) issued, delivered or agreed to issue or deliver any stock, bonds or other corporate securities (whether authorized and unissued or held in the treasury), or granted or agreed to grant any options (including employee stock options), warrants or other rights for the issue thereof; (b) been removed from trading on the OTC-BB because of a breach or violation of any applicable laws, or received notice by any security supervisory agencies warning or punishing CCAC due to a violation of exchange market rules or receive notice of termination or suspension in trading on the OTC-BB, except for suspensions for trading in normal situations; (c) borrowed or agreed to borrow any funds exceeding $200,000, except current bank borrowings not in excess of the amount thereof shown on the Balance Sheet; (d) incurred any obligation or liability, absolute, accrued, contingent or otherwise, whether due or to become due exceeding $200,000, except current liabilities for trade obligations incurred in the ordinary course of business and consistent with prior practice; (e) discharged or satisfied any encumbrance exceeding $200,000 other than those then required to be discharged or satisfied, or paid any obligation or liability other than current liabilities shown on the Balance Sheet and liabilities incurred since September 30, 2004 in the ordinary course of business and consistent with prior practice; (f) sold, transferred, leased to others or otherwise disposed of any assets exceeding $100,000, except for inventories sold in the ordinary course of business and assets no longer used or useful in the conduct of its business, or canceled or compromised any debt or claim, or waived or released any right of substantial value; 32
(g) received any notice of termination of any Contract, Lease or other agreement, or suffered any damage, destruction or loss exceeding $100,000 (whether or not covered by insurance) which, in any case or in the aggregate, has had, or might reasonably be expected to have, an CCAC Material Adverse Effect; (h) had any material change in its relations with its employees or agents, clients or insurance carriers which has had or might reasonably be expected to have an CCAC Material Adverse Effect; (i) suffered any other serious material adverse effect in its assets, liabilities, financial condition, results of operations or business; or (j) entered into any agreement or made any commitment to take any of the types of action described in any of the foregoing clauses (other than clauses (f), (g) or (i)). SECTION 5.11 Compliance with Law. The business of CCAC has been conducted, and is now being conducted, in compliance in all material respects with all applicable Laws. CCAC and its officers, directors and employees (i) are not, and during the periods of CCAC's existence were not, in violation of, or not in compliance with, in any material respect all such applicable Laws with respect to the conduct of the businesses of CCAC; and (ii) have not received any notice from any Governmental Authority, and to the best of the knowledge of CCAC none is threatened, alleging that CCAC has violated, or not complied with, any of the above. SECTION 5.12 Litigation. There are no actions, suits, arbitrations or other proceedings pending or, to the best of the knowledge of CCAC, threatened against CCAC at law or in equity before any Governmental Authority. Neither CCAC nor any of their property is subject to any order, judgment, injunction or decree that would have a material adverse effect on the business or financial condition of CCAC. SECTION 5.13 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the transaction contemplated by this Agreement based upon arrangements made by or on behalf of CCAC. 33
SECTION 5.14 Survival of Representations and Warranties. The representations and warranties of CCAC set forth in this Agreement shall survive the Closing for a period of four years, except that the representations in Section 5.02 shall survive without limitation as to time. SECTION 5.15 Records. The books of account, minute books, stock certificate books and stock transfer ledgers of CCAC are complete and correct in all material respects, and there have been no material transactions involving CCAC which are required to be set forth therein and which have not been so set forth. SECTION 5.16 Disclosure. No representation or warranty by CCAC contained in this Agreement and no information contained in any Schedule or other instrument furnished or to be furnished to Origin Stockholders or any Origin Subsidiaries pursuant to this Agreement or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein not misleading. ARTICLE VI COVENANTS OF ORIGIN, THE ORIGIN SUBSIDIARIES AND THE ORIGIN STOCKHOLDERS --------------------------- SECTION 6.01 Conduct of the Business. Origin, each Origin Subsidiary and each Origin Stockholder covenants and agrees that, from the date hereof through the Closing Date, except as otherwise set forth in this Agreement or with the prior written consent of CCAC, they shall, and shall use their best efforts to cause Origin each Origin Subsidiary to: (a) conduct the Business only in the ordinary course and in a manner consistent with the current practice of the Business, except as required to reorganize for the purpose of satisfying Section 6.14 hereof, to preserve substantially intact the business organization of each Origin Subsidiary, to keep available the services of the current employees of each Origin Subsidiary, to preserve the current relationships of each Origin Subsidiary with customers and other persons with which each Origin Subsidiary has significant business relations and to comply with all Laws; (b) except as required to reorganize for the purpose of satisfying Section 6.14 hereof, not pledge, sell, transfer, dispose or otherwise encumber or grant any rights or interests to others of any kind with respect to all or any part of the Origin Stock or Origin Subsidiary Stock, or enter into any discussions or negotiations with any other party to do so; 34
(c) except as required to reorganize for the purpose of satisfying Section 6.14 hereof, not pledge, sell, lease, transfer, dispose of or otherwise encumber any property or assets of any Origin Subsidiary, other than consistent with past practices and in the ordinary course of business of each Origin Subsidiary or enter into any discussions or negotiations with any other party to do so; (d) except as required to reorganize for the purpose of satisfying Section 6.14 hereof, not issue any shares of capital stock of Origin or any Origin Subsidiary or any other class of securities, whether debt (other than debt incurred in the ordinary course of business and consistent with past practice) or equity, of Origin or any Origin Subsidiary or any options therefor or any securities convertible into or exchangeable for capital stock of Origin or any Origin Subsidiary or enter into any agreements in respect of the ownership or control of such capital stock; (e) not declare any dividend or make any distribution in cash, securities or otherwise on the outstanding shares of capital stock of Origin or any Origin Subsidiary or directly or indirectly redeem, purchase or in any other manner whatsoever advance, transfer (other than in payment for goods received or services rendered in the ordinary course of business), or distribute to any of their affiliates or otherwise withdraw cash or cash equivalents in any manner inconsistent with established cash management practices, except to pay existing indebtedness of any Origin Subsidiary; (f) not make, agree to make or announce any general wage or salary increase or enter into any employment contract or, unless provided for on or before the date of this Agreement, increase the compensation payable or to become payable to any officer or employee of any Origin Subsidiary or adopt or increase the benefits of any bonus, insurance, pension or other employee benefit plan, payment or arrangement, except for those increases, consistent with past practices, normally occurring as the result of regularly scheduled salary reviews and increases, and except for increases directly or indirectly required as a result of changes in applicable law or regulations; 35
(g) not to amend the Memorandum and Articles of Association (or other organizational documents) of Origin or any Origin Subsidiary; (h) except as required to reorganize for the purpose of satisfying Section 6.14, not to merge or consolidate with, or acquire all or substantially all the assets of, or otherwise acquire any business operations of, any Person; (i) not to make any payments outside the ordinary course of business; and (j) not make any capital expenditures, except in accordance with prudent business and operational practices consistent with prior practice. SECTION 6.02 Access to Information. (a) Between the date of this Agreement and the Closing Date, Origin, each Origin Subsidiary and each Origin Stockholder will (i) permit CCAC and its Representatives reasonable access to all of the books, records, reports and other related materials, offices and other facilities and properties of Origin, each Origin Subsidiary and the Business; (ii) permit CCAC and its Representatives to make such inspections thereof as CCAC may reasonably request; and (iii) furnish CCAC and its Representatives with such financial and operating data (including without limitation the work papers of Origin's Accountants) and other information with respect to Origin and each Origin Subsidiary and the Business as CCAC may from time to time reasonably request. (b) Between the date of this Agreement and the Closing Date, CCAC shall be permitted to meet with and interview all employees of each Origin Subsidiary. SECTION 6.03 Insurance. Through the Closing Date, Origin and each Origin Stockholder shall cause Origin and each Origin Subsidiary to maintain insurance policies providing insurance coverage for the Business and the assets of Origin and each Origin Subsidiary of the kinds, in the amounts and against the risks as are commercially reasonable for the businesses and risks covered. SECTION 6.04 Protection of Confidential Information; Non-Competition. -------------------------------------------------------- (a) Confidential Information. Each Origin Stockholder acknowledges that: 36
(i) As a result of their stock ownership of and employment by the Origin Subsidiaries, they have obtained secret and confidential information concerning the Business including, without limitation, financial information, trade secrets and "know-how," customers, and certain methodologies ("Confidential Information"). (ii) The Origin Subsidiaries will suffer substantial damage which will be difficult to compute if they should divulge Confidential Information or enter a business competitive with that of the Origin Subsidiaries. (iii) The provisions of this Section are reasonable and necessary for the protection of the Business. (b) Maintain Confidentiality. Each Origin Stockholder agrees to not at any time after the date hereof divulge to any person or entity any Confidential Information obtained or learned as a result of stock ownership of Origin or any Origin Subsidiary and employment by Origin or any Origin Subsidiary except (i) with the express written consent of CCAC on or before the Closing Date and of Chardan Sub's Board of Directors thereafter; (ii) to the extent that any such information is in the public domain other than as a result of a breach of any obligations hereunder; or (iii) where required to be disclosed by court order, subpoena or other government process. If any Origin Stockholder shall be required to make disclosure pursuant to the provisions of clause (iii) of the preceding sentence, it will promptly, but in no event more than 72 hours after learning of such subpoena, court order, or other government process, notify, by personal delivery or by electronic means, confirmed by mail, Origin or the relevant Origin Subsidiary and, at Origin or the relevant Origin Subsidiary's expense, shall: (i) take all reasonably necessary steps required by Origin or the relevant Origin Subsidiary to defend against the enforcement of such subpoena, court order or other government process, and (ii) permit Origin or the relevant Origin Subsidiary to intervene and participate with counsel of its choice in any proceeding relating to the enforcement thereof. (c) Records. At the Closing, each Origin Stockholder will promptly deliver to Origin and each Origin Subsidiary all original memoranda, notes, records, reports, manuals, formula and other documents relating to the Business and all property associated therewith, which they then possess or have under their control; provided, however, that they shall be entitled to retain copies of such documents reasonably necessary to document their financial relationship with Origin and Origin Subsidiary. 37
(d) Non-Compete. During the Non-Competition Period, no Origin Stockholder, without the prior written permission of Origin, shall, anywhere in the PRC, Hong Kong and Taiwan, directly or indirectly, (i) enter into the employ of or render any services to any person, firm or corporation engaged in any business which is a "Competitive Business" (as defined below); (ii) engage in any Competitive Business for his own account; (iii) become associated with or interested in any Competitive Business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, trustee, consultant, advisor or in any other relationship or capacity; (iv) employ or retain, or have or cause any other person or entity to employ or retain, any person who was employed or retained by Origin, any Origin Subsidiary or any other Origin Stockholder in the six-month period prior to the date that all relationships of such person terminates with Origin, any Origin Subsidiary or other Origin Stockholder; or (v) solicit, interfere with, or endeavor to entice away from Origin, any Origin Subsidiary or any Origin Stockholder, for the benefit of a Competitive Business, any of its customers or other persons with whom Origin, any Origin Subsidiary or any Origin Stockholder has a business relationship. However, nothing in this Agreement shall preclude them from investing their personal assets in the securities of any corporation or other business entity which is engaged in a Competitive Business if such securities are traded on a national stock exchange or in the over-the-counter market and if such investment does not result in their beneficially owning, at any time, more than 1% of the publicly-traded equity securities of such Competitive Business. (e) Injunctive Relief. If any Origin Stockholder breaches, or threatens to breach, any of the provisions of Sections 6.04 (b), (c) or (d), Origin and each Origin Subsidiary shall have the right and remedy to have the provisions of this Section 6.04 specifically enforced by any Governmental Authority, it being acknowledged and agreed by each Origin Stockholder that any such breach or threatened breach will cause irreparable injury to Origin and the Origin Subsidiaries and that money damages will not provide an adequate remedy. (f) Modification of Scope. If any provision of Sections 6.04 (b), (c) or (d) is held to be unenforceable because of the scope, duration or area of its applicability, the Governmental Authority making such determination shall have the power to modify such scope, duration, or area, or all of them, and such provision or provisions shall then be applicable in such modified form. 38
(g) Competitive Business. As used in this Agreement, (i) "Competitive Business" means any business which operates in any aspect of the Business; and (ii) "Non-Competition Period" means the period beginning on the Closing Date and ending on the later of five years from the Closing Date or two years after the date all relationships between an Origin Stockholder and Origin or an Origin Subsidiary have been terminated, including relationships as a consultant or employee. SECTION 6.05 Post-Closing Assurances. Origin and each Origin Subsidiary from time to time after the Closing, at CCAC's request, will take such other actions and execute and deliver such other documents, certifications and further assurances as CCAC may reasonably require in order to manage and operate Origin and the Origin Subsidiaries and the Business, including but not limited to executing such certificates as may be reasonably requested by CCAC's Accountants in connection with any audit of the financial statements of Origin and any Origin Subsidiary for any period through the Closing Date. SECTION 6.06 No Other Negotiations. Until the earlier of the Closing or the termination of this Agreement, neither any Origin Stockholder nor Origin nor any Origin Subsidiary shall (a) solicit, encourage, directly or indirectly, any inquiries, discussions or proposals for, (b) continue, propose or enter into any negotiations or discussions looking toward, or (c) enter into any agreement or understanding providing for any acquisition of any capital stock of Origin, any Origin Subsidiary or of any part of their respective assets or the Business (in whole or in part), nor shall any Origin Stockholder or Origin Subsidiary provide any information to any Person for the purpose of evaluating or determining whether to make or pursue any such inquiries or proposals with respect to any such acquisition. Origin, each Origin Stockholder and each Origin Subsidiary shall immediately notify CCAC of any such inquiries or proposals or requests for information for such purpose. SECTION 6.07 No Securities Transactions. No Origin Stockholder nor any of their affiliates, directly or indirectly, shall engage in any transactions involving the securities of CCAC prior to the time of the making of a public announcement of the transactions contemplated by this Agreement. Each Origin Subsidiary shall use its best efforts to require each of its officers, directors, employees, agents and Representatives to comply with the foregoing requirement. 39
SECTION 6.08 Fulfillment of Conditions. Each Origin Stockholder and each Origin Subsidiary shall use their best efforts to fulfill the conditions specified in Article IX to the extent that the fulfillment of such conditions is within their control. The foregoing obligation includes (a) the execution and delivery of documents necessary or desirable to consummate the transactions contemplated hereby and (b) taking or refraining from such actions as may be necessary to fulfill such conditions (including using their best efforts to conduct the Business in such manner that on the Closing Date the representations and warranties of Origin, each Origin Subsidiary and each Origin Stockholder contained herein shall be accurate as though then made, except as contemplated by the terms hereof). SECTION 6.09 Disclosure of Certain Matters. From the date hereof through the Closing Date, Origin, each Origin Subsidiary and each Origin Stockholder shall give CCAC prompt written notice of any event or development that occurs that (a) had it existed or been known on the date hereof would have been required to be disclosed under this Agreement, (b) would cause any of the representations and warranties of Origin, each Origin Subsidiary and each Origin Stockholder contained herein to be inaccurate or otherwise misleading, (c) gives Origin, each Origin Subsidiary and each Origin Stockholder any reason to believe that any of the conditions set forth in Article IX will not be satisfied, (d) is of a nature that is or may be materially adverse to the operations, prospects or condition (financial or otherwise) of any Origin Subsidiary or (e) would require any amendment or supplement to the Proxy Statement. SECTION 6.10 Regulatory and Other Authorizations; Notices and Consents. ---------------------------------------------------------- (a) Origin, each Origin Subsidiary and each Origin Stockholder shall use their commercially reasonable efforts to obtain all authorizations, consents, orders and approvals of all Governmental Authorities and officials that may be or become necessary for their execution and delivery of, and the performance of their obligations pursuant to, this Agreement and the Transaction Documents and will cooperate fully with CCAC in promptly seeking to obtain all such authorizations, consents, orders and approvals. 40
(b) Origin, each Origin Subsidiary and each Origin Stockholder shall give promptly such notices to third parties and use its or their best efforts to obtain such third party consents and estoppel certificates as CCAC may in its reasonable discretion deem necessary or desirable in connection with the transactions contemplated by this Agreement. (c) CCAC shall cooperate and use all reasonable efforts to assist Origin, each Origin Subsidiary and each Origin Stockholder in giving such notices and obtaining such consents and estoppel certificates; provided, however, that CCAC shall have no obligation to give any guarantee or other consideration of any nature in connection with any such notice, consent or estoppel certificate or to consent to any change in the terms of any agreement or arrangement which CCAC in its sole discretion may deem adverse to the interests of CCAC, the Origin Subsidiaries or the Business. SECTION 6.11 Use of Intellectual Property. Each Origin Stockholder acknowledges that from and after the Closing, all the Intellectual Property of any kind related to or used in connection with the Business shall be owned by Origin or an Origin Subsidiary, that no Origin Stockholder nor any of their affiliates shall have any rights in the Intellectual Property and that no Origin Stockholder nor any of their affiliates will contest the ownership or validity of any rights of Chardan Sub, Origin or any Origin Subsidiary in or to the Intellectual Property. SECTION 6.12 Related Tax. Each Origin Stockholder covenants and agrees to pay any tax and duties assessed on the part of such Origin Stockholder in connection with, or as a result of the issuance of the Chardan Sub Stock and other consideration received pursuant to this Agreement required by any Governmental Authority. SECTION 6.13 Origin Acquisition. Origin, each Origin Subsidiary and each Origin Stockholder shall do all things necessary in order to effectuate and consummate the Origin Acquisition. SECTION 6.14 Origin Merger Reorganization. Prior to the Closing, Origin and the Origin Subsidiaries will be prepared to be reorganized such that at the Closing there will be a parent holding corporation formed under British Virgin Islands law with the wholly and beneficially owned or controlled companies as set forth on Schedule A. 41
SECTION 6.15 Origin Proxy Information. As a condition to CCAC calling and holding the Stockholder Meeting (as hereinafter defined), Origin, the Origin Subsidiaries and the Origin Stockholders will furnish to CCAC such information as is reasonably required by CCAC for the preparation of the Proxy Statement (as hereinafter defined) in accordance with the requirements of the Commission (as hereinafter defined), including full and accurate descriptions of the Business, material agreements affecting the Business, Origin and the Origin Subsidiaries and the reorganization of Origin and the Origin Subsidiaries, the Origin Stockholders and the audited consolidated financial statements of Origin and the Origin Subsidiaries for each of the three years ended December 31, 2003, which financial statements will include a balance sheet, statement of operations and statement of cash flows, prepared in accordance with either PRC GAAP reconciled to US GAAP or entirely in US GAAP, together with footnotes and interim consolidated quarterly financial statements for the quarter ended September 30, 2004, as required by the rules and regulations of the Commission for combination proxy statement disclosure (collectively, "Origin Proxy Information"). The Origin Proxy Information will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements in the Origin Proxy Information not misleading. SECTION 6.16 Interim Financial Information. From the date of this Agreement until the Closing, Origin and the Origin Subsidiaries shall provide to CCAC a copy of (i) the monthly internal management report of financial information concerning Origin and the Origin Subsidiaries on an individual and consolidated basis, and (ii) a monthly pro forma balance sheet and income statement on an individual and consolidated basis for Origin and the Origin Subsidiaries. The above interim financial information shall be delivered to CCAC within twenty-five (25) days after each monthly anniversary of the date of this Agreement. Origin and the Origin Subsidiaries will prepare the above financial information in good faith in accordance with PRC GAAP. ARTICLE VII COVENANTS OF CCAC ----------------- SECTION 7.01 Conduct of the Business. CCAC covenants and agrees that, from the date hereof through the Closing Date, except (i) in the context of an unsolicited, bona fide written proposal for a superior transaction or consummation of a superior transaction, (ii) as otherwise set forth in this Agreement or (iii) with the prior written consent of Origin, it shall: 42
(a) conduct its business only in the ordinary course and in a manner consistent with the current practice of their business, except as required to reorganize for the purpose of redomestication, to preserve substantially intact the business organization of each CCAC and Chardan Sub (when established), to preserve the current relationships of CCAC and Chardan Sub with customers and other persons with which they have has significant business relations and to comply with all Laws; (b) except as required to reorganize for the purpose of redomestication, not pledge, sell, transfer, dispose or otherwise encumber or grant any rights or interests to others of any kind with respect to all or any part of the capital securities of CCAC or Chardan Sub (when established); (c) except as required to reorganize for the purpose of redomestication, not pledge, sell, lease, transfer, dispose of or otherwise encumber any property or assets of CCAC and Chardan Sub (when established), other than consistent with past practices and in the ordinary course of business of CCAC and Chardan Sub (when established); (d) except as required to reorganize for the purpose of redomestication, not issue any shares of capital stock of CCAC and Chardan Sub (when established) or any other class of securities, whether debt (other than debt incurred in the ordinary course of business and consistent with past practice) or equity, of CCAC and Chardan Sub (when established) or any options therefor or any securities convertible into or exchangeable for capital stock of CCAC and Chardan Sub (when established) or enter into any agreements in respect of the ownership or control of such capital stock; (e) not declare any dividend or make any distribution in cash, securities or otherwise on the outstanding shares of capital stock of CCAC and Chardan Sub (when established) or directly or indirectly redeem, purchase or in any other manner whatsoever advance, transfer (other than in payment for goods received or services rendered in the ordinary course of business), or distribute to any of their affiliates or otherwise withdraw cash or cash equivalents in any manner inconsistent with established cash management practices, except to pay existing indebtedness of CCAC and Chardan Sub (when established); 43
(f) not make, agree to make or announce any general wage or salary increase or enter into any employment contract or, unless provided for on or before the date of this Agreement, increase the compensation payable or to become payable to any officer or employee of CCAC and Chardan Sub (when established) or adopt or increase the benefits of any bonus, insurance, pension or other employee benefit plan, payment or arrangement, except for those increases, consistent with past practices, normally occurring as the result of regularly scheduled salary reviews and increases, and except for increases directly or indirectly required as a result of changes in applicable law or regulations; (g) except as required to reorganize for the purpose of redomestication, not to amend the Certificate of Incorporation or By-laws or Memorandum and Articles of Association (or other organizational documents) of CCAC and Chardan Sub (when established); (h) except as required to reorganize for the purpose of redomestication, not to merge or consolidate with, or acquire all or substantially all the assets of, or otherwise acquire any business operations of, any Person; (i) not to make any payments outside the ordinary course of business; and (j) not make any capital expenditures, except in accordance with prudent business and operational practices consistent with prior practice. SECTION 7.02 Stockholder Meeting. CCAC shall cause a meeting of its stockholders (the "Stockholder Meeting") to be duly called and held as soon as reasonably practicable for the purpose of voting on the adoption of this Agreement as required by CCAC's certificate of incorporation. The directors of CCAC shall recommend to its stockholders that they vote in favor of the adoption of such matter. In connection with such meeting, CCAC (a) will file with the Securities and Exchange Commission ("Commission") as promptly as practicable a proxy statement meeting the requirements of the Exchange Act ("Proxy Statement") and all other proxy materials for such meeting, (b) upon receipt of approval from the Commission, will mail to its stockholders the Proxy Statement and other proxy materials, (c) will use its best efforts to obtain the necessary approvals by its stockholders of this Agreement and the transactions contemplated hereby, and (d) will otherwise comply with all legal requirements applicable to such meeting. As a condition to the filing and distribution to the CCAC stockholders of the Proxy Statement, CCAC will have received the Origin Proxy Information. 44
SECTION 7.03 Fulfillment of Conditions. From the date hereof to the Closing Date, CCAC shall use its best efforts to fulfill the conditions specified in Article IX to the extent that the fulfillment of such conditions is within its control. The foregoing obligation includes (a) the execution and delivery of documents necessary or desirable to consummate the transactions contemplated hereby, and (b) taking or refraining from such actions as may be necessary to fulfill such conditions (including conducting the business of CCAC in such manner that on the Closing Date the representations and warranties of CCAC contained herein shall be accurate as though then made). SECTION 7.04 Disclosure of Certain Matters. From the date hereof through the Closing Date, CCAC shall give Origin, the Origin Subsidiaries and the Origin Stockholders prompt written notice of any event or development that occurs that (a) had it existed or been known on the date hereof would have been required to be disclosed under this Agreement, (b) would cause any of the representations and warranties of CCAC contained herein to be inaccurate or otherwise misleading, (c) gives CCAC any reason to believe that any of the conditions set forth in Article IX will not be satisfied, (d) is of a nature that is or may be materially adverse to the operations, prospects or condition (financial or otherwise) of CCAC, or (e) would require any amendment or supplement to the Proxy Statement. SECTION 7.05 Chardan Sub Incorporation. CCAC will cause Chardan Sub to be incorporated and duly organized, to adopt the Plan of Merger, to effectuate the Chardan Merger, to issue the Chardan Sub Stock and to do all other things as are necessary for it to do as a constituent corporation to the Chardan Merger. The Board of Directors of Chardan Sub following the Closing shall consist of seven directors, five of whom shall be appointed by the Origin Stockholders and two of whom shall be appointed by CCAC. SECTION 7.06 Post-Closing Assurances. CCAC and Chardan Sub from time to time after the Closing, at Origin or Origin Stockholders' request, will take such other actions and execute and deliver such other documents, certifications and further assurances as Origin or Origin Stockholders may reasonably require in order to manage and operate CCAC and Chardan Sub and the Business, including but not limited to executing such certificates as may be reasonably requested by Origin or Origin Stockholders' Accountants in connection with any audit of the financial statements of CCAC and Chardan Sub for any period through the Closing Date. 45
SECTION 7.07 Regulatory and Other Authorizations; Notices and Consents. ---------------------------------------------------------- (a) CCAC and Chardan Sub (when established) shall use their commercially reasonable efforts to obtain all authorizations, consents, orders and approvals of all Governmental Authorities and officials that may be or become necessary for their execution and delivery of, and the performance of their obligations pursuant to, this Agreement and the Transaction Documents and will cooperate fully with Origin, Origin Subsidiary or Origin Stockholders in promptly seeking to obtain all such authorizations, consents, orders and approvals. (b) CCAC and Chardan Sub (when established) shall give promptly such notices to third parties and use its or their best efforts to obtain such third party consents and estoppel certificates as Origin, Origin Subsidiary or Origin Stockholders may in their reasonable discretion deem necessary or desirable in connection with the transactions contemplated by this Agreement. SECTION 7.08 Books and Records. (a) On and after the Closing Date, CCAC will cause Chardan Sub (when established) to permit the Origin Stockholders and their Representatives, during normal business hours, to have access to and to examine and make copies of all books and records of the Origin Subsidiaries which are delivered to CCAC pursuant to this Agreement and which relate to the Business or the Origin Subsidiaries or to events occurring prior to the Closing Date or to transactions or events occurring subsequent to the Closing Date which arise out of transactions or events occurring prior to the Closing Date to the extent reasonably necessary to the Origin Stockholders in connection with preparation of any Tax returns, Tax audits, government or regulatory investigations, lawsuits or any other matter in which the Origin Stockholders are a party to the proceeding or in which they have a reasonable business interest. (b) CCAC will cause Chardan Sub to preserve and keep all books and records with respect to the Origin Subsidiaries and the Business for a period of at least seven years from the Closing Date. After such seven year period, before Chardan Sub (when established) shall dispose of any such books and records, at least 90 days' prior written notice to such effect shall be given by Chardan Sub to the Origin Stockholders and the Origin Stockholders shall be given an opportunity, at their cost and expense, to remove and retain all or any part of such books or records as they may select. 46
ARTICLE VIII ADDITIONAL COVENANTS OF THE PARTIES ----------------------------------- SECTION 8.01 Other Information. If in order to properly prepare documents required to be filed with any Governmental Authority or financial statements of the Origin Subsidiaries, it is necessary that either Party be furnished with additional information relating to such Origin Subsidiaries or the Business, and such information is in the possession of the other Party, such Party agrees to use its best efforts to furnish such information in a timely manner to such other Party, at the cost and expense of the Party being furnished such information. SECTION 8.02 Mail Received After Closing. (a) If Chardan Sub or any Origin Subsidiary receives after the Closing any mail or other communications addressed to any Origin Stockholder, Chardan Sub may open such mail or other communications and deal with the contents thereof in its discretion to the extent that such mail or other communications and the contents thereof relate to the Origin Subsidiaries. Chardan Sub will deliver promptly or cause to be delivered to the Origin Stockholders all other mail addressed to them and the contents thereof which does not relate to the Origin Subsidiaries or the Business. (b) If any Origin Stockholder receives after the Closing Date mail or other communications addressed to them which relate to Origin or the Origin Subsidiaries, they shall promptly deliver or cause to be delivered all such mail and the contents thereof to Chardan Sub and Origin. SECTION 8.03 Further Action. Each of the Parties shall execute such documents and other papers and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated hereby. Upon the terms and subject to the conditions hereof, each of the Parties shall use its best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement. 47
SECTION 8.04 Schedules. The Parties shall have the obligation to supplement or amend the Schedules being delivered concurrently with the execution of this Agreement and annexed hereto with respect to any matter hereafter arising or discovered which, if existing or known at the date of this Agreement, would have been required to be set forth or described in the Schedules. The obligations of the Parties to amend or supplement the Schedules being delivered herewith shall terminate on the Closing Date. Notwithstanding any such amendment or supplementation, for purposes of Section 8.02(a), the representations and warranties of the Parties shall be made with reference to the Schedules as they exist at the time of execution of this Agreement. SECTION 8.05 Execution of Agreements. On or before the Closing Date, CCAC, Origin, each Origin Subsidiary and each Origin Stockholder shall execute and deliver each Transaction Document which it is a party to. SECTION 8.06 Confidentiality. Origin, each Origin Subsidiary and each Origin Stockholder, on the one hand, and CCAC and, on and after the Closing Date, Chardan Sub, on the other hand, shall hold and shall cause their respective Representatives to hold in strict confidence, unless compelled to disclose by judicial or administrative process or by other requirements of law, all documents and information concerning the other Party furnished it by such other Party or its Representatives in connection with the transactions contemplated by this Agreement (except to the extent that such information can be shown to have been (a) previously known by the Party to which it was furnished, (b) in the public domain through no fault of such Party or (c) later lawfully acquired from other sources, which source is not the agent of the other Party, by the Party to which it was furnished), and each Party shall not release or disclose such information to any other person, except its Representatives in connection with this Agreement. Each Party shall be deemed to have satisfied its obligations to hold confidential information concerning or supplied by the other Party if it exercises the same care as it takes to preserve confidentiality for its own similar information. 48
SECTION 8.07 Public Announcements. From the date of this Agreement until Closing or termination, CCAC, Origin, each Origin Subsidiary and each Origin Stockholder shall cooperate in good faith to jointly prepare all press releases and public announcements pertaining to this Agreement and the transactions governed by it, and none of the foregoing shall issue or otherwise make any public announcement or communication pertaining to this Agreement or the transaction without the prior consent of CCAC (in the case of Origin, each Origin Subsidiary and each Origin Stockholder) or Origin (in the case of CCAC), except as required by any legal requirement or by the rules and regulations of, or pursuant to any agreement of a stock exchange or trading system. Each party will not unreasonably withhold approval from the others with respect to any press release or public announcement. If any party determines with the advice of counsel that it is required to make this Agreement and the terms of the transaction public or otherwise issue a press release or make public disclosure with respect thereto, it shall at a reasonable time before making any public disclosure, consult with the other party regarding such disclosure, seek such confidential treatment for such terms or portions of this Agreement or the transaction as may be reasonably requested by the other party and disclose only such information as is legally compelled to be disclosed. This provision will not apply to communications by any party to its counsel, accountants and other professional advisors. SECTION 8.08 Board of CCAC - Chardan Sub. (a) The board of directors of CCAC or Chardan Sub after the Closing (whichever is the public company) will consist of 9 persons. The Proxy Statement will present the following persons as nominees for election as directors for a period of one year after the Closing, or until their successor is elected and take office: Kerry Propper, one additional member of the CCAC team, and 5 members from Origin. In addition, the membership of the board of directors will comply with the requirements in Article X hereof for the existence of the Independent Committee. (b) For a period of three years after the Closing, each non-employee director of CCAC or Chardan Sub after the Closing will receive options to purchase shares of common stock issued on his election, exercisable at the market price of the common stock on the date of issuance, vesting immediately and exercisable for five years in such number as to be determined in good faith negotiations between CCAC and Origin prior to the Closing. The options will be issued under a stock option plan approved by the board of directors and stockholder and the underlying common stock will be registered for issuance upon exercise. The non-employee directors will be reimbursed their expenses and paid such amount as to be determined in good faith negotiations between CCAC and Origin prior to the Closing for attendance at each meeting of the board and committee on which they serve. 49
SECTION 8.09 Nominations of Directors. Origin, the Origin Stockholders, CCAC and Chardan Sub (after the Closing) agree that for a period of three years after the Closing, they and any persons over which they have influence, shall use their best efforts to nominate Kerry Propper and one additional person for election as directors of CCAC and Chardan Sub after the Closing, subject to any obligations imposed by law, rule or regulation on any nominating committee. SECTION 8.10 CCAC or Chardan Sub. After the Closing, CCAC or Chardan Sub shall be responsible for payment of the $1,000,000 capital contribution for Beijing Origin State Harvest Biotechnology Limited, and to the extent such capital is paid by Dr. Han to take such action as to fully reimburse him for any advances of the capital contribution. ARTICLE IX CONDITIONS TO CLOSING --------------------- SECTION 9.01 Conditions to Each Party's Obligations. The respective obligations of each Party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions. (a) Approval by CCAC's Stockholders. This Agreement and the transactions contemplated hereby shall have been approved by a majority-in-interest of the common stockholders of CCAC in accordance with CCAC's certificate of incorporation and the aggregate number of shares of CCAC's Common Stock held by stockholders of CCAC (other than the Initial Stockholders) who exercise their right to convert the shares of common stock of CCAC owned by them into cash in accordance with CCAC's certificate of incorporation shall not constitute 20% or more of the number of shares of CCAC's Common Stock outstanding as of the date of this Agreement and owned by Persons other than the Initial Stockholders. (b) Litigation. No order, stay, judgment or decree shall have been issued by any Governmental Authority preventing, restraining or prohibiting in whole or 50
in part, the consummation of the transactions contemplated hereby or instrumental to the consummation of the transactions contemplated hereby, and no action or proceeding by any governmental authority shall be pending or threatened (including by suggestion through investigation) by any person, firm, corporation, entity or Governmental Authority, which questions, or seeks to enjoin, modify, amend or prohibit (a) the reorganization of Origin and Origin Subsidiaries, (b) the ownership of Origin and the Origin Subsidiaries, (c) the purchase and sale and issuance of the Chardan Sub Stock, (d) the Plan of Merger, (e) the Chardan Merger, (f) the Stockholders Meeting and use of the Proxy Statement by CCAC, or (g) the conduct or ownership (direct or indirect or beneficial) in any material respect the Business as a whole or any material portion of the Business conducted or to be conducted by an Origin Subsidiary or Origin Stockholder. (c) Transaction Documents. Each of the Transaction Documents shall have been executed and delivered to each Party. SECTION 9.02 Conditions to Obligations of Origin, the Origin Subsidiaries and the Origin Stockholders. The obligations of Origin, each Origin Subsidiary and each Origin Stockholder to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions: (a) Deliveries. Chardan Sub shall have delivered the Chardan Sub Stock and made the payments specified in Section 2.02 and the Origin Stockholders shall have received confirmations of the payment of the cash portion thereof and such other documents, certificates and instruments as may be reasonably requested by Origin, the Origin Subsidiaries and Origin Stockholders. (b) Representations and Warranties; Covenants. Without supplementation after the date of this Agreement, the representations and warranties of CCAC contained in this Agreement shall be with respect to those representations and warranties qualified by any materiality standard, true and correct as of the Closing, and with respect to all the other representations and warranties, true and correct in all material respects as of the Closing, with the same force and effect as if made as of the Closing, and all the covenants contained in this Agreement to be materially complied with by CCAC on or before the Closing shall have been materially complied with, and CCAC shall have delivered a certificate signed by a duly authorized officer thereof to such effect. 51
(c) Legal Opinion. Origin, the Origin Subsidiaries and the Origin Stockholders shall have received from Graubard Miller, counsel to CCAC, a legal opinion addressed to Origin, the Origin Subsidiaries and the Origin Stockholders and dated the Closing Date. (d) Chardan Sub. The Chardan Sub will be an existing company under the laws of the British Virgin Islands with the name Origin Agritech Limited. (e) Consents. CCAC and Chardan Sub shall have obtained and delivered to Origin, the Origin Subsidiaries and the Origin Stockholders consents of all third parties, as appropriately required for the consummation of the transactions contemplated by this Agreement. (f) Performance of Agreements. All covenants, agreements and obligations required by the terms of this Agreement to be performed by CCAC at or prior to the Closing shall have been duly and properly performed or fulfilled in all material respects. (g) No Adverse Changes. At the Closing, there shall have been no material adverse change in the assets, liabilities or financial condition of CCAC and Chardan Sub from that shown in the CCAC Balance Sheet and related statements of income. Between the date of this Agreement and the Closing Date, there shall not have occurred an event which, in the reasonable opinion of Origin, would have had a material adverse effect on the operations, financial condition or prospects of CCAC and Chardan Sub. (h) Supplemental Disclosure. If CCAC or Chardan Sub shall have supplemented or amended any schedule pursuant to their obligations set forth in Section 8.04 in any material respect, Origin, the Origin Subsidiaries and the Origin Stockholders shall give notice to CCAC that as a result of information provided to Origin, the Origin Subsidiaries and the Origin Stockholders in connection with any or all of such amendments or supplements, Origin, the Origin Subsidiaries and the Origin Stockholders have determined not to proceed with the consummation of the transactions contemplated hereby. (i) Necessary Proceedings. All proceedings, corporate or otherwise, to be taken by CCAC and Chardan Sub in connection with the consummation of the transactions contemplated by this Agreement shall have been duly and validly taken, and copies of all documents, resolutions and certificates incident thereto, duly certified by CCAC and Chardan Sub, as appropriate, as of the Closing, shall have been delivered to Origin, the Origin Subsidiaries and the Origin Stockholders. 52
(j) Employment and Option Agreements. Origin will have entered into, effective as of the Closing, the employment agreements provided for in Section 9.03(k) of this Agreement. (k) Trustee Notice. CCAC (or Chardan Sub), simultaneously with the Closing, will deliver to the trustee of the trust account of CCAC (or Chardan Sub) instructions to disburse the funds therein to Origin or its designees and to CCAC. (l) Resignations. Effective as of the Closing, the directors of CCAC who are not continuing directors and the officers of CCAC (or as the case may be, Chardan Sub) will have resigned and that they have no claim for employment compensation in any form from CCAC. SECTION 9.03 Conditions to Obligations of CCAC. The obligations of CCAC to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions: (a) Deliveries. The Origin Stockholders shall have delivered the Origin Stock and the Stock Consignment and Technology Service Agreements listed below and confirmations of receipt of payments specified in Section 2.02, and Chardan Sub shall have received the same and such other documents, certificates and instruments as may be reasonably requested by CCAC and the Chardan Sub; (i) The table below lists the parties to the stock consignment agreement and the ratio of the stock consigned under the agreements. 53
Parties to the Agreement Ratio of Stock ----------------------------------------------- Consigned Under this Agreement -------------------------------------- Mr. Han Gengchen State Harvest Holding Limited 34.4% of Beijing Origin shares Mr. Yang Yasheng State Harvest Holding Limited 28.675% of Beijing Origin shares Mr. Yuan Liang State Harvest Holding Limited 25.8% of Beijing Origin shares Ms. Zhao Yuping State Harvest Holding Limited 3.995% of Beijing Origin shares Mr. Zhang Weidong State Harvest Holding Limited 3.13% of Beijing Origin shares Mr. Chen Weicheng State Harvest Holding Limited 1.96% of Beijing Origin shares Beijing Origin State Harvest Holding Limited 99% of Beijing Origin shares Mr. Han Gengchen State Harvest Holding Limited 1% of Beijing Origin shares Beijing Origin State Harvest Holding Limited 90% of Beijing Origin shares Ms. Zhang Yingli State Harvest Holding Limited 4.1% of Beijing Origin shares Mr. Yang Yasheng State Harvest Holding Limited 3.86% of Beijing Origin shares
(c) Legal Opinion. CCAC shall have received from Origin's assigned counsel, the Origin Subsidiaries and the Origin Stockholders, a legal opinion addressed to CCAC, dated the Closing Date; (d) Consents. Origin, each Origin Subsidiary and each Origin Stockholder shall have obtained and delivered to CCAC consents of all third parties required by the Contracts and Permits set forth in Schedule 9.03(e); (e) Regulatory Approvals. Any Governmental Authority whose approval or consent is required each shall have unconditionally approved of the transactions contemplated by this Agreement and CCAC shall have received written confirmation thereof; (f) Performance of Agreements. All covenants, agreements and obligations required by the terms of this Agreement to be performed by Origin, each Origin Subsidiary and each Origin Stockholder at or prior to the Closing shall have been duly and properly performed or fulfilled in all material respects; (g) No Adverse Change. At the Closing, there shall have been no material adverse change in the assets, liabilities, financial condition or prospects of Origin, the Origin Subsidiaries or Business from that shown or reflected in the September Financial Statements and as described in the Proxy Statement. Between the date of this Agreement and the Closing Date, there shall not have occurred an event which, in the reasonable opinion of CCAC, would have an Origin Material Adverse Effect; (h) Supplemental Disclosure. If Origin, any Origin Subsidiary or any Origin Stockholder shall have supplemented or amended any Schedule pursuant to their obligations set forth in Section 8.04 in any material respect, CCAC shall notice Origin that, as a result of information provided to CCAC in connection with any or all of such amendments or supplements, CCAC has determined not to proceed with the consummation of the transactions contemplated hereby; and (i) Necessary Proceedings. All proceedings, corporate or otherwise, to be taken by Origin, each Origin Subsidiary and each Origin Stockholder in connection with the consummation of the transactions contemplated by this Agreement shall have been duly and validly taken, and copies of all documents, resolutions and certificates incident thereto, duly certified by Origin, each Origin Subsidiary and each Origin Stockholder, as appropriate, as of the Closing, shall have been delivered to CCAC. 55
(j) Origin Proxy Information. The Origin Proxy Information, at the time of distribution of the Proxy Statement and at Closing, will accurately reflect the Business, Origin, the Origin Subsidiaries, and the Origin Stockholders, and the Origin Proxy Information will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements in the Origin Proxy Information not misleading. (k) Employment Agreements and Option Agreements. Each of Han Gengchen, Yuan Liang, Yang Yasheng, and any other "key " employees designated by Dr. Han will enter into employment agreements in form of Schedules I, J and K with Origin. These agreements generally are to provide employment terms of three years, at current compensation levels and include Intellectual Property assignment and non-competition provisions for not less than two years after termination of employment. (l) Minimum Assets. At the Closing, Origin and the Origin Subsidiaries will certify to CCAC that on a consolidated basis, immediately prior to closing, Origin will have not less than US $10,000,000 in cash assets and will only have short- and long-term debt arising in the ordinary course. In addition, Origin will certify that the fair market value of the consolidated Origin entities represents at least 80% of CCAC's net assets at the date of Closing. (m) Voting Agreements. Each of Gengchen Han, Yasheng Yang and Leong Yuen, recipients of Chardan Sub Stock, will have entered into voting agreements with Chardan Sub, to be delivered at the Closing, that provide that they will vote all the shares of Chardan Sub Stock over which they have direct or beneficial ownership and right to vote in favor of Kerry Propper and one other designee as director of CCAC or Chardan Sub after the Closing, for a period of three years after the Closing. 56
ARTICLE XINDEMNIFICATION --------------- SECTION 10.01 Indemnification by Origin Stockholders. Subject to the limitations set forth in Section 10.04, each of the Origin Stockholders shall indemnify and hold harmless CCAC (or Chardan Sub after the Closing) from and against, and shall reimburse CCAC (or Chardan Sub after the Closing) for, any Damages which may be sustained, suffered or incurred by them, whether as a result of any Third Party Claim or otherwise, and which arise from or in connection with or are attributable to the breach of any of the representations or warranties or covenants of Origin, the Origin Subsidiaries or the Origin Stockholders contained in this Agreement. Indemnification pursuant to this Section 10.01 shall be the sole remedy of CCAC (or Chardan Sub after the Closing) with respect to any breach of the representations and warranties or covenants of Origin, any Origin Subsidiary or any Origin Stockholder contained in this Agreement. This indemnity shall survive the Closing for a period of four years after the Closing Date with respect to Claims arising under the foregoing clause (i) other than Claims arising as a result of a breach of the representations and warranties in Sections 3.01, 3.02, 3.03, 4.01, 4.02, 4.03, 4.14 and 4.15, as to which it shall survive without limitation as to time, and (ii) Claims arising as a result of a breach of the representations and warranties in Sections 3.06, 4.16, 4.18 and 4.20, as to which it shall survive for a period of six months after the expiration of the statute of limitations. Each Origin Stockholder shall give prompt written notice to CCAC (or Chardan Sub after the Closing) of any Third Party Claims or other facts and circumstances known to them which may entitle CCAC (or Chardan Sub after the Closing) to indemnification under this Section 10.01. SECTION 10.02 Indemnification by CCAC. Subject to the limitations set forth in Section 10.04, CCAC (and Chardan Sub after the Closing) shall indemnify and hold harmless each Origin Stockholder from and against, and shall reimburse each Origin Stockholder for, any Damages which may be sustained, suffered or incurred by such Origin Stockholder, whether as a result of Third Party Claims or otherwise, and which arise or result from or in connection with or are attributable to the breach of any of CCAC's representations or warranties or covenants contained in this Agreement. The indemnity in the foregoing clause (a) shall survive the Closing for a period of four years after the Closing Date. CCAC (or Chardan Sub after the Closing) shall give each Origin Stockholder prompt written notice of any Third Party Claims or other facts and circumstances known to it which may entitle them to indemnification under this Section 10.02. 57
SECTION 10.03 Notice, Etc. A Party required to make an indemnification payment pursuant to this Agreement ("Indemnifying Party") shall have no liability with respect to Third Party Claims or otherwise with respect to any covenant, representation, warranty, agreement, undertaking or obligation under this Agreement unless the Party entitled to receive such indemnification payment ("Indemnified Party") gives notice to the Indemnifying Party specifying (i) the covenant, representation or warranty, agreement, undertaking or obligation contained herein which it asserts has been breached, (ii) in reasonable detail, the nature and dollar amount of any Claim the Indemnified Party may have against the Indemnifying Party by reason thereof under this Agreement, and (iii) whether or not the Claim is a Third Party Claim. With respect to Third Party Claims, an Indemnified Party (i) shall give the Indemnifying Party prompt notice of any Third Party Claim, (ii) prior to taking any action with respect to such Third Party Claim, shall consult with the Indemnifying Party as to the procedure to be followed in defending, settling, or compromising the Third Party Claim, (iii) shall not consent to any settlement or compromise of the Third Party Claim without the written consent of the Indemnifying Party (which consent shall not be unreasonably withheld or delayed), and (iv) shall permit the Indemnifying Party, if it so elects, to assume the exclusive defense of such Third Party Claim (including, except as provided in the penultimate sentence of this Section, the compromise or settlement thereof) at its own cost and expense. If the Indemnifying Party shall elect to assume the exclusive defense of any Third Party Claim pursuant to this Agreement, it shall notify the Indemnified Party in writing of such election, and the Indemnifying Party shall not be liable hereunder for any fees or expenses of the Indemnified Party's counsel relating to such Third Party Claim after the date of delivery to the Indemnified Party of such notice of election. The Indemnifying Party will not compromise or settle any such Third Party Claim without the written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed) if the relief provided is other than monetary damages or such relief would have a material adverse effect on the Indemnified Party. Notwithstanding the foregoing, if the Indemnifying Party elects to assume the defense with respect to any Third Party Claim, the Indemnifying Party shall have the right to compromise or settle for solely monetary damages such Third Party Claim, provided such settlement will not result in or have a material adverse effect on the Indemnified Party. Notwithstanding the foregoing, the Party which defends any Third Party Claim shall, to the extent required by any insurance policies of the Indemnified Party, share or give control thereof to any insurer with respect to such Claim. 58
SECTION 10.04 Limitations. (a) No Origin Stockholder or Origin Stockholders shall be required to indemnify CCAC under Section 10.01 unless the aggregate of all amounts for which indemnity would otherwise be due against them exceeds $50,000, but then the Origin Stockholders will be liable for the full amount of Damages. (b) CCAC (or Chardan Sub after Closing) shall not be required to indemnify any Origin Stockholder under Section 10.02 unless the aggregate of all amounts for which indemnity would otherwise be due against it exceeds $50,000, but then CCAC (or Chardan Sub after Closing) will be liable for the full amount of Damages. (c) If a Third Party Claim subject to indemnification by any Origin Stockholder is brought against Origin or any Origin Subsidiary and Origin and/or the Origin Subsidiary prevails in the defense thereof, such Origin Stockholder shall not be required to indemnify such Origin Subsidiary or CCAC (or Chardan Sub after Closing) with respect to the costs of such defense, including attorneys' fees. SECTION 10.05 Adjustment to Purchase Price; Setoff. (a) Purchase Price. Any indemnification payments made pursuant to Sections 10.01 and 10.02 shall be deemed to be an adjustment to the Purchase Price. To the extent that any Origin Stockholder is obligated to indemnify CCAC or the Chardan Sub after Closing under the provisions of the Article X for Damages reduced to a monetary amount, CCAC or Chardan Sub after Closing shall have the right to adjust any amount due and owing or to be due and owing under any agreement with the Origin Stockholder, whether under this Agreement or any other agreement between the Origin Stockholder and any of CCAC's or Chardan Sub's affiliates, subsidiaries or controlled persons or entities. To the extent that CCAC or Chardan Sub is obligated to indemnify Origin or any Origin Stockholders after Closing under the provisions of this Article X for Damages reduced to a monetary amount, Origin or any Origin Stockholders after Closing shall have the right to decrease any amount due and owing or to be due and owing under any agreement with CCAC or Chardan Sub, whether under this Agreement or any other agreement between the Origin or Origin Stockholder and any of CCAC's or Chardan Sub's affiliates, subsidiaries or controlled persons or entities. 59
(b) Holdback Amount. Notwithstanding the foregoing, CCAC, and Chardan Sub after the Closing, may apply all or a portion of the Holdback Amount to satisfy any Claim for indemnification pursuant to this Article X. CCAC, and Chardan Sub after the Closing, will hold the Holdback Amount until final resolution of the Claim or dispute. The Holdback Amount is security for the indemnification obligations of the Origin Stockholders and is not a limitation on the Damages recoverable or liquidated damages and such security does not limit any other right of set off or recovery under this Agreement or at law, whether pursuant to this Agreement or any other agreement of the Origin Stockholders. SECTION 10.06 Claims on behalf or in right of CCAC and Chardan Sub. Pursuant to the provisions of this Article X, if any Claim for indemnification is to be brought against the Origin Stockholders on behalf of or by right of CCAC, or Chardan Sub after the Closing, such claims will be determined by the Independent Committee of the Board of Directors. Any settlement of a Claim for indemnification brought on behalf of or by right of CCAC, or Chardan Sub after the Closing, shall be determined and approved by the Independent Committee of the Board of Directors. The Independent Committee of the Board of Directors of CCAC, or Chardan Sub after the Closing, will consist of two persons, none of which are officers or employees of CCAC, or Chardan Sub after the Closing, or any of their operating subsidiary companies or are direct or beneficial owners of 5% or more of the voting capital stock of CCAC, or Chardan Sub after the Closing. For a period of not less than four years after the Closing or until final resolution of Claims under this Section X brought by or by right of CCAC, or Chardan Sub after the Closing, the board of directors of CCAC, or Chardan Sub after the Closing, will maintain a sufficient number of directors such that it will be able to maintain the Independent Committee. ARTICLE XI TERMINATION AND ABANDONMENT --------------------------- SECTION 11.01 Methods of Termination. The transactions contemplated herein may be terminated and/or abandoned at any time but not later than the Closing: 60
(a) by mutual written consent of CCAC and Origin; (b) (i) by CCAC if Origin, any Origin Subsidiary or any Origin Stockholder amends or supplements any Origin, Origin Subsidiary or Origin Stockholder schedule hereto in accordance with Section 8.04 hereof and such amendment or supplement reflects a material adverse change in the condition (financial or other), operations or prospects of Origin or any Origin Subsidiary or the Business, as a whole or in part, after the date hereof, or (ii) by Origin if CCAC amends or supplements any CCAC Schedule hereto in accordance with Section 8.04 hereof and such amendment or supplement reflects a material adverse change in the condition (financial or other) or operations of CCAC. (c) by either CCAC or Origin, if the Closing has not occurred by May 31, 2005 (or such other date as may be extended from time to time by written agreement of CCAC and Origin); provided, however, that the right to terminate this Agreement under this Section 11.01(c) shall not be available to any Party that is then in breach of any of its covenants, representations or warranties in this Agreement; (d) by Origin, (i) if CCAC shall have breached any of its covenants in Articles VII or VIII hereof in any respect or (ii) if the representations and warranties of CCAC contained in this Agreement shall not be true and correct in all material respects, at the time made, or (iii) if such representations and warranties shall not be true and correct at and as of the Closing Date as though such representations and warranties were made again at and as of the Closing Date, except to the extent that such representations are made herein as of a specific date prior to the Closing Date, and in any such event, if such breach is subject to cure, CCAC has not cured such breach within 10 Business Days of Origin's notice of an intent to terminate; (e) by CCAC, (i) if Origin, any Origin Subsidiary or any Origin Stockholder shall have breached any of the covenants in Articles VI or VIII hereof in any respect or (ii) if the representations and warranties of Origin, any Origin Subsidiary or any Origin Stockholder contained in this Agreement shall not be true and correct in all material respects, at the time made, or (iii) if such representations and warranties shall not be true and correct at and as of the Closing Date as though such representations and warranties were made again at and as of the Closing Date, except to the extent that such representations are made herein as of a specific date prior to the Closing Date, and in any such event, if such breach is subject to cure, Origin, such Origin Subsidiary or Origin Stockholder have not cured such breach within 10 Business Days of CCAC's notice of an intent to terminate; 61
(f) by Origin, if the Board of Directors of CCAC (or any committee thereof) at the time of the signing of this Agreement shall have failed to recommend or withdrawn or modified in a manner adverse to Origin its approval or recommendation of this Agreement and any of the transactions contemplated hereby; (g) by CCAC if the Board of Directors of CCAC shall have determined in good faith, based upon the advice of outside legal counsel, that failure to terminate this Agreement is reasonably likely to result in the Board of Directors breaching its fiduciary duties to stockholders under applicable law by reason of the pendency of an unsolicited, bona fide written proposal for a superior transaction; (h) by either CCAC or Origin, if, at CCAC's Stockholder Meeting (including any adjournments thereof), this Agreement and the transactions contemplated thereby shall fail to be approved and adopted by the affirmative vote of the holders of CCAC's common stock required under its certificate of incorporation, or 20% or more of the number of shares of CCAC's common stock outstanding as of the date of the record date of the stockholders meeting held by Persons other than the Initial Stockholders exercise their rights to convert the shares of CCAC's common stock held by them into cash in accordance with CCAC's certificate of incorporation. SECTION 11.02 Effect of Termination. (a) In the event of termination and abandonment by CCAC or by Origin, or both, pursuant to Section 11.01 hereof, written notice thereof shall forthwith be given to the other Party, and except as set forth in this Section 11.02, all further obligations of the Parties shall terminate, no Party shall have any right against the other Party hereto, and each Party shall bear its own costs and expenses. (b) Consequence of Termination. If the transactions contemplated by this Agreement are terminated and/or abandoned as provided herein: (i) each Party hereto will return all documents, work papers and other material (and all copies thereof) of the other Party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the Party furnishing the same; and 62
(ii) all confidential information received by either Party hereto with respect to the business of the other Party, or in the case of the Origin Stockholders, of the Origin Subsidiaries, hereto shall be treated in accordance with Section 8.06 hereof, which shall survive such termination or abandonment. (c) Termination Recovery and Fee. If this Agreement is terminated by CCAC under Section 11.01(b)(i) or (e), then CCAC will be entitled to $1,000,000 due and payable immediately upon termination of this Agreement as liquidated damages and not as a penalty amount, and in lieu of any other right or remedy that CCAC may have against the other parties to this Agreement for such breach. If this Agreement is terminated by Origin under Section 11.01(b)(ii), (d) or (f), then Origin will be entitled to $1,000,000 due and payable from Richard Propper, Kerry Propper, Jiangnan Huang, Li Zhang, Dan Beharry and Steven Urbach (collectively, the "CCAC Initial Stockholders"), pro rata among such individuals in relation to their initial ownership in CCAC, immediately upon termination of this Agreement as liquidated damages and not as a penalty amount, and in lieu of any other right or remedy that Origin may have against the other parties to this Agreement for such breach. SECTION 11.03 No Claim Against Trust Fund. It is understood by Origin, the Origin Subsidiaries and the Origin Stockholders that in the event of breach of this Agreement or any of the Transactional Documents by CCAC and Chardan Sub, that they have no right to Damages, including the termination fees set forth in Sectoin11.02(c) from CCAC or Chardan Sub. In addition, Origin, the Origin Subsidiaries and the Origin Stockholders agree that they have no right to any amount held in the trust fund referred to in Section 5.07 and they will not make any claim against CCAC and Chardan Sub that would adversely affect the business, operations or prospects of CCAC and Chardan Sub or the amount of the funds held in the trust fund referred to in Section 5.07. 63
ARTICLE XII DEFINITIONS ----------- SECTION 12.01 Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Actions" means any claim, action, suit, litigation, arbitration, inquiry, proceeding or investigation by or pending before any Governmental Authority. "Business" means the combined and several operations and proposed combined and several operations of Origin, the Origin Subsidiaries and their respective affiliates, contract parties and nominees (or beneficial owners) as a breeder, developer, producer and marketer of top-quality seeds to customers. "Business Day" means a day of the year on which banks are not required or authorized to be closed in the City of New York. "Claim" means any claim, demand, suit, proceeding or action. "Company's Accountants" means Deloitte & Touche. "Contracts" mean any contract, agreement, arrangement, plan, lease, license or similar instrument. "Copyrights" shall mean all copyrights, including rights in and to works of authorship and all other rights corresponding thereto throughout the world, whether published or unpublished, including rights to prepare, reproduce, perform, display and distribute copyrighted works and copies, compilations and derivative works thereof. "Damages" means the dollar amount of any loss, damage, expense or liability, including, without limitation, reasonable attorneys' fees and disbursements incurred by an Indemnified Party in any action or proceeding between the Indemnified Party and the Indemnifying Party or between the Indemnified Party and a third party, which is determined (as provided in Article X) to have been sustained, suffered or incurred by a Party or the Company and to have arisen from or in connection with an event or state of facts which is subject to indemnification under this Agreement; the amount of Damages shall be the amount finally determined by a court of competent jurisdiction or appropriate governmental administrative agency (after the exhaustion of all appeals) or the amount agreed to upon settlement in accordance with the terms of this Agreement, if a Third Party Claim, or by the Parties, if a Direct Claim. 64
"Direct Claim" means any claim other than a Third Party Claim. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles, consistently applied in the United States. "Government Securities" means any Treasury Bill issued by the United States having a maturity of one hundred and eighty days or less. "Governmental Authority" means any PRC or non-PRC national, supranational, state, provincial, local or similar government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal or judicial or arbitral body. "Governmental Order" means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority. "Intellectual Property" means any intellectual property rights, including, without limitations, Patents, Copyrights, service marks, moral rights, Trade Secrets, Trademarks, designs and Technology, together with (a) all registrations and applications for registration therefore and (b) all rights to any of the foregoing (including (i) all rights received under any license or other arrangement with respect to the foregoing, (ii) all rights or causes of action for infringement or misappropriation (past, present or future) of any of the foregoing, (iii) all rights to apply fore or register any of the foregoing), (iv) domain names and URL's of or relating to the Acquired Assets and variations of the domain names and URL's, (vi) Contracts which related to any of the foregoing, including invention assignment, intellectual property assignment, confidentiality, and non-competition agreements, and (vii) goodwill of any of the foregoing. "Initial Stockholders" means all of the shares of common stock of CCAC issued and outstanding prior to March 16, 2004 held by various Persons. "Laws" means all statutes, rules, regulations, ordinances, orders, writs, injunctions, judgments, decrees, awards and restrictions, including, without limitation, applicable statutes, rules, regulations, orders and restrictions relating to zoning, land use, safety, health, environment, hazardous substances, pollution controls, employment and employment practices and access by the handicapped. 65
"Lien" means any lien, claim, contingent interest, security interest, charge, restriction or encumbrance. "Party" means CCAC, on the one hand, and Origin, each Origin Subsidiary and each Origin Stockholder, on the other hand (collectively, "Parties"). "Patents" means all United States and foreign patents and utility models and applications therefore and all reissues, divisions, re-examinations, renewals, extensions, provisionals, continuations and continuations-in-part thereof, and equivalent or similar rights anywhere in the world in inventions and discoveries. "Permits" means all governmental registrations, licenses, permits, authorizations and approvals. "Person" means an individual, partnership, corporation, joint venture, unincorporated organization, cooperative or a governmental entity or agency thereof. "PRC GAAP" means PRC Accounting Standards for Business Enterprises in effect from time to time applied consistently throughout the periods involved. "Release" means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment. "Representatives" of either Party means such Party's employees, accountants, auditors, actuaries, counsel, financial advisors, bankers, investment bankers and consultants. "Securities Act" means the Securities Act of 1933, as amended. "Software" means all software, in object, human-readable or source code, whether previously completed or now under development, including programs, applications, databases, data files, coding and other software, components or elements thereof, programmer annotations, and all versions, upgrades, updates, enhancements and error corrections of all of the foregoing. "Stockholder Meeting" has the meaning specified in Section 7.01. "Tax" or "Taxes" means all income, gross receipts, sales, stock transfer, excise, bulk transfer, use, employment, social security, franchise, profits, property or other taxes, tariffs, imposts, fees, stamp taxes and duties, assessments, levies or other charges of any kind whatsoever (whether payable directly or by withholding), together with any interest and any penalties, additions to tax or additional amounts imposed by any government or taxing authority with respect thereto. 66
"Technology" means any know-how, confidential or proprietary information, name, data, discovery, formulae, idea, method, process, procedure, other invention, record of invention, model, research, Software, technique, technology, test information, market survey, website, or information or material of a like nature, whether patentable or unpatentable and whether or not reduced to practice. "Third Party Claim" means a Claim by a person, firm, corporation or government entity other than a party hereto or any affiliate of such party. "Trade Secrets" means all trade secrets under applicable law and other rights in know-how and confidential or proprietary information, processing, manufacturing or marketing information, including new developments, inventions, processes, ideas or other proprietary information that provides advantages over competitors who do not know or use it and documentation thereof (including related papers, blueprints, drawings, chemical compositions, formulae, diaries, notebooks, specifications, designs, methods of manufacture and data processing software and compilations of information) and all claims and rights related thereto. "Trademarks" means any and all United States and foreign trademarks, service marks, logos, trade names, corporate names, trade dress, Internet domain names and addresses, and all goodwill associated therewith throughout the world. ARTICLE XIII GENERAL PROVISIONS ------------------ SECTION 13.01 Expenses. Except as otherwise provided herein, all costs and expenses, including, without limitation, fees and disbursements of Representatives, incurred in connection with the preparation of this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such costs and expenses, whether or not the Closing shall have occurred. 67
SECTION 13.02 Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made as of the date delivered or mailed if delivered personally or by nationally recognized courier or mailed by registered mail (postage prepaid, return receipt requested) or by telecopy to the Parties at the following addresses (or at such other address for a Party as shall be specified by like notice, except that notices of changes of address shall be effective upon receipt): (a) If to Origin or to Dr. Han Gengchen, Mr. Yang Yasheng, Mr. Yuan Liang, Ms. Zhao Yuping, Mr. Zhang Weidong or Mr. Chen Weicheng: State Harvest Holdings Limited c/o Beijing Origin Seed Technology Inc. E201 Zhongguanchen Development Building 12 Shangdi Xinxi, Haidan District Beijing, China 100085 with a copy to: GuanTao Law Firm 6/F, Tower B, Tong Tai Plaza No. 33 Finance Street Xicheng District Beijing 10032 (b) If to CCAC or the CCAC Initial Stockholders: Chardan China Acquisition Corp. 625 Broadway Suite 1111 San Diego, California 92101 Attention: Dr. Richard D. Propper Telecopier No.: (858) 847-9090 with a copy to: Graubard Miller 600 Third Avenue New York, New York 10016 Attention: David Alan Miller, Esq. Telecopier No.: 212-818-8181 SECTION 13.03 Amendment. This Agreement may not be amended or modified except by an instrument in writing signed by the Parties. 68
SECTION 13.04 Waiver. At any time prior to the Closing, either Party may (a) extend the time for the performance of any of the obligations or other acts of the other Party, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby. SECTION 13.05 Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 13.06 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. SECTION 13.07 Entire Agreement. This Agreement and the Schedules and Exhibits hereto constitute the entire agreement and supersede all prior agreements and undertakings, both written and oral, between Origin, any Origin Subsidiary, any Origin Stockholder and CCAC with respect to the subject matter hereof and, except as otherwise expressly provided herein, are not intended to confer upon any other person any rights or remedies hereunder. SECTION 13.08 Benefit. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Parties. SECTION 13.09 Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York. 69
SECTION 13.10 Counterparts. This Agreement may be executed in one or more counterparts, and by the different Parties in separate counterparts, each of which when executed shall be deemed to be an original but all of which when taken together shall constitute one and the same agreement. 70
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above. CHARDAN CHINA ACQUISITION CORP. By: /s/ Richard Propper, MD --------------------------------------- Name: Richard Propper, MD Title: Chairman /s/ Kerry Propper ---------------------------------------------- Kerry Propper (Solely with respect to Section 11.02(c)) /s/ Dr. Richard Propper ---------------------------------------------- Kerry Propper (Solely with respect to Section 11.02(c)) /s/ Jiangnan Huang ---------------------------------------------- Jiangnan Huang (Solely with respect to Section 11.02(c)) /s/ Li Zhang ---------------------------------------------- Li Zhang (Solely with respect to Section 11.02(c)) /s/ Dan Beharry ---------------------------------------------- Dan Beharry (Solely with respect to Section 11.02(c)) /s/ Steven Urbach ---------------------------------------------- Steven Urbach (Solely with respect to Section 11.02(c)) 71
STATE HARVEST HOLDINGS LIMITED By or Designed by:/s/ Han Gengchen ---------------------------- Name: Han Gengchen, PhD Title: CEO By or Designed by:/s/ Yang Yasheng ---------------------------- Name: Yang Yasheng By or Designed by:/s/ Yuan Liang ---------------------------- Name: Yuan Liang By or Designed by:/s/ Zhao Yuping ---------------------------- Name: Zhao Yuping By or Designed by:/s/ Zhang Wiedong ---------------------------- Name: Zhang Wiedong By or Designed by:/s/ Chen Weicheng ---------------------------- Name: Chen Weicheng By or Designed by:/s/ Bo Luxia ---------------------------- Name: Bo Luxia By or Designed by:/s/ Huang Xilin ---------------------------- Name: Huang Xilin By or Designed by:/s/ Huo Qingtao ---------------------------- Name: Huo Qingtao 72
FIRST MODIFICATION TO STOCK PURCHASE AGREEMENT DATED DECEMBER 20, 2004 First Modification Agreement to that certain Stock Purchase Agreement dated December 20, 2004 ("Agreement"), by and among Chardan China Acquisition Corp., Dr. Richard D. Propper, Mr. Kerry Propper, Mr. Jiangnan Huang, Mr. Li Zhang, Mr. Dan Beharry, Mr. Steven Urbach, State Harvest Holdings Limited, Dr. Han Gengchen, Mr. Yang Yasheng, Mr. Yuan Liang, Ms. Zhao Yuping, Mr. Zhuang Weigong, Mr. Chen Weicheng, Ms. Bo Luxia, Mr. Huang Xilin, and Mr. Huo Qingtao made as of April 18, 2005. The above parties hereby desire to amend and extend the termination provision set forth in Section 11.01(c) of the Agreement to change the date in that section from May 31, 2005 to August 1, 2005. The Agreement in all other respects is affirmed and shall continue in full force and effect. It is agreed by the signatories to this modification agreement that executed the Agreement as to Section 11.02(c) that they are continuing to be obligated pursuant to Section 11.02(c) as their obligations may be extended thereunder in time. This modification agreement may be executed in counterpart and by facsimile, all of which counterparts taken together may be considered one agreement, binding upon all the signatories thereto, whether by facsimile or original signature. 73
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above. CHARDAN CHINA ACQUISITION CORP. By:/s/ Richard D. Propper ------------------------------------------- Name: Richard D. Propper, MD Title: Chairman /s/ Kerry Propper ---------------------------------------------- Kerry Propper (Solely with respect to Section 11.02(c)) /s/ Dr. Richard D. Propper ---------------------------------------------- Dr. Richard D. Propper (Solely with respect to Section 11.02(c)) /s/ Jiangnan Huang ---------------------------------------------- Jiangnan Huang (Solely with respect to Section 11.02(c)) /s/ Li Zhang ---------------------------------------------- Li Zhang (Solely with respect to Section 11.02(c)) /s/ Dan Beharry ---------------------------------------------- Dan Beharry (Solely with respect to Section 11.02(c)) /s/ Steven Urbach ---------------------------------------------- Steven Urbach (Solely with respect to Section 11.02(c)) 74
STATE HARVEST HOLDINGS LIMITED By or Designated by:/s/ Han Gengchen -------------------------- Name:Han Gengchen, PhD Title:CEO By or Designated by:/s/ Yang Yasheng -------------------------- Name: Yang Yasheng By or Designated by:/s/ Yuan Liang -------------------------- Name:Yuan Liang By or Designated by:/s/ Zhao Yuping -------------------------- Name: Zhao Yuping By or Designated by:/s/ Zhang Wiedong -------------------------- Name: Zhang Weidong By or Designated by:/s/ Chen Weicheng -------------------------- Name: Chen Weicheng By or Designated by:/s/ Bo Luxia -------------------------- Name: Bo Luxia By or Designated by:/s/ Huang Xilin -------------------------- Name: Huang Xilin By or Designated by:/s/ Huo Qingtao -------------------------- Name: Huo Qingtao 76
SECOND MODIFICATION TO STOCK PURCHASE AGREEMENT DATED DECEMBER 20, 2004 Second Modification Agreement to that certain Stock Purchase Agreement dated December 20, 2004 ("Agreement"), by and among Chardan China Acquisition Corp., Dr. Richard D. Propper, Mr. Kerry Propper, Mr. Jiangnan Huang, Mr. Li Zhang, Mr. Dan Beharry, Mr. Steven Urbach, State Harvest Holdings Limited, Dr. Han Gengchen, Mr. Yang Yasheng, Mr. Yuan Liang, Ms. Zhao Yuping, Mr. Zhuang Weigong, Mr. Chen Weicheng, Ms. Bo Luxia, Mr. Huang Xilin, and Mr. Huo Qingtao made as of June 16, 2005. The Agreement is hereby modified to substitute the phrase "10,000,000 shares of Chardan Sub's common stock, no par value per share ("Chardan Sub Stock")" for "10,200,000 shares of Chardan Sub's common stock, par value $0.0001 per share ("Chardan Sub Stock")" for the purpose of reducing the stock component of the consideration under the Agreement, such change to be considered made throughout the Agreement and to correct the par value per share to no par value pursuant to the Memorandum of Association of Chardan Sub. Schedule C to the Agreement is amended to delete the allocation to Best of the Best Investment Limited. The Agreement is modified to substitute the words "follow-on offering" for the words "secondary offering" set forth in Section 1.02(b)(ii)(a)(2) of the Agreement. The Agreement in all other respects is affirmed and shall continue in full force and effect. This modification agreement may be executed in counterpart and by facsimile, all of which counterparts taken together may be considered one agreement, binding upon all the signatories thereto, whether by facsimile or original signature. 77
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date first written above. CHARDAN CHINA ACQUISITION CORP. By:/s/ Richard D. Propper ------------------------------------------- Name: Richard D. Propper, MD Title: Chairman /s/ Kerry Propper ---------------------------------------------- Kerry Propper (Solely with respect to Section 11.02(c)) /s/ Dr. Richard D. Propper ---------------------------------------------- Dr. Richard D. Propper (Solely with respect to Section 11.02(c)) /s/ Jiangnan Huang ---------------------------------------------- Jiangnan Huang (Solely with respect to Section 11.02(c)) /s/ Li Zhang ---------------------------------------------- Li Zhang (Solely with respect to Section 11.02(c)) /s/ Dan Beharry ---------------------------------------------- Dan Beharry (Solely with respect to Section 11.02(c)) /s/ Steven Urbach ---------------------------------------------- Steven Urbach (Solely with respect to Section 11.02(c)) 78
STATE HARVEST HOLDINGS LIMITED By or Designated by:/s/ Han Gengchen -------------------------- Name: Han Gengchen, PhD Title: CEO By or Designated by:/s/ Yang Yasheng -------------------------- Name: Yang Yasheng By or Designated by:/s/ Yuan Liang -------------------------- Name:Yuan Liang By or Designated by:/s/ Zhao Yuping -------------------------- Name: Zhao Yuping By or Designated by:/s/ Zhang Wiedong -------------------------- Name: Zhang Weidong By or Designated by:/s/ Chen Weicheng -------------------------- Name: Chen Weicheng By or Designated by:/s/ Bo Luxia -------------------------- Name: Bo Luxia By or Designated by:/s/ Huang Xilin -------------------------- Name: Huang Xilin By or Designated by:/s/ Huo Qingtao -------------------------- Name: Huo Qingtao
THIRD MODIFICATION TO STOCK PURCHASE AGREEMENT DATED DECEMBER 20, 2004 Third Modification Agreement to that certain Stock Purchase Agreement dated December 20, 2004 ("Agreement"), by and among Chardan China Acquisition Corp., Dr. Richard D. Propper, Mr. Kerry Propper, Mr. Jiangnan Huang, Mr. Li Zhang, Mr. Dan Beharry, Mr. Steven Urbach, State Harvest Holdings Limited, Dr. Han Gengchen, Mr. Yang Yasheng, Mr. Yuan Liang, Ms. Zhao Yuping, Mr. Zhang Weidong, Mr. Chen Weicheng, Ms. Bo Luxia, Mr. Huang Xilin, and Mr. Huo Qingtao made as of July 21, 2005. The above parties hereby desire to amend and extend the termination provision set forth in Section 11.01(c) of the Agreement to change the date in that section from August 1, 2005, 2005 to September 30, 2005. The Agreement in all other respects is affirmed and shall continue in full force and effect. This modification agreement may be executed in counterpart and by facsimile, all of which counterparts taken together may be considered one agreement, binding upon all the signatories thereto, whether by facsimile or original signature.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date written above. CHARDAN CHINA ACQUISITION CORP. By: /s/ Richard D. Propper, MD ------------------------------------------- Name: Richard D. Propper, MD Title: Chairman /s/ Kerry Propper ---------------------------------------------- Kerry Propper (Solely with respect to Section 11.02(c)) /s/ Dr. Richard D. Propper ---------------------------------------------- Dr. Richard D. Propper (Solely with respect to Section 11.02(c)) /s/ Jiangnan Huang ---------------------------------------------- Jiangnan Huang (Solely with respect to Section 11.02(c)) /s/ Li Zhang ---------------------------------------------- Li Zhang (Solely with respect to Section 11.02(c)) /s/ Dan Beharry ---------------------------------------------- Dan Beharry (Solely with respect to Section 11.02(c)) /s/ Steven Urbach ---------------------------------------------- Steven Urbach (Solely with respect to Section 11.02(c))
STATE HARVEST HOLDINGS LIMITED By or Designated by: /s/ Han Gengchen -------------------------- Name: Han Gengchen, PhD Title: CEO By or Designated by: /s/ Yang Yasheng -------------------------- Name: Yang Yasheng By or Designated by: /s/ Yuan Liang -------------------------- Name: Yuan Liang By or Designated by: /s/ Zhao Yuping -------------------------- Name: Zhao Yuping By or Designated by: /s/ Zhang Wiedong -------------------------- Name: Zhang Weidong By or Designated by: /s/ Chen Weicheng -------------------------- Name: Chen Weicheng By or Designated by: /s/ Bo Luxia -------------------------- Name: Bo Luxia By or Designated by: /s/ Huang Xilin -------------------------- Name: Huang Xilin By or Designated by: /s/ Huo Qingtao -------------------------- Name: Huo Qingtao
FOURTH MODIFICATION TO STOCK PURCHASE AGREEMENT DATED DECEMBER 20, 2004 Fourth Modification Agreement to that certain Stock Purchase Agreement dated December 20, 2004 ("Agreement"), by and among Chardan China Acquisition Corp., Dr. Richard D. Propper, Mr. Kerry Propper, Mr. Jiangnan Huang, Mr. Li Zhang, Mr. Dan Beharry, Mr. Steven Urbach, State Harvest Holdings Limited, Dr. Han Gengchen, Mr. Yang Yasheng, Mr. Yuan Liang, Ms. Zhao Yuping, Mr. Zhang Weidong, Mr. Chen Weicheng, Ms. Bo Luxia, Mr. Huang Xilin, and Mr. Huo Qingtao made as of September 15, 2005. The above parties hereby desire to amend and extend the termination provision set forth in Section 11.01(c) of the Agreement to change the date in that section from September 30, 2005, 2005 to November 15, 2005, and thereby superseding the Third Modification extension of the date of termination. The Agreement in all other respects is affirmed and shall continue in full force and effect. This modification agreement may be executed in counterpart and by facsimile, all of which counterparts taken together may be considered one agreement, binding upon all the signatories thereto, whether by facsimile or original signature.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed as of the date written above. CHARDAN CHINA ACQUISITION CORP. By: /s/ Richard D. Propper, MD ------------------------------------------- Name: Richard D. Propper, MD Title: Chairman /s/ Kerry Propper ---------------------------------------------- Kerry Propper (Solely with respect to Section 11.02(c)) /s/ Dr. Richard D. Propper ---------------------------------------------- Dr. Richard D. Propper (Solely with respect to Section 11.02(c)) /s/ Jiangnan Huang ---------------------------------------------- Jiangnan Huang (Solely with respect to Section 11.02(c)) /s/ Li Zhang ---------------------------------------------- Li Zhang (Solely with respect to Section 11.02(c)) /s/ Dan Beharry ---------------------------------------------- Dan Beharry (Solely with respect to Section 11.02(c)) /s/ Steven Urbach ---------------------------------------------- Steven Urbach (Solely with respect to Section 11.02(c))
STATE HARVEST HOLDINGS LIMITED By or Designated by: /s/ Han Gengchen -------------------------- Name: Han Gengchen, PhD Title: CEO By or Designated by: /s/ Yang Yasheng -------------------------- Name: Yang Yasheng By or Designated by: /s/ Yuan Liang -------------------------- Name: Yuan Liang By or Designated by: /s/ Zhao Yuping -------------------------- Name: Zhao Yuping By or Designated by: /s/ Zhang Wiedong -------------------------- Name: Zhang Weidong By or Designated by: /s/ Chen Weicheng -------------------------- Name: Chen Weicheng By or Designated by: /s/ Bo Luxia -------------------------- Name: Bo Luxia By or Designated by: /s/ Huang Xilin -------------------------- Name: Huang Xilin By or Designated by: /s/ Huo Qingtao -------------------------- Name: Huo Qingtao
Annex B TERRITORY OF THE BRITISH VIRGIN ISLANDS THE INTERNATIONAL BUSINESS COMPANIES ACT (CAP 291) MEMORANDUM OF ASSOCIATION OF ORIGIN AGRITECH LIMITED NAME 1. The name of the Company is Origin Agritech Limited. REGISTERED OFFICE 2. The registered office of the Company will be situated at P.O. Box 173, Kingston Chambers, Road Town, Tortola, British Virgin Islands. REGISTERED AGENT 3. The registered agent of the Company will be Maples Finance BVI Limited of P.O. Box 173, Kingston Chambers, Road Town, Tortola, British Virgin Islands. GENERAL OBJECTS AND POWERS 4. (1) The object of the Company is to engage in any act or activity that is not prohibited under any law for the time being in force in the British Virgin Islands. (2) The Company may not: (a) carry on business with persons resident in the British Virgin Islands; (b) own an interest in real property situated in the British Virgin Islands, other than a lease referred to in paragraph (e) of sub clause (3); (c) carry on banking or trust business unless it is licensed to do so under the Banks and Trust Companies Act, l990; (d) carry on business as an insurance or reinsurance company, insurance agent or insurance broker, unless it is licensed under an enactment authorizing it to carry on that business; (e) carry on the business of company management, unless it is licensed under the Company Management Act, l990; (f) carry on the business of providing the registered office or the registered agent for companies incorporated in the British Virgin Islands. 1
(3) For purposes of paragraph (a) of sub clause (2), the Company shall not be treated as carrying on business with persons resident in the British Virgin Islands if (a) it makes or maintains deposits with a person carrying on banking business within the British Virgin Islands; (b) it makes or maintains professional contact with solicitors, barristers, accountants, book-keepers, trust companies, administration companies, investment advisers or other similar persons carrying on business within the British Virgin Islands; (c) it prepares or maintains books and records within the British Virgin Islands; (d) it holds, within the British Virgin Islands, meetings of its directors or members; (e) it holds a lease of property for use as an office from which to communicate with members or where books and records of the Company are prepared or maintained; (f) it holds shares, debt obligations or other securities in a company incorporated under the International Business Companies Act or under the Companies Act; or (g) shares, debt obligations or other securities in the Company are owned by any person resident in the British Virgin Islands or by any company incorporated under the International Business Companies Act or under the Companies Act. (4) The Company shall have all such powers as are permitted by law for the time being in force in the British Virgin Islands, irrespective of corporate benefit, to perform all acts and engage in all activities necessary or conducive to the conduct, promotion or attainment of the object of the Company. CURRENCY 5. Shares in the Company shall be issued in the currency of the United States of America. AUTHORIZED CAPITAL 6. The Company shall have no authorized capital but shall be authorized to issue 61,000,000 shares. CLASSES, NUMBER AND PAR VALUE OF SHARES 7. The Company is authorized to issue two classes of shares as follows: 2
(a) 60,000,000 shares in one series of $.0001 par value each ("Ordinary Shares"); and (b) 1,000,000 preference shares in one series of $.0001 par value each ("Preferred Stock"). DESIGNATIONS, POWERS, PREFERENCES, ETC. OF SHARES 8. (1) Ordinary Shares All Ordinary Shares shall (a) have one vote each; (b) be subject to redemption, purchase or acquisition by the Company for fair value; and (c) have the same rights with regard to dividends and distributions upon liquidation of the Company. (2) Preferred Stock The Board of Directors of the Company is authorized, subject to limitations prescribed by law and the provisions of this Clause 8, to amend the Company's Memorandum of Association to provide for the creation from time to time of one or more classes of shares of Preferred Stock, and pursuant to such amendment, to establish the number of shares and series to be included in each such class, and to fix the designation, relative rights, preferences, qualifications and limitations of the shares of each such class. The authority of the Board of Directors with respect to each class shall include, but not be limited to, determination of the following: (a) the number of shares and series constituting that class and the distinctive designation of that class; (b) the dividend rate on the shares of that class, whether dividends shall be cumulative, and, if so, from which date or dates, and whether they shall be payable in preference to, or in another relation to, the dividends payable on any other class or classes of stock; (c) whether that class shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (d) whether that class shall have conversion or exchange privileges, and, if so, the terms and conditions of such conversion or exchange, including provision for adjustment of the conversion or exchange rate in such events as the Board of Directors shall determine; (e) whether or not the shares of that class shall be redeemable, and, if so, the terms and conditions of such redemption, including the manner of selecting shares for redemption if less than all shares are to be redeemed, the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; 3
(f) whether that class shall be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of shares of that class, and, if so, the terms and amounts of such sinking fund; (g) the right of the shares of that class to the benefit of conditions and restrictions upon the creation of indebtedness of the Company or any subsidiary, upon the issue of any additional stock (including additional shares of such class of any other class) and upon the payment of dividends or the making of other distributions on, and the purchase, redemption or other acquisition by the Company or any subsidiary of any outstanding stock of the Company; (h) the right of the shares of that class in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company and whether such rights shall be in preference to, or in another relation to, the comparable rights of any other class or classes of stock; and (i) any other relative, participating, optional or other special rights, qualifications, limitations or restrictions of that class. RIGHTS NOT VARIED BY THE ISSUE OF SHARES PARI PASSU 9. The rights conferred upon the holders of the shares of any class issued with preferred or other rights shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu therewith. REGISTERED SHARES 10. Shares in the Company may be issued as registered shares only. AMENDMENT OF MEMORANDUM AND ARTICLES OF ASSOCIATION 11. The Company may only amend its Memorandum of Association and Articles of Association by a resolution of members or by a resolution of directors. DEFINITIONS 12. The meanings of words in this Memorandum of Association are as defined in the Articles of Association. 4
We, Maples Finance BVI Limited of P.O. Box 173, Kingston Chambers, Road Town, Tortola, British Virgin Islands for the purpose of incorporating an International Business Company under the laws of the British Virgin Islands hereby subscribe our name to this Memorandum of Association dated this 10th day of February, 2005 in the presence of: /s/ Aiko Stevens /s/ Carl Seymour ---------------- ---------------- Witness: Subscriber: Aiko Stevens Carl Seymour P.O. Box 173 Maples Finance BVI Limited Kingston Chambers P.O. Box 173 Road Town, Tortola Kingston Chambers British Virgin Islands Road Town, Tortola British Virgin Islands 5
COMPANY NO. 641792 EXTRACT FROM THE RESOLUTION OF THE FIRST DIRECTOR OF Origin Agritech Limited HELD ON 10 June 2005 AMENDMENT TO THE COMPANY'S MEMORANDUM OF ASSOCIATION IT WAS RESOLVED that Clause 7 of the Company's Memorandum of Association be deleted in its entirety and the following Clause be substituted in lieu thereof:- "7. CLASSES, NUMBER AND PAR VALUE OF SHARES The Company is authorized to issue two classes of shares as follows: (a) 60,000,000 shares in one series of no par value ("Ordinary Shares"); and (b) 1,000,000 preference shares in one series of no par value ("Preferred Stock"). CERTIFIED AS A TRUE EXTRACT /s/ Aiko Stevens ---------------- For and on behalf of Maples Finance BVI Limited Registered Agent
Annex C TERRITORY OF THE BRITISH VIRGIN ISLANDS THE INTERNATIONAL BUSINESS COMPANIES ACT (CAP 291) ARTICLES OF ASSOCIATION OF ORIGIN AGRITECH LIMITEDPRELIMINARY 1. In these Articles, if not inconsistent with the subject or context, the words and expressions standing in the first column of the following table shall bear the meanings set opposite them respectively in the second column thereof. Words Meaning ----- ------- capital The sum of the aggregate par value of all outstanding shares with par value of the Company and shares with par value held by the Company as treasury shares plus (a) the aggregate of the amounts designated as capital of all outstanding shares without par value of the Company and shares without par value held by the Company as treasury shares, and(b) the amounts as are from time to time transferred from surplus to capital by a resolution of directors. member A person who holds shares in the Company. person An individual, a corporation, a trust, the estate of a deceased individual, a partnership or an unincorporated association of persons. 1
resolution of directors (a) a resolution approved at a duly convened directors and constituted meeting of directors of the Company or of a committee of directors of the Company by the affirmative vote of a simple majority of the directors present at the meeting who voted and did not abstain; or (b) a resolution consented to in writing by a simple majority of the directors or of a simple majority of the members of the committee of directors , as the case may be. (c) The foregoing resolutions or consents may include the actions of director alternates. meeting of directors With respect to calling a meeting of directors, a resolution consented to in writing by any one director and notified to all other directors. resolution of members A resolution approved at a duly convened and
the Act The International Business Companies Act (Cap 291) including any modification, extension, re-enactment or renewal thereof and any regulations made thereunder. the Memorandum The Memorandum of Association of the Company as originally framed or as from time to time amended. the Seal Any Seal which has been duly adopted as the Seal of the Company. these Articles These Articles of Association as originally framed or as from time to time amended. treasury shares Shares in the Company that were previously issued but were repurchased, redeemed or otherwise acquired by the Company and not cancelled.
(a) be signed by two directors or two officers of the Company, or by one director and one officer; or (b) be under the Seal of the company, with or without the signature of any director or officer of the company and the signature of the director(s) or officer(s) and/or the Seal may be facsimiles. 8. If several persons are registered as joint holders of any shares, any one of such persons may give an effectual receipt for any dividend payable in respect of such shares. SHARES, AUTHORIZED CAPITAL, CAPITAL AND SURPLUS 9. Subject to the provisions of these Articles and any resolution of members, the unissued shares of the Company shall be at the disposal of the directors who may, without limiting or affecting any rights previously conferred on the holders of any existing shares or class or series of shares, offer, allot, grant options over or otherwise dispose of shares to such persons, at such times and upon such terms and conditions as the Company may by resolution of directors determine. 10. No share in the Company may be issued until the consideration in respect thereof is fully paid as provided in the Act, and when issued the share is for all purposes fully paid and non-assessable save that a share issued for a promissory note or other written obligation for payment of a debt may be issued subject to forfeiture in the manner prescribed in these Articles. 11. Shares in the Company may be issued for money, services rendered, personal property, an estate in real property, a promissory note or other binding obligation to contribute money or property or any combination of the foregoing as shall be determined by a resolution of directors. 12. Shares in the Company may be issued for such amount of consideration as the directors may from time to time by resolution of directors determine, except that in the case of shares with par value, the amount shall not be less than the par value, and in the absence of fraud the decision of the directors as to the value of the consideration received by the Company in respect of the issue is conclusive unless a question of law is involved. The consideration in respect of the shares constitutes capital to the extent of the par value and the excess constitutes surplus. 13. A share issued by the Company upon conversion of, or in exchange for, another share or a debt obligation or other security in the Company, shall be treated for all purposes as having been issued for money equal to the consideration received or deemed to have been received by the Company in respect of the other share, debt obligation or security. 14. Treasury shares may be disposed of by the Company on such terms and conditions (not otherwise inconsistent with these Articles) as the Company may by resolution of directors determine. 15. The Company may issue fractions of a share and a fractional share shall have the same corresponding fractional liabilities, limitations, preferences, privileges, qualifications, restrictions, rights and other attributes of a whole share of the same class or series of shares. 4
16. Upon the issue by the Company of a share without par value, if an amount is stated in the Memorandum to be authorized capital represented by such shares then each share shall be issued for no less than the appropriate proportion of such amount which shall constitute capital, otherwise the consideration in respect of the share constitutes capital to the extent designated by the directors and the excess constitutes surplus, except that the directors must designate as capital an amount of the consideration that is at least equal to the amount that the share is entitled to as a preference, if any, in the assets of the Company upon liquidation of the Company. 17. The Company may purchase, redeem or otherwise acquire and hold its own shares but only out of surplus or in exchange for newly issued shares of equal value. 18. Subject to provisions to the contrary in (a) the Memorandum or these Articles; (b) the designations, powers, preferences, rights, qualifications, limitations and restrictions with which the shares were issued; or (c) the subscription agreement for the issue of the shares, the Company may not purchase, redeem or otherwise acquire its own shares without the consent of members whose shares are to be purchased, redeemed or otherwise acquired. 19. No purchase, redemption or other acquisition of shares shall be made unless the directors determine that immediately after the purchase, redemption or other acquisition the Company will be able to satisfy its liabilities as they become due in the ordinary course of its business and the realizable value of the assets of the Company will not be less than the sum of its total liabilities, other than deferred taxes, as shown in the books of account, and its capital and, in the absence of fraud, the decision of the directors as to the realizable value of the assets of the Company is conclusive, unless a question of law is involved. 20. A determination by the directors under the preceding Regulation is not required where shares are purchased, redeemed or otherwise acquired (a) pursuant to a right of a member to have his shares redeemed or to have his shares exchanged for money or other property of the Company; (b) by virtue of a transfer of capital pursuant to Regulation 47; (c) by virtue of the provisions of Section 83 of the Act; or (d) pursuant to an order of the Court. 21. Shares that the Company purchases, redeems or otherwise acquires pursuant to the preceding Regulation may be cancelled or held as treasury shares except to the extent that such shares are in excess of 80 percent of the issued shares of the Company in which case they shall be cancelled but they shall be available for reissue. 22. Where shares in the Company are held by the Company as treasury shares or are held by another company of which the Company holds, directly or indirectly, shares having more than 50 percent of the votes in the election of directors of the other company, such shares of the Company are not entitled to vote or to have dividends paid thereon and shall not be treated as outstanding for any purpose except for purposes of determining the capital of the Company. 5
23. The Company may by a resolution of directors include in the computation of surplus for any purpose the unrealised appreciation of the assets of the Company, and, in the absence of fraud, the decision of the directors as to the value of the assets is conclusive, unless a question of law is involved. MORTGAGES AND CHARGES OF REGISTERED SHARES 24. Members may pledge, hypothecate, mortgage or charge their registered shares in the Company and upon satisfactory evidence thereof the Company shall give effect to the terms of any valid pledge, hypothecation, mortgage or charge except insofar as it may conflict with any requirements herein contained for consent to the transfer of shares. 25. In the case of the pledge, hypothecate, mortgage or charge of registered shares there may be entered in the share register of the Company at the request of the registered holder of such shares (a) a statement that the shares are pledged, hypothecated, mortgaged or charged; (b) the name of the pledge, mortgagee or chargee; and (c) the date on which the aforesaid particulars are entered in the share register. 26. Where particulars of a pledge, hypothecation, mortgage or charge are registered, such particulars shall be cancelled (a) with the consent of the named pledgee, mortgagee or chargee or anyone authorized to act on his behalf; or (b) upon evidence satisfactory to the directors of the discharge of the liability secured by the pledge, hypothecation, mortgage or charge and the issue of such indemnities as the directors shall consider necessary or desirable. 27. Whilst particulars of a pledge, hypothecation, mortgage or charge are registered, no transfer of any share comprised therein shall be effected without the written consent of the named mortgagee or chargee or anyone authorized to act on his behalf. FORFEITURE 28. When shares issued for a promissory note or other written obligation for payment of a debt have been issued subject to forfeiture, the following provisions shall apply. 29. Written notice specifying a date for payment to be made and the shares in respect of which payment is to be made shall be served on the member who defaults in making payment pursuant to a promissory note or other written obligations to pay a debt. 30. The written notice specifying a date for payment shall 6
(a) name a further date not earlier than the expiration of 14 days from the date of service of the notice on or before which payment required by the notice is to be made; and (b) contain a statement that in the event of non-payment at or before the time named in the notice the shares, or any of them, in respect of which payment is not made will be liable to be forfeited. 31. Where a written notice has been issued and the requirements have not been complied with within the prescribed time, the directors may at any time before tender of payment forfeit and cancel the shares to which the notice relates. 32. The Company is under no obligation to refund any moneys to the member whose shares have been forfeited and cancelled pursuant to these provisions. Upon forfeiture and cancellation of the shares the member is discharged from any further obligation to the Company with respect to the shares forfeited and cancelled. LIEN 33. The Company shall have a first and paramount lien on every share issued for a promissory note or for any other binding obligation to contribute money or property or any combination thereof to the Company, and the Company shall also have a first and paramount lien on every share standing registered in the name of a member, whether singly or jointly with any other person or persons, for all the debts and liabilities of such member or his estate to the Company, whether the same shall have been incurred before or after notice to the Company of any interest of any person other than such member, and whether the time for the payment or discharge of the same shall have actually arrived or not, and notwithstanding that the same are joint debts or liabilities of such member or his estate and any other person, whether a member of the Company or not. The Company's lien on a share shall extend to all dividends payable thereon. The directors may at any time either generally, or in any particular case, waive any lien that has arisen or declare any share to be wholly or in part exempt from the provisions of this Regulation. 34. In the absence of express provisions regarding sale in the promissory note or other binding obligation to contribute money or property, the Company may sell, in such manner as the directors may by resolution of directors determine, any share on which the Company has a lien, but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of twenty-one days after a notice in writing, stating and demanding payment of the sum presently payable and giving notice of the intention to sell in default of such payment, has been served on the holder for the time being of the share. 35. The net proceeds of the sale by the Company of any shares on which it has a lien shall be applied in or towards payment of discharge of the promissory note or other binding obligation to contribute money or property or any combination thereof in respect of which the lien exists so far as the same is presently payable and any residue shall (subject to a like lien for debts or liabilities not presently payable as existed upon the share prior to the sale) be paid to the holder of the share immediately before such sale. For giving effect to any such sale the directors may authorize some person to transfer the share sold to the purchaser thereof. The purchaser shall be regihstered as the holder of the share and he shall not be bound to see to the application of the purchase money, nor shall his title to the share be affected by any irregularity or invalidity in the proceedings in reference to the sale. 7
TRANSFER OF SHARES 36. Subject to any limitations in the Memorandum, registered shares in the Company may be transferred by a written instrument of transfer signed by the transferor and containing the name and address of the transferee, but in the absence of such written instrument of transfer the directors may accept such evidence of a transfer of shares as they consider appropriate. 37. The Company shall not be required to treat a transferee of a registered share in the Company as a member until the transferee's name has been entered in the share register. TRANSMISSION OF SHARES 38. The executor or administrator of a deceased member, the guardian of an incompetent member or the trustee of a bankrupt member shall be the only person recognized by the Company as having any title to his share but they shall not be entitled to exercise any rights as a member of the Company until they have proceeded as set forth in the next following three Regulations. 39. The production to the Company of any document which is evidence of probate of the will, or letters of administration of the estate, or confirmation as executor, of a deceased member or of the appointment of a guardian of an incompetent member or the trustee of a bankrupt member shall be accepted by the Company even if the deceased, incompetent or bankrupt member is domiciled outside the British Virgin Islands if the document evidencing the grant of probate or letters of administration, confirmation as executor, appointment as guardian or trustee in bankruptcy is issued by a foreign court which had competent jurisdiction in the matter. For the purpose of establishing whether or not a foreign court had competent jurisdiction in such a matter the directors may obtain appropriate legal advice. The directors may also require an indemnity to be given by the executor, administrator, guardian or trustee in bankruptcy. 40. Any person becoming entitled by operation of law or otherwise to a share or shares in consequence of the death, incompetence or bankruptcy of any member may be registered as a member upon such evidence being produced as may reasonably be required by the directors. An application by any such person to be registered as a member shall for all purposes be deemed to be a transfer of shares of the deceased, incompetent or bankrupt member and the directors shall treat it as such. 41. Any person who has become entitled to a share or shares in consequence of the death, incompetence or bankruptcy of any member may, instead of being registered himself, request in writing that some person to be named by him be registered as the transferee of such share or shares and such request shall likewise be treated as if it were a transfer. 42. What amounts to incompetence on the part of a person is a matter to be determined by the court having regard to all the relevant evidence and the circumstances of the case. 8
REDUCTION OR INCREASE IN AUTHORIZED CAPITAL OR CAPITAL 43. The Company may by a resolution of directors or a resolution of members amend the Memorandum to increase or reduce its authorized capital and in connection therewith the Company may in respect of any unissued shares increase or reduce the number of such shares, increase or reduce the par value of any such shares or effect any combination of the foregoing. 44. Subject to the requirements of the Memorandum, the Company may by either a resolution of members or a resolution of directors amend the Memorandum to (a) increase or reduce its authorized capital and in connection therewith the Company may in respect of any unissued shares increase or reduce the number of such shares, increase or reduce the par value of any such shares or effect any combination of the foregoing; (b) increase the number of its shares having no par value; (c) increase its capital constituted by shares of no par value by transferring reserves or profits to the capital, with or without a distribution of shares; ( d) combine and divide all or any part of its share capital into shares of larger amount than its existing shares or combine and reduce the number of the issued no par value shares; (e) increase the number of its issued no par value shares without an increase of its capital; (f) subdivide its shares, or any of them, into shares of smaller amount than is fixed by the Memorandum; (g) convert any shares having a par value into shares of no par value; (h) convert any shares of no par value into shares having a par value; or (i) convert any of its shares, whether issued or not, into shares of another class. 45. The Company may by a resolution of directors or a resolution of members amend the Memorandum to (a) divide the shares, including issued shares, of a class or series into a larger number of shares of the same class or series; or (b) combine the shares, including issued shares, of a class or series into a smaller number of shares of the same class or series, provided, however, that where shares are divided or combined under (a) or (b) of this Regulation, the aggregate par value of the new shares must be equal to the aggregate par value of the original shares. 9
46. The capital of the Company may by a resolution of directors be increased by transferring an amount of the surplus of the Company to capital. 47. Subject to the provisions of the two next succeeding Regulations, the capital of the Company may by resolution of directors be reduced by transferring an amount of the capital of the Company to surplus. 48. No reduction of capital shall be effected that reduces the capital of the Company to an amount that immediately after the reduction is less than the aggregate par value of all outstanding shares with par value and all shares with par value held by the Company as treasury shares and the aggregate of the amounts designated as capital of all outstanding shares without par value and all shares without par value held by the Company as treasury shares that are entitled to a preference, if any, in the assets of the Company upon liquidation of the Company. 49. No reduction of capital shall be effected unless the directors determine that immediately after the reduction the Company will be able to satisfy its liabilities as they become due in the ordinary course of its business and that the realizable assets of the Company will not be less than its total liabilities, other than deferred taxes, as shown in the books of the Company and its remaining capital, and, in the absence of fraud, the decision of the directors as to the realizable value of the assets of the Company is conclusive, unless a question of law is involved. MEETINGS AND CONSENTS OF MEMBERS 50. Any action required or permitted to be taken by the members must be effected at a duly called meeting (as described in Regulations 52 and 53) of the members entitled to vote on such action and may not be effected by written resolution. 51. Meetings of members shall be held at such places as may be fixed from time to time by the directors. 52. An annual meeting of members for election of directors and for such other business as may come before the meeting shall be held each year at such date and time as may be determined by the directors. 53. Special meetings of members (being all meetings of members which are not annual meetings) may be called only by the directors pursuant to a resolution of directors to that effect or upon the written request of members holding more than 50 percent of the votes of the outstanding voting shares in the Company. 54. Written notice of all meetings of members, stating the time, place and purposes thereof, shall be given not fewer than seven days before the date of the proposed meeting to those persons whose names appear as members in the share register of the Company on the date of the notice and are entitled to vote at the meeting. 55. The directors may fix the date notice is given of a meeting of members as the record date for determining those shares that are entitled to vote at the meeting. 56. A meeting of members may be called on short notice: (a) if members holding not less than 90 percent of the total number of shares entitled to vote on all matters to be considered at the meeting, or 90 percent of the votes of each class or series of shares where members are entitled to vote thereon as a class or series together with not less than a 90 percent majority of the remaining votes, have agreed to short notice of the meeting, or 10
(b) if all members holding shares entitled to vote on all or any matters to be considered at the meeting have waived notice of the meeting and for this purpose presence at the meeting shall be deemed to constitute waiver. 57. The inadvertent failure of the directors to give notice of a meeting to a member, or the fact that a member has not received notice, does not invalidate the meeting. 58. A member may be represented at a meeting of members by a proxy who may speak and vote on behalf of the member. 59. The instrument appointing a proxy shall be produced at the place appointed for the meeting before the time for holding the meeting at which the person named in such instrument proposes to vote. 60. An instrument appointing a proxy shall be in substantially the following form or such other form as the Chairman of the meeting shall accept as properly evidencing the wishes of the member appointing the proxy: (Name of Company)I/We ---------------------------------------------------------------------------- being a member of the above Company with. shares --------------------------------- HEREBY APPOINT ------------------------------------------------------------------ of ------------------------------------------------------------------------------ or failing him. ----------------------------------------------------------------- of to be ------------------------------------------------------------------------- my/our proxy to vote for me/us at the meeting of members to be held on the day of. ---------------- --------------------------------------------------------- and at any adjournment thereof. [Any restrictions on voting to be inserted here] Signed this. day of. ------------------ ------------------------------------------- /s/ ------------------------------ Member 61. The following shall apply in respect of joint ownership of shares: (a) if two or more persons hold shares jointly each of them may be present in person or by proxy at a meeting of members and may speak as a member; (b) if only one of the joint owners is present in person or by proxy he may vote on behalf of all joint owners, and (c) if two or more of the joint owners are present in person or by proxy they must vote as one. 62. A member shall be deemed to be present at a meeting of members if he participates by telephone or other electronic means and all members participating in the meeting are able to hear each other. 11
63. A meeting of members is duly constituted if, at the commencement of the meeting, there are present in person or by proxy not less than 50 percent of the votes of the shares or class or series of shares entitled to vote on resolutions of members to be considered at the meeting. If a quorum be present, notwithstanding the fact that such quorum may be represented by only one person then such person may resolve any matter and a certificate signed by such person accompanied where such person be a proxy by a copy of the proxy form shall constitute a valid resolution of members. 64. If within two hours from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the next business day at the same time and place or to such other time and place as the directors may determine, and if at the adjourned meeting there are present within one hour from the time appointed for the meeting in person or by proxy not less than one third of the votes of the shares or each class or series of shares entitled to vote on the resolutions to be considered by the meeting, those present shall constitute a quorum but otherwise the meeting shall be dissolved. 65. At any meeting of members, only such business shall be conducted as shall have been brought before such meeting: (a) by or at the direction of the Chairman of the Board of Directors; or (b) by any member who is a holder of record at the time of the giving of the notice provided for in Regulation 54 who is entitled to vote at the meeting and who complies with the procedures set out in Regulation 66. 66. For business to be properly brought to the annual meeting of members by a member, the member must have given timely written notice thereof, either by personal delivery or by prepaid registered post to the Secretary of the Company (the "Secretary") at the principal executive offices of the Company. To be timely, a member's notice must be delivered not less than 60 days nor more than 90 days prior to the anniversary date of the prior year's annual meeting; provided, however, that in the event that the date of the annual meeting changed by more than 30 days from such anniversary date, in order to be timely, notice by the member must be so received not later than the close of business on the tenth day following the day on which public disclosure is first made of the date of the annual meeting. For the purposes of this Regulation 66, any adjournment(s) or postponement(s) of the original meeting whereby the meeting will reconvene within 30 days from original date shall be deemed, for purposes of notice, to be a continuation of the original meeting and no business may be brought before any reconvened meeting unless such timely notice of such business was given to the Secretary for the meeting as originally scheduled. A member's notice to the Secretary shall set out as to each matter that the member wishes to be brought before the meeting of members: 12
(i) a brief description of the business desired to be brought before the meeting; (ii) the name and address of record of the member proposing such business; (iii) the class and number of shares of the Company which are beneficially owned by such member; (iv) any material interest of such member in such business; and (v) if the member intends to solicit proxies in support of such member's proposal, a representation to that effect (b) Notwithstanding the aforegoing, nothing in this Regulation 66 shall be interpreted or construed to require the inclusion of information about any such proposal in any proxy statement distributed by, at the direction of, or on behalf of, the directors. The chairman of a meeting of members shall, if the facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Regulation 66 and, if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. However, the notice requirements set out in this Regulation 66 shall be deemed satisfied by a member if the member has notified the Company of his intention to present a proposal at a meeting of members and such member's proposal has been included in a proxy statement that has been distributed by, at the direction of, or on behalf of, the directors to solicit proxies for such meeting; provided that, if such member does not appear or send a qualified representative, as determined by the chairman of the meeting, to present such proposal at such meeting, the Company need not present such proposal for a vote at such meeting notwithstanding that proxies in respect of such vote may have been received by the Company. 67. At every meeting of members, the Chairman of the Board of Directors shall preside as chairman of the meeting. If there is no Chairman of the Board of Directors or if the Chairman of the Board of Directors is not present at the meeting, the chief executive officer shall be the chairman. In the absence of the chief executive officer, such person as shall be selected by the Board of Directors shall act as chairman of the meeting. 68. The chairman may, with the consent of the meeting, adjourn any meeting from time to time, and from place to place, but no business shall be transacted at any adjourned meeting other than the business left unfinished at the meeting from which the adjournment took place. 69. At any meeting of the members the chairman shall be responsible for deciding in such manner as he shall consider appropriate whether any resolution has been carried or not and the result of his decision shall be announced to the meeting and recorded in the minutes thereof. If the chairman shall have any doubt as to the outcome of any resolution put to the vote, he shall cause a poll to be taken of all votes cast upon such resolution, but if the chairman shall fail to take a poll then any member present in person or by proxy who disputes the announcement by the chairman of the result of any vote may immediately following such announcement demand that a poll be taken and the chairman shall thereupon cause a poll to be taken. If a poll is taken at any meeting, the result thereof shall be duly recorded in the minutes of that meeting by the chairman. 13
70. Any person other than an individual shall be regarded as one member and subject to the specific provisions hereinafter contained for the appointment of representatives of such persons the right of any individual to speak for or represent such member shall be determined by the law of the jurisdiction where, and by the documents by which, the person is constituted or derives its existence. In case of doubt, the directors may in good faith seek legal advice from any qualified person and unless and until a court of competent jurisdiction shall otherwise rule, the directors may rely and act upon such advice without incurring any liability to any member. 71. Any person other than an individual which is a member of the Company may by resolution of its directors or other governing body authorize such person as it thinks fit to act as its representative at any meeting of the Company or of any class of members of the Company, and the person so authorized shall be entitled to exercise the same powers on behalf of the person which he represents as that person could exercise if it were an individual member of the Company. 72. The chairman of any meeting at which a vote is cast by proxy or on behalf of any person other than an individual may call for a notarially certified copy of such proxy or authority which shall be produced within 7 days of being so requested or the votes cast by such proxy or on behalf of such person shall be disregarded. 73. Directors of the Company may attend and speak with members of the Company and at any separate meeting of the holders of any class or series of shares in the Company. 74. No business of the Company shall be conducted at a meeting of members except in accordance with the provisions of these Regulations 50 to 73. DIRECTORS 75. The initial number of directors shall be one until such time as the Company merger with its parent corporation when the number of directors shall be increased to nine. Subject to the requirements of the Memorandum, the directors may by a resolution of directors, amend this Regulation 75 to change the number of directors. 76. Subject to Regulation 75 to change the number of directors, the continuing directors may act, notwithstanding any casual vacancy in their body, so long as there remain in office not less than the prescribed minimum number of directors duly qualified to act, but if the number falls below the prescribed minimum, the remaining directors shall not act except for the purpose of filling such vacancy. 77. The shareholding qualification for directors may be fixed, and from time to time varied, by a resolution of members and unless and until so fixed no qualification shall be required. A director must be an individual. 78. The directors may, by a resolution of directors, fix the emoluments of directors with respect to services to be rendered in any capacity to the Company. 14
APPOINTMENT AND RETIREMENT OF DIRECTORS 79. The first directors of the Company shall be appointed by the subscribers to the Memorandum, and thereafter, directors shall hold office until the next annual meeting of shareholders or until such director's earlier resignation, removal from office, death or incapacity. 80. Any vacancy on the Board of Directors resulting from death, resignation, removal or other cause and any newly created directorship resulting from any increase in the authorized number of directors between meetings of members shall be filled only by the affirmative vote of a majority of all the directors then in office (even if less than a quorum). 81. (a) Nominations of persons for election to the Board of Directors shall be made only at a meeting of members and only (i) by or at the direction of the directors; or (ii) by a member entitled to vote for the election of directors who complies with the notice procedures set out below. (b) Such nominations, other than those made by or at the direction of the directors, shall be made pursuant to timely notice in writing to the Secretary. To be timely, a members' notice shall be delivered to or mailed and received at the principal executive offices of the Company not less than 60 days nor more than 90 days prior to the anniversary date of the prior year's annual meeting; provided, however, that in the event that the date of the annual meeting changed by more than 30 days from such anniversary date, notice by the member to be timely must be so received not later than the close of business on the tenth day following the day on which public disclosure is first made of the date of the annual meeting. For the purposes of this Regulation, any adjournment or postponement of the original meeting whereby the meeting will reconvene within 30 days from the original date shall be deemed for the purposes of this notice to be a continuation of the original meeting and no nominations by a member of persons to be elected directors of the Company may be made at any such reconvened meeting unless pursuant to a notice which was timely for the meeting on the date originally scheduled. Each such notice shall set out (i) the name and address of the member who intends to make the nomination and of the persons to be nominated; (ii) a representation that the member is a holder of record of shares in the Company entitled to vote at such meeting and that he intends to appear in person or by a proxy at the meeting to nominate the persons specified in the notice; (iii) a description of all arrangements or understandings between the member and each nominee and any other person (naming such person) pursuant to which the nominations are to be made by the member; 15
(iv) such other information regarding each nominee proposed by such member as would have been required to be included in a proxy statement filed pursuant to the proxy rules of the United States Securities and Exchange Commission, had each nominee been nominated, or intended to be nominated, by the directors; (v) the consent of each nominee to serve as a director of the Company if so elected; and (vi) if the member intends to solicit proxies in support of such member's nominees, a representation to that effect. 82. The chairman of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the aforegoing procedure detailed in Regulation 81. Only such persons as are nominated in accordance with the procedures set out in Regulation 81 shall be eligible to serve as directors of the Company. If at any meeting of members at which an election of directors ought to take place, the place of any retiring director is not filled, he shall, if willing, continue in office until the dissolution of the annual meeting of members in the next year, and so on from year to year until his place is filled, unless it shall be determined at such meeting not to fill such vacancy. 83. The appointment of a director shall take effect upon compliance with the requirements of the Act. DISQUALIFICATION AND REMOVAL OF DIRECTORS 84. Subject to the provisions of the Act, a director shall cease to hold office as such only: (a) if he becomes of unsound mind; or (b) if (unless he is not required to hold a share qualification) he has not duly qualified himself within two months of his appointment or if he ceases to hold the required number of shares to qualify him for office; or (c) if he is absent from meetings of the directors for six consecutive months without leave of the board of directors, provided that the directors shall have power to grant any director leave of absence for any or an indefinite period; or (d) if he dies; or (e) one month or, with the permission of the directors earlier, after he has given notice in writing of his intention to resign; or (f) if he shall, pursuant to the provisions of the Act, be disqualified or cease to hold office or be prohibited from acting as director; or (g) if he is removed from office by a resolution signed by all the other directors; or (h) if he is removed from office for cause by a resolution of members. For the purposes hereof, cause means the willful and continuous failure by a director to substantially perform his duties to the Company (other than any such failure resulting from incapacity due to physical or mental illness) or the willful engaging by the director in gross misconduct materially and demonstrably injurious to the Company; or 16
(i) if he is removed from office without cause by a resolution of the majority of the members of the Company, being for the purposes of this Regulation 84(i) only, an affirmative vote of the holders of 662/3 percent or more of the outstanding votes of the shares entitled to vote thereon. REGISTER OF DIRECTORS 85. The Company may determine by resolution of directors to keep a register of directors containing: (a) the names and addresses of the persons who are directors of the Company; (b) the date on which each person whose name is entered in the register was appointed as director of the Company; and (c) the date on which each person named as a director ceased to be a director of the Company. 86. If the directors determine to maintain a register of directors, a copy thereof shall be kept at the registered office of the Company and the Company may determine by resolution of directors to register a copy of the register with the Registrar of Companies. MANAGING DIRECTORS 87. The directors may from time to time and by resolution of directors appoint one or more of their number to be a managing director or joint managing director and may, subject to any contract between him or them and the Company, from time to time terminate his or their appointment and appoint another or others in his or their place or places. 88. A director appointed in terms of the provisions of Regulation 87 to the office of managing director of the Company may be paid, in addition to the remuneration payable in terms of Regulation 78, such remuneration not exceeding a reasonable maximum in each year in respect of such office as may be determined by a disinterested quorum of the directors. 89. The directors may from time to time, by resolution of directors, entrust and confer upon a managing director for the time being such of the powers and authorities vested in them as they think fit, save that no managing director shall have any power or authority with respect to the matters requiring a resolution of directors under the Act. POWERS OF DIRECTORS 90. The business and affairs of the Company shall be managed by the directors who may exercise all such powers of the Company as are not by the Act or by the Memorandum or these Articles required to be exercised by the members of the Company, subject to any delegation of such powers as may be authorized by these Articles and to such requirements as may be prescribed by a resolution of members; but no requirement made by a resolution of members shall prevail if it be inconsistent with these Articles nor shall such requirement invalidate any prior act of the directors which would have been valid if such requirement had not been made. 17
91. The directors may, by a resolution of directors, appoint any person, including a person who is a director, to be an officer or agent of the Company. The resolution of directors appointing an agent may authorize the agent to appoint one or more substitutes or delegates to exercise some or all of the powers conferred on the agent by the Company. 92. Every officer or agent of the Company has such powers and authority of the directors, including the power and authority to affix the Seal, as are set forth in these Articles or in the resolution of directors appointing the officer or agent, except that no officer or agent has any power or authority with respect to the matters requiring a resolution of directors under the Act. 93. The directors may authorize the payment of such donations by the Company to such religious, charitable, public or other bodies, clubs, funds or associations or persons as may seem to them advisable in the interests of the Company. 94. The directors may by resolution of directors exercise all the powers of the Company to borrow money and to mortgage or charge its undertakings and property or any part thereof, to issue debentures, debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of the Company or of any third party. 95. All cheques, promissory notes, drafts, bills of exchange and other negotiable instruments and all receipts for moneys paid to the Company, shall be signed, drawn, accepted, endorsed or otherwise executed, as the case may be, in such manner as shall from time to time be determined by resolution of directors. 96. The Company may determine by resolution of directors to maintain at its registered office a register of mortgages, charges and other encumbrances in which there shall be entered the following particulars regarding each mortgage, charge and other encumbrance: (a) the sum secured; (b) the assets secured; (c) the name and address of the mortgagee, chargee or other encumbrancer; (d) the date of creation of the mortgage, charge or other encumbrance; and (e) the date on which the particulars specified above in respect of the mortgage, charge or other encumbrance are entered in the register. 97. The Company may further determine by a resolution of directors to register a copy of the register of mortgages, charges or other encumbrances with the Registrar of Companies. 18
PROCEEDINGS OF DIRECTORS 98. The directors of the Company or any committee thereof may meet at such times and in such manner and places within or outside the British Virgin Islands as the directors may determine to be necessary or desirable. 99. A director shall be deemed to be present at a meeting of directors if he participates by telephone or other electronic means and all directors participating in the meeting are able to hear each other. 100. A director shall be given not less than 3 days notice of meetings of directors, but a meeting of directors held without 3 days notice having been given to all directors shall be valid if all the directors entitled to vote at the meeting who do not attend, waive notice of the meeting and for this purpose, the presence of a director at a meeting shall constitute waiver on his part. The inadvertent failure to give notice of a meeting to a director, or the fact that a director has not received the notice, does not invalidate the meeting. 101. A meeting of directors is duly constituted for all purposes if at the commencement of the meeting there are present in person not less than one-half of the total number of directors, unless there are only 2 directors in which case the quorum shall be 2. 102. At every meeting of the directors the Chairman of the Board of Directors shall preside as chairman of the meeting. If there is no Chairman of the Board of Directors or if the Chairman of the Board of Directors is not present at the meeting the Vice-Chairman of the Board of Directors shall preside. If there is no Vice-Chairman of the Board of Directors or if the Vice-Chairman of the Board of Directors is not present at the meeting the directors present shall choose some one of their number to be chairman of the meeting. 103. An action that may be taken by the directors or a committee of directors at a meeting may also be taken by a resolution of directors or a committee of directors consented to in writing or by telex, telegram, cable, facsimile or other written electronic communication by three quarters of the directors or three quarters of the members of the committee as the case may be, provided that a copy of the proposed resolution will have been sent to all of the directors or the members of the committee, for their consent. The consent may be in the form of counterparts, each counterpart being signed by one or more directors. 104. The directors shall cause the following corporate records to be kept: (a) minutes of all meetings of directors, members, committees of directors, committees of officers and committees of members; (b) copies of all resolutions consented to by directors, members, committees of directors, committees of officers and committees of members; and (c) such other accounts and records as the directors by resolution of directors consider necessary or desirable in order to reflect the financial position of the Company. 105. The books, records and minutes shall be kept at the registered office of the Company, its principal place of business or at such other place as the directors determine. 19
COMMITTEES 106. The directors may, by resolution of directors, designate one or more committees, each consisting of one or more directors. 107. Each committee of directors has such powers and authorities of the directors, including the power and authority to affix the Seal, as are set forth in the resolution of directors establishing the committee, except that no committee has any power or authority to amend the Memorandum or these Articles, to appoint directors or fix their emoluments, or to appoint officers or agents of the Company. 108. The meetings and proceedings of each committee of directors consisting of 2 or more directors shall be governed mutatis mutandis by the provisions of these Articles regulating the proceedings of directors so far as the same are not superseded by any provisions in the resolution establishing the committee. OFFICERS 109. The Company may by resolution of directors appoint officers of the Company at such times as shall be considered necessary or expedient. Such officers may consist of a Chief Executive Officer or one or more Joint Chief Executive Officers, a Chairman of the Board of Directors, a Vice-Chairman of the Board of Directors, a President or one or more Joint Presidents, a Chief Operating Officer and one or more Vice-Presidents, Secretaries and Treasurers and such other holders of any other executive office in the Company or officers as may from time to time be deemed desirable. Any number of offices may be held by the same person. 110. The officers shall perform such duties as shall be prescribed at the time of their appointment subject to any modification in such duties as may be prescribed thereafter by resolution of directors or resolution of members, but in the absence of any specific allocation of duties it shall be the responsibility of the Chairman of the Board of Directors to preside at meetings of directors and members, the Vice-Chairman to act in the absence of the Chairman, the President to manage the day to day affairs of the Company, the Vice-Presidents to act in order of seniority in the absence of the President but otherwise to perform such duties as may be delegated to them by the President, the Secretaries to maintain the share register, minute books and records (other than financial records) of the Company and to ensure compliance with all procedural requirements imposed on the Company by applicable law, and the Treasurer to be responsible for the financial affairs of the Company. 111. The emoluments of all officers shall be fixed by resolution of directors. 112. The officers of the Company shall hold office until their successors are duly elected and qualified, but any officer elected or appointed by the directors may be removed at any time, with or without cause, by resolution of directors. Any vacancy occurring in any office of the Company may be filled by resolution of directors.
114. A director who has an interest in any particular business to be considered at a meeting of directors or members may be counted for purposes of determining whether the meeting is duly constituted.INDEMNIFICATION 115. To the full extent permitted by the Act or any other applicable laws presently or hereafter in effect, no director of the Company shall be personally liable to the Company or its members for or with respect to any acts or omissions in the performance of his or her duties as a director of the Company. Any repeal or modification of this Regulation 115 by a resolution of members shall not adversely affect the right or protection of a director of the Company existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification. 116. Subject to the limitations hereinafter provided the Company may indemnify against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred in connection with legal, administrative or investigative proceedings any person who (a) is or was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigative, by reason of the fact that the person is or was a director, an officer or a liquidator of the Company; or (b) is or was, at the request of the Company, serving as a director, officer or liquidator of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise. 117. The Company may only indemnify a person if the person acted honestly and in good faith with a view to the best interests of the Company and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. 118. The decision of the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the Company and as to whether the person had no reasonable cause to believe that his conduct was unlawful is, in the absence of fraud, sufficient for the purposes of these Articles, unless a question of law is involved. 119. The termination of any proceedings by any judgment, order, settlement, conviction or the entering of a nolle prosequi does not, by itself, create a presumption that the person did not act honestly and in good faith and with a view to the best interests of the Company or that the person had reasonable cause to believe that his conduct was unlawful. 21
120. If a person to be indemnified has been successful in defence of any proceedings referred to above, the person is entitled to be indemnified against all expenses, including legal fees, and against all judgments, fines and amounts paid in settlement and reasonably incurred by the person in connection with the proceedings. 121. The Company may purchase and maintain insurance in relation to any person who is or was a director, an officer or a liquidator of the Company, or who at the request of the Company is or was serving as a director, an officer or a liquidator of, or in any other capacity is or was acting for, another company or a partnership, joint venture, trust or other enterprise, against any liability asserted against the person and incurred by the person in that capacity, whether or not the Company has or would have had the power to indemnify the person against the liability as provided in these Articles. SEAL 122. The Company may have more than one Seal and references herein to the Seal shall be references to every Seal which shall have been duly adopted by resolution of directors. The directors shall provide for the safe custody of the Seal and for an imprint thereof to be kept at the Registered Office. Except as otherwise expressly provided herein the Seal when affixed to any written instrument shall be witnessed and attested to by the signature of a director or any other person so authorized from time to time by resolution of directors. Such authorization may be before or after the Seal is affixed, may be general or specific and may refer to any number of sealings. The Directors may provide for a facsimile of the Seal and of the signature of any director or authorized person which may be reproduced by printing or other means on any instrument and it shall have the same force and validity as if the Seal had been affixed to such instrument and the same had been signed as hereinbefore described.
127. Notice of any dividend that may have been declared shall be given to each member in manner hereinafter mentioned and all dividends unclaimed for 3 years after having been declared may be forfeited by resolution of directors for the benefit of the Company. 128. No dividend shall bear interest as against the Company and no dividend shall be paid on treasury shares or shares held by another company of which the Company holds, directly or indirectly, shares having more than 50 percent of the vote in electing directors. 129. A share issued as a dividend by the Company shall be treated for all purposes as having been issued for money equal to the surplus that is transferred to capital upon the issue of the share. 130. In the case of a dividend of authorized but unissued shares with par value, an amount equal to the aggregate par value of the shares shall be transferred from surplus to capital at the time of the distribution. 131. In the case of a dividend of authorized but unissued shares without par value, the amount designated by the directors shall be transferred from surplus to capital at the time of the distribution, except that the directors must designate as capital an amount that is at least equal to the amount that the shares are entitled to as a preference, if any, in the assets of the Company upon liquidation of the Company. 132. A division of the issued and outstanding shares of a class or series of shares into a larger number of shares of the same class or series having a proportionately smaller par value does not constitute a dividend of shares. ACCOUNTS AND AUDIT 133. The Company may by resolution of members call for the directors to prepare periodically a profit and loss account and a balance sheet. The profit and loss account and balance sheet shall be drawn up so as to give respectively a true and fair view of the profit and loss of the Company for the financial period and a true and fair view of the state of affairs of the Company as at the end of the financial period. 134. The Company may by resolution of members call for the accounts to be examined by auditors. 135. The first auditors of the Company and subsequent auditors shall be appointed by resolution of directors. 136. The auditors may be members of the Company but no director or other officer shall be eligible to be an auditor of the Company during his continuance in office. 137. The remuneration of the auditors of the Company (a) in the case of auditors appointed by the directors, may be fixed by resolution of directors; and (b) subject to the foregoing, shall be fixed by resolution of members or in such manner as the Company may by resolution of members determine. 138. The auditors shall examine each profit and loss account and balance sheet required to be served on every member of the Company or laid before a meeting of the members of the Company and shall state in a written report whether or not 23
(a) in their opinion the profit and loss account and balance sheet give a true and fair view respectively of the profit and loss for the period covered by the accounts, and of the state of affairs of the Company at the end of that period; and (b) all the information and explanations required by the auditors have been obtained. 139. The report of the auditors shall be annexed to the accounts and shall be read at the meeting of members at which the accounts are laid before the Company or shall be served on the members. 140. Every auditor of the Company shall have a right of access at all times to the books of account and vouchers of the Company, and shall be entitled to require from the directors and officers of the Company such information and explanations as he thinks necessary for the performance of the duties of the auditors. 141. The auditors of the Company shall be entitled to receive notice of, and to attend any meetings of members of the Company at which the Company's profit and loss account and balance sheet are to be presented. NOTICES 142. Any notice, information or written statement to be given by the Company to members may be served in the case of members holding registered shares in any way by which it can reasonably be expected to reach each member or by mail addressed to each member at the address shown in the share register. 143. Any summons, notice, order, document, process, information or written statement to be served on the Company may be served by leaving it, or by sending it by registered mail addressed to the Company, at its registered office, or by leaving it with, or by sending it by registered mail to, the registered agent of the Company. 144. Service of any summons, notice, order, document, process, information or written statement to be served on the Company may be proved by showing that the summons, notice, order, document, process, information or written statement was delivered to the registered office or the registered agent of the Company or that it was mailed in such time as to admit to its being delivered to the registered office or the registered agent of the Company in the normal course of delivery within the period prescribed for service and was correctly addressed and the postage was prepaid. PENSION AND SUPERANNUATION FUNDS 145. The directors may establish and maintain or procure the establishment and maintenance of any non-contributory or contributory pension or superannuation funds for the benefit of, and give or procure the giving of donations, gratuities, pensions, allowances or emoluments to, any persons who are or were at any time in the employment or service of the Company or any company which is a subsidiary of the Company or is allied to or associated with the Company or with any such subsidiary, or who are or were at any time directors or officers of the Company or of any such other company as aforesaid or who hold or held any salaried employment or office in the Company or such other company, or any persons in whose welfare the Company or any such other company as aforesaid is or has been at any time interested, and to the wives, widows, families and dependents of any such person, and may make payments for or towards the insurance of any such persons as aforesaid, and may do any of the matters aforesaid either alone or in conjunction with any such other company as aforesaid. Subject always to the proposal being approved by resolution of members, a director holding any such employment or office shall be entitled to participate in and retain for his own benefit any such donation, gratuity, pension allowance or emolument. 24
VOLUNTARY WINDING UP AND DISSOLUTION 146. The Company may voluntarily commence to wind up and dissolve by a resolution of members but if the Company has never issued shares it may voluntarily commence to wind up and dissolve by resolution of director. CONTINUATION 147. The Company may by resolution of members or by a resolution passed unanimously by all directors of the Company continue as a company incorporated under the laws of a jurisdiction outside the British Virgin Islands in the manner provided under those laws. We, Maples Finance BVI Limited of P.O. Box 173, Kingston Chambers, Road Town, Tortola, British Virgin Islands for the purpose of incorporating an International Business Company under the laws of the British Virgin Islands hereby subscribe our name to these Articles of Association this 10th day of February 2005 in the presence of: /s/ Aiko Stevens /s/ Carl Seymour ---------------- ---------------- Witness: Subscriber: Aiko Stevens Carl Seymour P.O. Box 173 Maples Finance BVI Limited Kingston Chambers P.O. Box 173 Road Town, Tortola Kingston Chambers British Virgin Islands Road Town, Tortola British Virgin Islands
Annex D Approved by Board of Directors on December 7, 2004 Approved by Stockholders on _________, 2005 CHARDAN CHINA ACQUISITION CORP. 2005 Performance Equity Plan Section 1. Purpose; Definitions. 1.1. Purpose. The purpose of the 2005 Performance Equity Plan ("Plan") is to enable the Company to offer to its employees, officers, directors and consultants whose past, present and/or potential contributions to the Company and its Subsidiaries have been, are or will be important to the success of the Company, an opportunity to acquire a proprietary interest in the Company. The various types of long-term incentive awards that may be provided under the Plan will enable the Company to respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its businesses. 1.2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth below: (a) "Agreement" means the agreement between the Company and the Holder, or such other document as may be determined by the Committee, setting forth the terms and conditions of an award under the Plan. (b) "Board" means the Board of Directors of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" means the Stock Option Committee of the Board or any other committee of the Board that the Board may designate to administer the Plan or any portion thereof. If no Committee is so designated, then all references in this Plan to "Committee" shall mean the Board. (e) "Common Stock" means the Common Stock of the Company, par value $.0001 per share. (f) "Company" means Chardan China Acquisition Corp., a corporation organized under the laws of the State of Delaware. (g) "Deferred Stock" means Common Stock to be received under an award made pursuant to Section 8, below, at the end of a specified deferral period.
(h) "Disability" means physical or mental impairment as determined under procedures established by the Committee for purposes of the Plan. (i) "Effective Date" means the date set forth in Section 12.1, below. (j) "Fair Market Value", unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, means, as of any given date: (i) if the Common Stock is listed on a national securities exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, the last sale price of the Common Stock in the principal trading market for the Common Stock on such date, as reported by the exchange or Nasdaq, as the case may be; (ii) if the Common Stock is not listed on a national securities exchange or quoted on the Nasdaq National Market or Nasdaq SmallCap Market, but is traded in the over-the-counter market, the closing bid price for the Common Stock on such date, as reported by the OTC Bulletin Board or the National Quotation Bureau, Incorporated or similar publisher of such quotations; and (iii) if the fair market value of the Common Stock cannot be determined pursuant to clause (i) or (ii) above, such price as the Committee shall determine, in good faith. (k) "Holder" means a person who has received an award under the Plan. (l) "Incentive Stock Option" means any Stock Option intended to be and designated as an "incentive stock option" within the meaning of Section 422 of the Code. (m) "Nonqualified Stock Option" means any Stock Option that is not an Incentive Stock Option. (n) "Normal Retirement" means retirement from active employment with the Company or any Subsidiary on or after such age which may be designated by the Committee as "retirement age" for any particular Holder. If no age is designated, it shall be 65. (o) "Other Stock-Based Award" means an award under Section 9, below, that is valued in whole or in part by reference to, or is otherwise based upon, Common Stock. (p) "Parent" means any present or future "parent corporation" of the Company, as such term is defined in Section 424(e) of the Code. (q) "Plan" means the Chardan China Acquisition Corp. 2005 Performance Equity Plan, as hereinafter amended from time to time. (r) "Repurchase Value" shall mean the Fair Market Value in the event the award to be settled under Section 2.2(h) or repurchased under Section 10.2 is comprised of shares of Common Stock and the difference between Fair Market Value and the Exercise Price (if lower than Fair Market Value) in the event the award is a Stock Option or Stock Appreciation Right; in each case, multiplied by the number of shares subject to the award. (s) "Restricted Stock" means Common Stock received under an award made pursuant to Section 7, below, that is subject to restrictions under said Section 7. 2
(t) "SAR Value" means the excess of the Fair Market Value (on the exercise date) over the exercise price that the participant would have otherwise had to pay to exercise the related Stock Option, multiplied by the number of shares for which the Stock Appreciation Right is exercised. (u) "Stock Appreciation Right" means the right to receive from the Company, on surrender of all or part of the related Stock Option, without a cash payment to the Company, a number of shares of Common Stock equal to the SAR Value divided by the Fair Market Value (on the exercise date). (v) "Stock Option" or "Option" means any option to purchase shares of Common Stock which is granted pursuant to the Plan. (w) "Stock Reload Option" means any option granted under Section 5.3 of the Plan. (x) "Subsidiary" means any present or future "subsidiary corporation" of the Company, as such term is defined in Section 424(f) of the Code. (y) "Vest" means to become exercisable or to otherwise obtain ownership rights in an award. Section 2. Administration. 2.1. Committee Membership. The Plan shall be administered by the Board or a Committee. Committee members shall serve for such term as the Board may in each case determine, and shall be subject to removal at any time by the Board. The Committee members, to the extent possible and deemed to be appropriate by the Board, shall be "non-employee directors" as defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended ("Exchange Act"), and "outside directors" within the meaning of Section 162(m) of the Code. 2.2. Powers of Committee. The Committee shall have full authority to award, pursuant to the terms of the Plan: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based Awards. For purposes of illustration and not of limitation, the Committee shall have the authority (subject to the express provisions of this Plan): (a) to select the officers, employees, directors and consultants of the Company or any Subsidiary to whom Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Reload Stock Options and/or Other Stock-Based Awards may from time to time be awarded hereunder. (b) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder (including, but not limited to, number of shares, share exercise price or types of consideration paid upon exercise of such options, such as other securities of the Company or other property, any restrictions or limitations, and any vesting, 3
exchange, surrender, cancellation, acceleration, termination, exercise or forfeiture provisions, as the Committee shall determine); (c) to determine any specified performance goals or such other factors or criteria which need to be attained for the vesting of an award granted hereunder; (d) to determine the terms and conditions under which awards granted hereunder are to operate on a tandem basis and/or in conjunction with or apart from other equity awarded under this Plan and cash and non-cash awards made by the Company or any Subsidiary outside of this Plan; (e) to permit a Holder to elect to defer a payment under the Plan under such rules and procedures as the Committee may establish, including the payment or crediting of interest on deferred amounts denominated in cash and of dividend equivalents on deferred amounts denominated in Common Stock; (f) to determine the extent and circumstances under which Common Stock and other amounts payable with respect to an award hereunder shall be deferred that may be either automatic or at the election of the Holder; (g) to substitute (i) new Stock Options for previously granted Stock Options, which previously granted Stock Options have higher option exercise prices and/or contain other less favorable terms, and (ii) new awards of any other type for previously granted awards of the same type, which previously granted awards are upon less favorable terms; and (h) to make payments and distributions with respect to awards (i.e., to "settle" awards) through cash payments in an amount equal to the Repurchase Value. Notwithstanding anything to the contrary, the Committee shall not grant to any one Holder in any one calendar year awards for more than 300,000 shares in the aggregate. 2.3. Interpretation of Plan. (a) Committee Authority. Subject to Section 11, below, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable to interpret the terms and provisions of the Plan and any award issued under the Plan (and to determine the form and substance of all agreements relating thereto), and to otherwise supervise the administration of the Plan. Subject to Section 11, below, all decisions made by the Committee pursuant to the provisions of the Plan shall be made in the Committee's sole discretion and shall be final and binding upon all persons, including the Company, its Subsidiaries and Holders. (b) Incentive Stock Options. Anything in the Plan to the contrary notwithstanding, no term or provision of the Plan relating to Incentive Stock Options (including but not limited to Stock Reload Options or Stock Appreciation rights granted in conjunction with an Incentive Stock Option) or any Agreement providing for Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so 4
exercised, so as to disqualify the Plan under Section 422 of the Code or, without the consent of the Holder(s) affected, to disqualify any Incentive Stock Option under such Section 422. Section 3. Stock Subject to Plan. 3.1. Number of Shares. The total number of shares of Common Stock reserved and available for issuance under the Plan shall be 1,500,000 shares. Shares of Common Stock under the Plan ("Shares") may consist, in whole or in part, of authorized and unissued shares or treasury shares. If any shares of Common Stock that have been granted pursuant to a Stock Option cease to be subject to a Stock Option, or if any shares of Common Stock that are subject to any Stock Appreciation Right, Restricted Stock award, Deferred Stock award, Reload Stock Option or Other Stock-Based Award granted hereunder are forfeited or any such award otherwise terminates without a payment being made to the Holder in the form of Common Stock, such shares shall again be available for distribution in connection with future grants and awards under the Plan. If a Holder pays the exercise price of a Stock Option by surrendering any previously owned shares and/or arranges to have the appropriate number of shares otherwise issuable upon exercise withheld to cover the withholding tax liability associated with the Stock Option exercise, then the number of shares available under the Plan shall be increased by the lesser of (i) the number of such surrendered shares and shares used to pay taxes; and (ii) the number of shares purchased under such Stock Option. 3.2. Adjustment Upon Changes in Capitalization, Etc. In the event of any merger, reorganization, consolidation, common stock dividend payable on shares of Common Stock, Common Stock split or reverse split, combination or exchange of shares of Common Stock, or other extraordinary or unusual event which results in a change in the shares of Common Stock of the Company as a whole, the Committee shall determine, in its sole discretion, whether such change equitably requires an adjustment in the terms of any award (including number of shares subject to the award and the exercise price) or the aggregate number of shares reserved for issuance under the Plan. Any such adjustments will be made by the Committee, whose determination will be final, binding and conclusive. Section 4. Eligibility. Awards may be made or granted to employees, officers, directors and consultants who are deemed to have rendered or to be able to render significant services to the Company or its Subsidiaries and who are deemed to have contributed or to have the potential to contribute to the success of the Company. No Incentive Stock Option shall be granted to any person who is not an employee of the Company or a Subsidiary at the time of grant. Notwithstanding the foregoing, an award may be made or granted to a person in connection with his hiring or retention, or at any time on or after the date he reaches an agreement (oral or written) with the Company with respect to such hiring or retention, even though it may be prior to the date the person first performs services for the Company or its Subsidiaries; provided, however, that no portion of any such award shall vest prior to the date the person first performs such services. 5
Section 5. Stock Options. 5.1. Grant and Exercise. Stock Options granted under the Plan may be of two types: (i) Incentive Stock Options and (ii) Nonqualified Stock Options. Any Stock Option granted under the Plan shall contain such terms, not inconsistent with this Plan, or with respect to Incentive Stock Options, not inconsistent with the Plan and the Code, as the Committee may from time to time approve. The Committee shall have the authority to grant Incentive Stock Options or Non-Qualified Stock Options, or both types of Stock Options which may be granted alone or in addition to other awards granted under the Plan. To the extent that any Stock Option intended to qualify as an Incentive Stock Option does not so qualify, it shall constitute a separate Nonqualified Stock Option. 5.2. Terms and Conditions. Stock Options granted under the Plan shall be subject to the following terms and conditions: (a) Option Term. The term of each Stock Option shall be fixed by the Committee; provided, however, that an Incentive Stock Option may be granted only within the ten-year period commencing from the Effective Date and may only be exercised within ten years of the date of grant (or five years in the case of an Incentive Stock Option granted to an optionee who, at the time of grant, owns Common Stock possessing more than 10% of the total combined voting power of all classes of voting stock of the Company ("10% Stockholder"). (b) Exercise Price. The exercise price per share of Common Stock purchasable under a Stock Option shall be determined by the Committee at the time of grant, provided, however, that in no event may the exercise price per share be less than $[.02] under any Stock Option. (c) Exercisability. Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee and as set forth in Section 10, below. If the Committee provides, in its discretion, that any Stock Option is exercisable only in installments, i.e., that it vests over time, the Committee may waive such installment exercise provisions at any time at or after the time of grant in whole or in part, based upon such factors as the Committee shall determine. (d) Method of Exercise. Subject to whatever installment, exercise and waiting period provisions are applicable in a particular case, Stock Options may be exercised in whole or in part at any time during the term of the Option by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price, which shall be in cash or, if provided in the Agreement, either in shares of Common Stock (including Restricted Stock and other contingent awards under this Plan) or partly in cash and partly in such Common Stock, or such other means which the Committee determines are consistent with the Plan's purpose and applicable law. Cash payments shall be made by wire transfer, certified or bank check or personal check, in each case payable to the order of the Company; provided, however, that the Company shall not be required to deliver certificates for shares of Common Stock with respect to which an Option is exercised until the Company has confirmed the receipt of good and available 6
funds in payment of the purchase price thereof (except that, in the case of an exercise arrangement approved by the Committee and described in the last sentence of this paragraph, payment may be made as soon as practicable after the exercise). Payments in the form of Common Stock shall be valued at the Fair Market Value on the date prior to the date of exercise. Such payments shall be made by delivery of stock certificates in negotiable form that are effective to transfer good and valid title thereto to the Company, free of any liens or encumbrances. Subject to the terms of the Agreement, the Committee may, in its sole discretion, at the request of the Holder, deliver upon the exercise of a Nonqualified Stock Option a combination of shares of Deferred Stock and Common Stock; provided, however, that, notwithstanding the provisions of Section 8 of the Plan, such Deferred Stock shall be fully vested and not subject to forfeiture. A Holder shall have none of the rights of a Stockholder with respect to the shares subject to the Option until such shares shall be transferred to the Holder upon the exercise of the Option. The Committee may permit a Holder to elect to pay the Exercise Price upon the exercise of a Stock Option by irrevocably authorizing a third party to sell shares of Common Stock (or a sufficient portion of the shares) acquired upon exercise of the Stock Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise. (e) Transferability. Except as may be set forth in the next sentence of this Section or in the Agreement, no Stock Option shall be transferable by the Holder other than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the Holder's lifetime, only by the Holder (or, to the extent of legal incapacity or incompetency, the Holder's guardian or legal representative). Notwithstanding the foregoing, a Holder, with the approval of the Committee, may transfer a Stock Option (i) (A) by gift, for no consideration, or (B) pursuant to a domestic relations order, in either case, to or for the benefit of the Holder's "Immediate Family" (as defined below), or (ii) to an entity in which the Holder and/or members of Holder's Immediate Family own more than fifty percent of the voting interest, in exchange for an interest in that entity, subject to such limits as the Committee may establish and the execution of such documents as the Committee may require, and the transferee shall remain subject to all the terms and conditions applicable to the Stock Option prior to such transfer. The term "Immediate Family" shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any person sharing the Holder's household (other than a tenant or employee), a trust in which these persons have more than fifty percent beneficial interest, and a foundation in which these persons (or the Holder) control the management of the assets. (f) Termination by Reason of Death. If a Holder's employment by the Company or a Subsidiary terminates by reason of death, any Stock Option held by such Holder, unless otherwise determined by the Committee and set forth in the Agreement, shall thereupon automatically terminate, except that the portion of such Stock Option that has vested on the date of death may thereafter be exercised by the legal representative of the estate or by the legatee of the Holder under the will of the Holder, for a period of one year (or such other greater or lesser period as the Committee may specify in the Agreement) from the date of such death or until the expiration of the stated term of such Stock Option, whichever period is shorter. 7
(g) Termination by Reason of Disability. If a Holder's employment by the Company or any Subsidiary terminates by reason of Disability, any Stock Option held by such Holder, unless otherwise determined by the Committee and set forth in the Agreement, shall thereupon automatically terminate, except that the portion of such Stock Option that has vested on the date of termination may thereafter be exercised by the Holder for a period of one year (or such other greater or lesser period as the Committee may specify in the Agreement) from the date of such termination of employment or until the expiration of the stated term of such Stock Option, whichever period is shorter. (h) Other Termination. Subject to the provisions of Section 13.3, below, and unless otherwise determined by the Committee and set forth in the Agreement, if such Holder's employment or retention by, or association with, the Company or any Subsidiary terminates for any reason other than death or Disability, the Stock Option shall thereupon automatically terminate, except that if the Holder's employment is terminated by the Company or a Subsidiary without cause or due to Normal Retirement, then the portion of such Stock Option that has vested on the date of termination of employment may be exercised for the lesser of three months after termination of employment or the balance of such Stock Option's term. (i) Additional Incentive Stock Option Limitation. In the case of an Incentive Stock Option, the aggregate Fair Market Value (on the date of grant of the Option) with respect to which Incentive Stock Options become exercisable for the first time by a Holder during any calendar year (under all such plans of the Company and its Parent and Subsidiaries) shall not exceed $100,000. (j) Buyout and Settlement Provisions. The Committee may at any time, in its sole discretion, offer to repurchase a Stock Option previously granted, based upon such terms and conditions as the Committee shall establish and communicate to the Holder at the time that such offer is made. 5.3. Stock Reload Option. If a Holder tenders shares of Common Stock to pay the exercise price of a Stock Option ("Underlying Option") and/or arranges to have a portion of the shares otherwise issuable upon exercise withheld to pay the applicable withholding taxes, then the Holder may receive, at the discretion of the Committee, a new Stock Reload Option to purchase that number of shares of Common Stock equal to the number of shares tendered to pay the exercise price and the withholding taxes (but only if such tendered shares were held by the Holder for at least six months). Stock Reload Options may be any type of option permitted under the Code and will be granted subject to such terms, conditions, restrictions and limitations as may be determined by the Committee from time to time. Such Stock Reload Option shall have an exercise price equal to the Fair Market Value as of the date of exercise of the Underlying Option. Unless the Committee determines otherwise, a Stock Reload Option may be exercised commencing one year after it is granted and shall expire on the date of expiration of the Underlying Option to which the Reload Option is related. 8
Section 6. Stock Appreciation Rights. 6.1. Grant and Exercise. The Committee may grant Stock Appreciation Rights to participants who have been or are being granted Stock Options under the Plan as a means of allowing such participants to exercise their Stock Options without the need to pay the exercise price in cash. In the case of a Nonqualified Stock Option, a Stock Appreciation Right may be granted either at or after the time of the grant of such Nonqualified Stock Option. In the case of an Incentive Stock Option, a Stock Appreciation Right may be granted only at the time of the grant of such Incentive Stock Option. 6.2. Terms and Conditions. Stock Appreciation Rights shall be subject to the following terms and conditions: (a) Exercisability. Stock Appreciation Rights shall be exercisable as shall be determined by the Committee and set forth in the Agreement, subject to the limitations, if any, imposed by the Code with respect to related Incentive Stock Options. (b) Termination. A Stock Appreciation Right shall terminate and shall no longer be exercisable upon the termination or exercise of the related Stock Option. (c) Method of Exercise. Stock Appreciation Rights shall be exercisable upon such terms and conditions as shall be determined by the Committee and set forth in the Agreement and by surrendering the applicable portion of the related Stock Option. Upon such exercise and surrender, the Holder shall be entitled to receive a number of shares of Common Stock equal to the SAR Value divided by the Fair Market Value on the date the Stock Appreciation Right is exercised. (d) Shares Affected Upon Plan. The granting of a Stock Appreciation Right shall not affect the number of shares of Common Stock available under for awards under the Plan. The number of shares available for awards under the Plan will, however, be reduced by the number of shares of Common Stock acquirable upon exercise of the Stock Option to which such Stock Appreciation Right relates. Section 7. Restricted Stock. 7.1. Grant. Shares of Restricted Stock may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be awarded, the number of shares to be awarded, the price (if any) to be paid by the Holder, the time or times within which such awards may be subject to forfeiture ("Restriction Period"), the vesting schedule and rights to acceleration thereof and all other terms and conditions of the awards. 7.2. Terms and Conditions. Each Restricted Stock award shall be subject to the following terms and conditions: (a) Certificates. Restricted Stock, when issued, will be represented by a stock certificate or certificates registered in the name of the Holder to whom such Restricted Stock 9
shall have been awarded. During the Restriction Period, certificates representing the Restricted Stock and any securities constituting Retained Distributions (as defined below) shall bear a legend to the effect that ownership of the Restricted Stock (and such Retained Distributions) and the enjoyment of all rights appurtenant thereto are subject to the restrictions, terms and conditions provided in the Plan and the Agreement. Such certificates shall be deposited by the Holder with the Company, together with stock powers or other instruments of assignment, each endorsed in blank, which will permit transfer to the Company of all or any portion of the Restricted Stock and any securities constituting Retained Distributions that shall be forfeited or that shall not become vested in accordance with the Plan and the Agreement. (b) Rights of Holder. Restricted Stock shall constitute issued and outstanding shares of Common Stock for all corporate purposes. The Holder will have the right to vote such Restricted Stock, to receive and retain all regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute on such Restricted Stock and to exercise all other rights, powers and privileges of a holder of Common Stock with respect to such Restricted Stock, with the exceptions that (i) the Holder will not be entitled to delivery of the stock certificate or certificates representing such Restricted Stock until the Restriction Period shall have expired and unless all other vesting requirements with respect thereto shall have been fulfilled; (ii) the Company will retain custody of the stock certificate or certificates representing the Restricted Stock during the Restriction Period; (iii) other than regular cash dividends and other cash equivalent distributions as the Board may in its sole discretion designate, pay or distribute, the Company will retain custody of all distributions ("Retained Distributions") made or declared with respect to the Restricted Stock (and such Retained Distributions will be subject to the same restrictions, terms and conditions as are applicable to the Restricted Stock) until such time, if ever, as the Restricted Stock with respect to which such Retained Distributions shall have been made, paid or declared shall have become vested and with respect to which the Restriction Period shall have expired; (iv) a breach of any of the restrictions, terms or conditions contained in this Plan or the Agreement or otherwise established by the Committee with respect to any Restricted Stock or Retained Distributions will cause a forfeiture of such Restricted Stock and any Retained Distributions with respect thereto. (c) Vesting; Forfeiture. Upon the expiration of the Restriction Period with respect to each award of Restricted Stock and the satisfaction of any other applicable restrictions, terms and conditions (i) all or part of such Restricted Stock shall become vested in accordance with the terms of the Agreement, subject to Section 10, below, and (ii) any Retained Distributions with respect to such Restricted Stock shall become vested to the extent that the Restricted Stock related thereto shall have become vested, subject to Section 10, below. Any such Restricted Stock and Retained Distributions that do not vest shall be forfeited to the Company and the Holder shall not thereafter have any rights with respect to such Restricted Stock and Retained Distributions that shall have been so forfeited. Section 8. Deferred Stock. 8.1. Grant. Shares of Deferred Stock may be awarded either alone or in addition to other awards granted under the Plan. The Committee shall determine the eligible persons to whom and the time or times at which grants of Deferred Stock will be awarded, the number of 10
shares of Deferred Stock to be awarded to any person, the duration of the period ("Deferral Period") during which, and the conditions under which, receipt of the shares will be deferred, and all the other terms and conditions of the awards. 8.2. Terms and Conditions. Each Deferred Stock award shall be subject to the following terms and conditions: (a) Certificates. At the expiration of the Deferral Period (or the Additional Deferral Period referred to in Section 8.2 (d) below, where applicable), share certificates shall be issued and delivered to the Holder, or his legal representative, representing the number equal to the shares covered by the Deferred Stock award. (b) Rights of Holder. A person entitled to receive Deferred Stock shall not have any rights of a Stockholder by virtue of such award until the expiration of the applicable Deferral Period and the issuance and delivery of the certificates representing such Common Stock. The shares of Common Stock issuable upon expiration of the Deferral Period shall not be deemed outstanding by the Company until the expiration of such Deferral Period and the issuance and delivery of such Common Stock to the Holder. (c) Vesting; Forfeiture. Upon the expiration of the Deferral Period with respect to each award of Deferred Stock and the satisfaction of any other applicable restrictions, terms and conditions all or part of such Deferred Stock shall become vested in accordance with the terms of the Agreement, subject to Section 10, below. Any such Deferred Stock that does not vest shall be forfeited to the Company and the Holder shall not thereafter have any rights with respect to such Deferred Stock. (d) Additional Deferral Period. A Holder may request to, and the Committee may at any time, defer the receipt of an award (or an installment of an award) for an additional specified period or until a specified event ("Additional Deferral Period"). Subject to any exceptions adopted by the Committee, such request must generally be made at least one year prior to expiration of the Deferral Period for such Deferred Stock award (or such installment). Section 9. Other Stock-Based Awards. Other Stock-Based Awards may be awarded, subject to limitations under applicable law, that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of Common Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, purchase rights, shares of Common Stock awarded which are not subject to any restrictions or conditions, convertible or exchangeable debentures, or other rights convertible into shares of Common Stock and awards valued by reference to the value of securities of or the performance of specified Subsidiaries. Other Stock-Based Awards may be awarded either alone or in addition to or in tandem with any other awards under this Plan or any other plan of the Company. Each other Stock-Based Award shall be subject to such terms and conditions as may be determined by the Committee. 11
Section 10. Accelerated Vesting and Exercisability. 10.1. Non-Approved Transactions. If any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act of 1934, as amended ("Exchange Act")), is or becomes the "beneficial owner" (as referred in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities in one or more transactions, and the Board does not authorize or otherwise approve such acquisition, then the vesting periods of any and all Stock Options and other awards granted and outstanding under the Plan shall be accelerated and all such Stock Options and awards will immediately and entirely vest, and the respective holders thereof will have the immediate right to purchase and/or receive any and all Common Stock subject to such Stock Options and awards on the terms set forth in this Plan and the respective agreements respecting such Stock Options and awards. 10.2. Approved Transactions. The Committee may, in the event of an acquisition of substantially all of the Company's assets or at least 50% of the combined voting power of the Company's then outstanding securities in one or more transactions (including by way of merger or reorganization) which has been approved by the Company's Board of Directors, (i) accelerate the vesting of any and all Stock Options and other awards granted and outstanding under the Plan, or (ii) require a Holder of any award granted under this Plan to relinquish such award to the Company upon the tender by the Company to Holder of cash in an amount equal to the Repurchase Value of such award or, in the event that an outstanding award does not have any Repurchase Value, then the Board ofDirectors may terminate the award on payment of $.01 per share that may be acquired or vest under an award. Section 11. Amendment and Termination. The Board may at any time, and from time to time, amend alter, suspend or discontinue any of the provisions of the Plan, but no amendment, alteration, suspension or discontinuance shall be made that would impair the rights of a Holder under any Agreement theretofore entered into hereunder, without the Holder's consent, except as set forth in this Plan. Section 12. Term of Plan. 12.1. Effective Date. The Plan shall be effective as of December 7, 2004 subject to the approval of the Plan by the Company's stockholders within one year after the Effective Date. Notwithstanding the foregoing, if the Plan is not approved by the Company's stockholders, it will continue to be effective provided that no Incentive Stock Options will be issued under the Plan Any awards granted under the Plan prior to such approval shall be effective when made (unless otherwise specified by the Committee at the time of grant), but shall be conditioned upon, and subject to, such approval of the Plan by the Company's stockholders and no awards shall vest or otherwise become free of restrictions prior to such approval. 12.2. Termination Date. Unless terminated by the Board, this Plan shall continue to remain effective until such time as no further awards may be granted and all awards granted 12
under the Plan are no longer outstanding. Notwithstanding the foregoing, grants of Incentive Stock Options may be made only during the ten-year period following the Effective Date. Section 13. General Provisions. 13.1. Written Agreements. Each award granted under the Plan shall be confirmed by, and shall be subject to the terms of, the Agreement executed by the Company and the Holder, or such other document as may be determined by the Committee. The Committee may terminate any award made under the Plan if the Agreement relating thereto is not executed and returned to the Company within 10 days after the Agreement has been delivered to the Holder for his or her execution. 13.2. Unfunded Status of Plan. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation. With respect to any payments not yet made to a Holder by the Company, nothing contained herein shall give any such Holder any rights that are greater than those of a general creditor of the Company. 13.3. Employees. (a) Engaging in Competition With the Company; Solicitation of Customers and Employees; Disclosure of Confidential Information. If a Holder's employment with the Company or a Subsidiary is terminated for any reason whatsoever, and within 12 months after the date thereof such Holder either (i) accepts employment with any competitor of, or otherwise engages in competition with, the Company or any of its Subsidiaries, (ii) solicits any customers or employees of the Company or any of its Subsidiaries to do business with or render services to the Holder or any business with which the Holder becomes affiliated or to which the Holder renders services or (iii) discloses to anyone outside the Company or uses any confidential information or material of the Company or any of its Subsidiaries in violation of the Company's policies or any agreement between the Holder and the Company or any of its Subsidiaries, the Committee, in its sole discretion, may require such Holder to return to the Company the economic value of any Shares that was realized or obtained by such Holder at any time during the period beginning on the date that is six months prior to the date such Holder's employment with the Company is terminated. In such event, Holder agrees to remit to the Company, in cash, an amount equal to the difference between the Fair Market Value of the Shares on the date of termination (or the sales price of such Shares if the Shares were sold during such six month period) and the price the Holder paid the Company for such Shares. (b) Termination for Cause. The Committee may, if a Holder's employment with the Company or a Subsidiary is terminated for cause, annul any award granted under this Plan to such employee and, in such event, the Committee, in its sole discretion, may require such Holder to return to the Company the economic value of any Shares that was realized or obtained by such Holder at any time during the period beginning on that date that is six months prior to the date such Holder's employment with the Company is terminated. In such event, Holder agrees to remit to the Company, in cash, an amount equal to the difference between the Fair Market Value of the Shares on the date of termination (or the sales price of such Shares if the 13
Shares were sold during such six month period) and the price the Holder paid the Company for such Shares. (c) No Right of Employment. Nothing contained in the Plan or in any award hereunder shall be deemed to confer upon any Holder who is an employee of the Company or any Subsidiary any right to continued employment with the Company or any Subsidiary, nor shall it interfere in any way with the right of the Company or any Subsidiary to terminate the employment of any Holder who is an employee at any time. 13.4. Investment Representations; Company Policy. The Committee may require each person acquiring shares of Common Stock pursuant to a Stock Option or other award under the Plan to represent to and agree with the Company in writing that the Holder is acquiring the shares for investment without a view to distribution thereof. Each person acquiring shares of Common Stock pursuant to a Stock Option or other award under the Plan shall be required to abide by all policies of the Company in effect at the time of such acquisition and thereafter with respect to the ownership and trading of the Company's securities. 13.5. Additional Incentive Arrangements. Nothing contained in the Plan shall prevent the Board from adopting such other or additional incentive arrangements as it may deem desirable, including, but not limited to, the granting of Stock Options and the awarding of Common Stock and cash otherwise than under the Plan; and such arrangements may be either generally applicable or applicable only in specific cases. 13.6. Withholding Taxes. Not later than the date as of which an amount must first be included in the gross income of the Holder for Federal income tax purposes with respect to any Stock Option or other award under the Plan, the Holder shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any Federal, state and local taxes of any kind required by law to be withheld or paid with respect to such amount. If permitted by the Committee, tax withholding or payment obligations may be settled with Common Stock, including Common Stock that is part of the award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditioned upon such payment or arrangements and the Company or the Holder's employer (if not the Company) shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Holder from the Company or any Subsidiary. 13.7. Governing Law. The Plan and all awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware (without regard to choice of law provisions); provided, however, that all matters relating to or involving corporate law shall be governed by the laws of the State of Delaware. 13.8. Other Benefit Plans. Any award granted under the Plan shall not be deemed compensation for purposes of computing benefits under any retirement plan of the Company or any Subsidiary and shall not affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation (unless required by specific reference in any such other plan to awards under this Plan). 14
13.9. Non-Transferability. Except as otherwise expressly provided in the Plan or the Agreement, no right or benefit under the Plan may be alienated, sold, assigned, hypothecated, pledged, exchanged, transferred, encumbranced or charged, and any attempt to alienate, sell, assign, hypothecate, pledge, exchange, transfer, encumber or charge the same shall be void. 13.10. Applicable Laws. The obligations of the Company with respect to all Stock Options and awards under the Plan shall be subject to (i) all applicable laws, rules and regulations and such approvals by any governmental agencies as may be required, including, without limitation, the Securities Act of 1933 (the "Securities Act"), as amended, and (ii) the rules and regulations of any securities exchange on which the Common Stock may be listed. 13.11. Conflicts. If any of the terms or provisions of the Plan or an Agreement conflict with the requirements of Section 422 of the Code, then such terms or provisions shall be deemed inoperative to the extent they so conflict with such requirements. Additionally, if this Plan or any Agreement does not contain any provision required to be included herein under Section 422 of the Code, such provision shall be deemed to be incorporated herein and therein with the same force and effect as if such provision had been set out at length herein and therein. If any of the terms or provisions of any Agreement conflict with any terms or provisions of the Plan, then such terms or provisions shall be deemed inoperative to the extent they so conflict with the requirements of the Plan. Additionally, if any Agreement does not contain any provision required to be included therein under the Plan, such provision shall be deemed to be incorporated therein with the same force and effect as if such provision had been set out at length therein. 13.12. Non-Registered Stock. The shares of Common Stock to be distributed under this Plan have not been, as of the Effective Date, registered under the Securities Act of 1933, as amended, or any applicable state or foreign securities laws and the Company has no obligation to any Holder to register the Common Stock or to assist the Holder in obtaining an exemption from the various registration requirements, or to list the Common Stock on a national securities exchange or any other trading or quotation system, including the Nasdaq National Market and Nasdaq SmallCap Market. 15
Plan Amendments Date Approved Initials of by Attorney Date Approved Stockholders, Sections Description of Effecting by Board if necessary Amended Amendments Amendment -------- ------------ ------- ---------- ---------
Annex E Adopted by the Board of Directors and Audit Committee on __________, 2005 AUDIT COMMITTEE CHARTER OF ORIGIN AGRITECH LIMITED Purpose The Audit Committee is appointed by the Board of Directors ("Board") of Origin Agritech Limited. ("Company") to assist the Board in monitoring (1) the integrity of the annual, quarterly and other financial statements of the
preparing or issuing an audit report or related work. The independent auditor shall report directly to the Audit Committee. The Audit Committee shall pre-approve all auditing services and permitted non-audit services to be performed for the Company by its independent auditor, including the fees and terms thereof (subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Audit Committee prior to the completion of the audit). The Audit Committee may form and delegate authority to subcommittees of the Audit Committee consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals shall be presented to the full Audit Committee at its next scheduled meeting. The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain independent legal, accounting or other advisors. The Company shall provide for appropriate funding, as determined by the Audit Committee, for payment of compensation to (i) the independent auditor for the purpose of rendering or issuing an audit report and (ii) any advisors employed by the Audit Committee. The Audit Committee shall make regular reports to the Board. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Audit Committee annually shall review the Audit Committee's own performance. The Audit Committee shall: Financial Statement and Disclosure Matters 1. Meet with the independent auditor prior to the audit to review the scope, planning and staffing of the audit. 2. Review and discuss with management and the independent auditor the annual audited financial statements, and recommend to the Board whether the audited financial statements should be included in the Company's Form 10-K. 3. If requested by the Audit Committee, management or the independent auditors, review and discuss with management and the independent auditor the Company's quarterly financial statements prior to the filing of its Form 10-Q, including the results of the independent auditor's review of the quarterly financial statements. 4. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of the Company's financial statements, including: (a) any significant changes in the Company's selection or application of accounting principles; 2
(b) the Company's critical accounting policies and practices to be used; (c) All alternative treatments of financial information within GAAP that have been discussed with management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditor; (d) any material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences; and (e) any major issues as to the adequacy of the Company's internal controls and any special steps adopted in light of material control deficiencies. 5. Discuss with management the Company's earnings press releases generally, including the use of "pro forma" or "adjusted" non-GAAP information, and financial information and earnings guidance provided to analysts and rating agencies. Such discussion may be general and include the types of information to be disclosed and the types to be presentations to be made. 6. Discuss with management and the independent auditor the effect on the Company's financial statements of (i) regulatory and accounting initiatives and (ii) off-balance sheet structures. 7. Discuss with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's risk assessment and risk management policies. 8. Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any difficulties encountered in the course of the audit work, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management. 9. Review disclosures made to the Audit Committee by the Company's CEO and CFO during their certification process for the Form 10-Kand Form 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in the Company's internal controls. Oversight of the Company's Relationship with the Independent Auditor 10. At least annually, obtain and review a report from the independent auditor, consistent with Independence Standards Board Standard 1, regarding (a) the independent auditor's internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or 3
investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues and (d) all relationships between the independent auditor and the Company. Evaluate the qualifications, performance and independence of the independent auditor, including whether the auditor's quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor's independence, and taking into account the opinions of management. The Audit Committee shall present its conclusions with respect to the independent auditor to the Board. 11. Verify the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law. Consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on a regular basis. 12. Oversee the Company's hiring of employees or former employees of the independent auditor who participated in any capacity in the audit of the Company. 13. Be available to the independent auditors during the year for consultation purposes. Compliance Oversight Responsibilities 14. Obtain from the independent auditor assurance that Section 10A(b) of the Exchange Act has not been implicated. 15. Review and approve all related-party transactions. 16. Inquire and discuss with management the Company's compliance with applicable laws and regulations and with the Company's Code of Ethics, in effect at such time, if any, and, where applicable, recommend policies and procedures for future compliance. 17. Establish procedures (which may be incorporated in the Company's Code of Ethics, in effect at such time, if any) for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, including procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters. 18. Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding the Company's financial statements or accounting policies. 19. Discuss with the Company's General Counsel legal matters that may have a material impact on the financial statements or the Company's compliance policies. 4
Limitation of Audit Committee's Role While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations. These are the responsibilities of management and the independent auditor. 5
Annex F Approved by the Board of Directors _____________, 2005 Adopted by the Nominating Committee _____________, 2005 ORIGIN AGRITECH LIMITED Nominating Committee Charter The Nominating Committee's responsibilities and powers as delegated by the board of directors are set forth in this charter. Whenever the Committee takes an action, it shall exercise its independent judgment on an informed basis that the action is in the best interests of the Company and its stockholders. I. PURPOSE As set forth herein, the Committee shall, among other things, discharge the responsibilities of the board of directors relating to the appropriate size, functioning and needs of the board including, but not limited to, recruitment and retention of high quality board members and committee composition and structure. II. MEMBERSHIP The Committee shall consist of at least two members of the board of directors as determined from time to time by the board. Each member shall be "independent" in accordance with the listing standards of the Nasdaq Stock Market, as amended from time to time. The board of directors shall elect the members of this Committee at the first board meeting practicable following the annual meeting of stockholders and may make changes from time to time pursuant to the provisions below. Unless a chair is elected by the board of directors, the members of the Committee shall designate a chair by majority vote of the full Committee membership. A Committee member may resign by delivering his or her written resignation to the chairman of the board of directors, or may be removed by majority vote of the board of directors by delivery to such member of written notice of removal, to take effect at a date specified therein, or upon delivery of such written notice to such member if no date is specified. III. MEETINGS AND COMMITTEE ACTION The Committee shall meet at such times as it deems necessary to fulfill its responsibilities. Meetings of the Committee shall be called by the chairman of the Committee upon such notice as is provided for in the by-laws of the company with respect to meetings of the 1
board of directors. A majority of the members shall constitute a quorum. Actions of the Committee may be taken in person at a meeting or in writing without a meeting. Actions taken at a meeting, to be valid, shall require the approval of a majority of the members present and voting. Actions taken in writing, to be valid, shall be signed by all members of the Committee. The Committee shall report its minutes from each meeting to the board of directors. The chairman of the Committee shall establish such rules as may from time to time be necessary or appropriate for the conduct of the business of the Committee. At each meeting, the chairman shall appoint as secretary a person who may, but need not, be a member of the Committee. A certificate of the secretary of the Committee or minutes of a meeting of the Committee executed by the secretary setting forth the names of the members of the Committee present at the meeting or actions taken by the Committee at the meeting shall be sufficient evidence at all times as to the members of the Committee who were present, or such actions taken. IV. COMMITTEE AUTHORITY AND RESPONSIBLITIES o Developing the criteria and qualifications for membership on the board. o Recruiting, reviewing and nominating candidates for election to the board of directors or to fill vacancies on the board of directors. o Reviewing candidates proposed by stockholders, and conducting appropriate inquiries into the background and qualifications of any such candidates. o Establishing subcommittees for the purpose of evaluating special or unique matters. o Monitoring and making recommendations regarding committee functions, contributions and composition. o Evaluating, on an annual basis, the Committee's performance. VI. REPORTING The Committee shall prepare a statement each year concerning its compliance with this charter for inclusion in the Company's proxy statement. 2
ORIGIN AGRITECH LIMTED Board of Director Candidate Guidelines The Nominating Committee of Origin Agritech Limited (the "Company") will identify, evaluate and recommend candidates to become members of the Board of Directors ("Board") with the goal of creating a balance of knowledge and experience. Nominations to the Board may also be submitted to the Nominating Committee by the Company's stockholders in accordance with the Company's policy, a copy of which is attached hereto. Candidates will be reviewed in the context of current composition of the Board, the operating requirements of the Company and the long-term interests of the Company's stockholders. In conducting this assessment, the Committee will consider and evaluate each director-candidate based upon its assessment of the following criteria: o Whether the candidate is independent pursuant to the requirements of the Nasdaq Stock Market. o Whether the candidate is accomplished in his or her field and has a reputation, both personal and professional, that is consistent with the image and reputation of the Company. o Whether the candidate has the ability to read and understand basic financial statements. The Nominating Committee also will determine if a candidate satisfies the criteria for being an "audit committee financial expert," as defined by the Securities and Exchange Commission. o Whether the candidate has relevant experience and expertise and would be able to provide insights and practical wisdom based upon that experience and expertise. o Whether the candidate has knowledge of the Company and issues affecting the Company. o Whether the candidate is committed to enhancing stockholder value. o Whether the candidate fully understands, or has the capacity to fully understand, the legal responsibilities of a director and the governance processes of a public company. o Whether the candidate is of high moral and ethical character and would be willing to apply sound, objective and independent business judgment, and to assume broad fiduciary responsibility. o Whether the candidate has, and would be willing to commit, the required hours necessary to discharge the duties of Board membership. o Whether the candidate has any prohibitive interlocking relationships or conflicts of interest. 3
o Whether the candidate is able to develop a good working relationship with other Board members and contribute to the Board's working relationship with the senior management of the Company. o Whether the candidate is able to suggest business opportunities to the Company. 4
Stockholder Recommendations for Directors Stockholders who wish to recommend to the Nominating Committee a candidate for election to the Board of Directors should send their letters to Origin Agritech Limited, 625 Broadway, Suite 1111, San Diego, California 92101, Attention: Nominating Committee. The Corporate Secretary will promptly forward all such letters to the members of the Nominating Committee. Stockholders must follow certain procedures to recommend to the Nominating Committee candidates for election as directors. In general, in order to provide sufficient time to enable the Nominating Committee to evaluate candidates recommended by stockholders in connection with selecting candidates for nomination in connection with the Company's annual meeting of stockholders, the Corporate Secretary must receive the stockholder's recommendation no later than thirty (30) days after the end of the Company's fiscal year.The recommendation must contain the following information about the candidate: o Name; o Age; o Current business and residence addresses and telephone numbers, as well as residence addresses for the past 20 years; o Principal occupation or employment and employment history (name and address of employer and job title) for the past 20 years (or such shorter period as the candidate has been in the workforce); o Educational background; o Permission for the Company to conduct a background investigation, including the right to obtain education, employment and credit information; o Three (3) character references and contact information; o The number of shares of common stock of the Company beneficially owned by the candidate; o The information that would be required to be disclosed by the Company about the candidate under the rules of the SEC in a Proxy Statement soliciting proxies for the election of such candidate as a director (which currently includes information required by Items 401, 404 and 405 of Regulation S-K); and o A signed consent of the nominee to serve as a director of the Company, if elected. 5
Annex G Adopted by Board of Directors ___________, 2005 ORIGIN AGRITECH LIMITED Code of Ethics 1. Introduction The Board of Directors of Origin Agritech Limited has adopted this code of ethics (the "Code"), which is applicable to all directors, officers and employees to: o promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o promote the full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the SEC, as well as in other public communications made by or on behalf of the Company; o promote compliance with applicable governmental laws, rules and regulations; o deter wrongdoing; and o require prompt internal reporting of breaches of, and accountability for adherence to, this Code. This Code may be amended only by resolution of the Company's Board of Directors. In this Code, references to the "Company" means Origin Agritech Limited and, in appropriate context, the Company's subsidiaries. 2. Honest, Ethical and Fair Conduct Each person owes a duty to the Company to act with integrity. Integrity requires, among other things, being honest, fair and candid. Deceit, dishonesty and subordination of principle are inconsistent with integrity. Service to the Company never should be subordinated to personal gain and advantage. Each person must: o Act with integrity, including being honest and candid while still maintaining the confidentiality of the Company's information where required or in the Company's interests. o Observe all applicable governmental laws, rules and regulations. o Comply with the requirements of applicable accounting and auditing standards, as well as Company policies, in the maintenance of a high standard of accuracy and completeness in the Company's financial records and other business-related information and data. 1
o Adhere to a high standard of business ethics and not seek competitive advantage through unlawful or unethical business practices. o Deal fairly with the Company's customers, suppliers, competitors and employees. o Refrain from taking advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts or any other unfair-dealing practice. o Protect the assets of the Company and ensure their proper use. o Refrain from taking for themselves personally opportunities that are discovered through the use of corporate assets or using corporate assets, information or position for general personal gain outside the scope of employment with the Company. o Avoid conflicts of interest wherever possible. Anything that would be a conflict for a person subject to this Code also will be a conflict if it is related to a member of his or her family or a close relative. Examples of conflict of interest situations include, but are not limited to, the following:o any significant ownership interest in any supplier or customer; o any consulting or employment relationship with any customer, supplier or competitor; o any outside business activity that detracts from an individual's ability to devote appropriate time and attention to his or her responsibilities with the Company; o the receipt of any money, non-nominal gifts or excessive entertainment from any company with which the Company has current or prospective business dealings; o being in the position of supervising, reviewing or having any influence on the job evaluation, pay or benefit of any close relative; o selling anything to the Company or buying anything from the Company, except on the same terms and conditions as comparable officers or directors are permitted to so purchase or sell; and o any other circumstance, event, relationship or situation in which the personal interest of a person subject to this Code interferes - or even appears to interfere - with the interests of the Company as a whole. 3. Disclosure The Company strives to ensure that the contents of and the disclosures in the reports and documents that the Company files with the Securities and Exchange Commission (the "SEC") 2
and other public communications shall be full, fair, accurate, timely and understandable in accordance with applicable disclosure standards, including standards of materiality, where appropriate. Each person must; o not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's independent auditors, governmental regulators, self-regulating organizations and other governmental officials, as appropriate; and o in relation to his or her area of responsibility, properly review and critically analyze proposed disclosure for accuracy and completeness. In addition to the foregoing, the Chief Executive Officer of Company and each subsidiary of Company, the Chief Financial Officer of Parent and each subsidiary, and each other person that typically is involved in the financial reporting of the Company must familiarize himself or herself with the disclosure requirements applicable to the Company as well as the business and financial operations of the Company. Each person must promptly bring to the attention of the Chairman of the Audit Committee of the Company's Board of Directors any information he or she may have concerning (a) significant deficiencies in the design or operation of internal and/or disclosure controls which could adversely affect the Company's ability to record, process, summarize and report financial data or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's financial reporting, disclosures or internal controls. 4. Compliance It is the Company's obligation and policy to comply with all applicable governmental laws, rules and regulations. It is the personal responsibility of each person to, and each person must, adhere to the standards and restrictions imposed by those laws, rules and regulations, including those relating to accounting and auditing matters. 5. Reporting and Accountability The Audit Committee of the Board of Directors of the Company is responsible for applying this Code to specific situations in which questions are presented to it and has the authority to interpret this Code in any particular situation. Any person who becomes aware of any existing or potential breach of this Code is required to notify the Chairman of the Audit Committee promptly. Failure to do so is itself a breach of this Code. Specifically, each person must: o Notify the Chairman of the Audit Committee promptly of any existing or potential violation of this Code. o Not retaliate against any other person for reports of potential violations that are made in good faith. The Company will follow the following procedures in investigating and enforcing this Code and in reporting on the Code: 3
o The Audit Committee will take all appropriate action to investigate any breaches reported to it. o If the Audit Committee determines that a breach has occurred, it will inform the Board of Directors. o Upon being notified that a breach has occurred, the Board will take or authorize such disciplinary or preventive action as it deems appropriate, after consultation with the Audit Committee and General Counsel, up to and including dismissal or, in the event of criminal or other serious violations of law, notification of the SEC or other appropriate law enforcement authorities. No person following the above procedure shall, as a result of following such procedure, be subject by the Company or any officer or employee thereof to discharge, demotion suspension, threat, harassment or, in any manner, discrimination against such person in terms and conditions of employment. 6. Waivers and Amendments Any waiver (defined below) or an implicit waiver (defined below) from a provision of this Code for the principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions or any amendment (as defined below) to this Code is required to be disclosed in the Company's Annual Report on Form 10-K or in a Current Report on Form 8-K filed with the SEC. A "waiver" means the approval by the Company's Board of Directors of a material departure from a provision of the Code. An "implicit waiver" means the Company's failure to take action within a reasonable period of time regarding a material departure from a provision of the Code that has been made known to an executive officer of the Company. An "amendment" means any amendment to this Code other than minor technical, administrative or other non-substantive amendments hereto. All persons should note that it is not the Company's intention to grant or to permit waivers from the requirements of this Code. The Company expects full compliance with this Code. 7. Other Policies and Procedures Any other policy or procedure set out by the Company in writing or made generally known to employees, officers or directors of the Company prior to the date hereof or hereafter are separate requirements and remain in full force and effect.8. Inquiries All inquiries and questions in relation to this Code or its applicability to particular people or situations should be addressed to the Director of Administration. 4
Annex H Adopted by the Audit Committee ________, 2005 ORIGIN AGRITECH LIMITED Employee Complaint Procedures for Accounting and Auditing Matters It is possible that an employee may have a concern about the accounting, internal accounting controls or auditing matters relating to Origin Agritech Limited or its subsidiaries ("Company"). Where the concern falls within the scope of matters covered by this procedure statement, the employee is encouraged to follow the reporting procedures set forth below. These procedures have been established by the audit committee for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and the confidential, anonymous submission of concerns regarding questionable accounting or auditing matters. Scope of Matters These procedures relate to issues within or related to the following areas, as they relate to the Company: 1) fraud or deliberate error in the preparation, evaluation, review or audit of any financial statement; 2) fraud or deliberate error in the recording and maintaining of financial records; 3) deficiencies in or noncompliance with internal accounting controls; 4) misrepresentation or false statement regarding a matter contained in financial records, financial reports or audit reports; or 5) deviation from full and fair reporting of financial condition. Procedure To report a concern, you may send by email or otherwise a written statement of the particulars of the issue to Kerry Propper, Director. If you are uncomfortable with contacting M[r/s]. _______, you may send a written statement or email to the chairman of the audit committee (currently _______________, at ________________. Letters need not be signed: The Company will accept anonymous statements. Each expression of concern should provide as much specific information as possible, including names, dates, places and events that took place, the employee's perception of why the incident may be an issue of concern and what action the employee recommends to be taken.
Treatment of Statements of Concern Upon receipt, all statements of concern will be recorded in a company log that will track their receipt, investigation and resolution. Each statement will be evaluated by the appropriate persons at the Company to determine if it relates to accounting functions or financial statements. Concerns about non-accounting matters will be referred to the appropriate persons. Accounting concerns will be investigated by the audit committee. Each review will be conducted in a confidential manner to the fullest extent possible, consistent with the need to conduct an adequate review. The audit committee will review the company log each fiscal quarter. Prompt and appropriate corrective action will be taken when and as warranted in the judgment of the audit committee. The Company will not discharge, demote, suspend, threaten, harass or in any manner discriminate against any employee based on the good faith reporting of his or her concerns regarding the accounting, internal accounting controls or auditing matters or financial statements of the Company. 2
Annex I Section 262 of the Delaware General Corporation Law 262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to ss. 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholder's shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to ss. 251 (other than a merger effected pursuant to ss. 251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of ss. 251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to ss.ss. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under ss. 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to ss. 228 or ss. 253 of this title, then, either constituent corporation before the effective date of the merger or consolidation, or the surviving or resulting corporation within ten days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal of such holder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holder's shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by one or more publications at least one week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
FOLD AND DETACH HERE AND READ THE REVERSE SIDE PROXY Chardan China Acquisition Corp. 625 Broadway, Suite 1111 San Diego, California 92101 SPECIAL MEETING OF STOCKHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CHARDAN CHINA ACQUISITION CORP. The undersigned appoints Richard Propper and Kerry Propper, as proxies, and each of them with full power to act without the other, as proxies, each with the power to appoint a substitute, and thereby authorizes either of them to represent and to vote, as designated on the reverse side, all shares of common stock of Chardan held of record by the undersigned on _________, 2005 at the Special Meeting of Stockholders to be held on ___________, 2005, or any postponement or adjournment thereof. THIS PROXY REVOKES ALL PRIOR PROXIES GIVEN BY THE UNDERSIGNED BY EXECUTING THIS PROXY CARD, THE UNDERSIGNED AUTHORIZES THE PROXIES TO VOTE IN THEIR DISCRETION TO ADOPT THE STOCK PURCHASE AGREEMENT AND THE PLAN OF MERGER IF THE UNDERSIGNED HAS NOT SPECIFIED HOW HIS, HER OR ITS SHARES SHOULD BE VOTED. THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED "FOR" PROPOSAL NUMBERS 1, 2, 3 & 4. THE CHARDAN BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSALS SHOWN ON THE REVERSE SIDE. CHARDAN MAY POSTPONE THE SPECIAL MEETING TO SOLICIT ADDITIONAL VOTING INSTRUCTIONS IN THE EVENT THAT A QUORUM IS NOT PRESENT OR UNDER OTHER CIRCUMSTANCES IF DEEMED ADVISABLE BY THE CHARDAN BOARD OF DIRECTORS. (Continued and to be signed on reverse side)
-------------------------------------------------------------- VOTE BY TELEPHONE OR INTERNET QUICK *** EASY *** IMMEDIATE -------------------------------------------------------------- Chardan China Acquisition Corp. Voting by telephone or Internet is quick, easy and immediate. As a Chardan China Acquisition Corp. shareholder, you have the option of voting your shares electronically through the Internet or on the telephone, eliminating the need to return the proxy card. Your electronic vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed, dated and returned the proxy card. Votes submitted electronically over the Internet or by telephone must be received by 11:59 p.m., Central Time, on _____________, 2005. To Vote Your Proxy By Internet It's fast, convenient, and your vote is immediately confirmed and posted. Follow these four easy steps. 1. Read the accompanying Proxy Statement and Proxy Card. 2. Go to the Website http://www.proxyvote.com 3. Enter your 12-digit Control Number located on your Proxy Card above your name. 4. Follow the instructions provided. YOUR VOTE IS IMPORTANT! http://www.proxyvote.com! To Vote Your Proxy By Phone It's fast, convenient, and immediate. Call Toll-free on a Touch-Tone Phone (1-800-454-8683) Follow these four easy steps: 1. Read the accompanying Proxy Statement and Proxy Card. 2. Call the toll-free number (1-800-454-8683) 3. Enter your 12-digit Control Number located on your Proxy Card above your name. 4. Follow the recorded instructions. YOUR VOTE IS IMPORTANT! Call 1-800-454-8683! DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET. To Vote Your Proxy By Mail Mark, sign and date your proxy card below, detach it and return it in the postage-paid envelope provided. FOLD AND DETACH HERE AND READ THE REVERSE SIDE PROXY THIS PROXY WILL BE VOTED AS DIRECTED, IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED "FOR" PROPOSAL NUMBERS 1, 2, 3 & 4. THE CHARDAN BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING PROPOSALS. 1. To adopt the Stock Purchase FOR AGAINST ABSTAIN Agreement , dated as of December |_| |_| |_| 20, 2004, among Chardan, State Harvest Holdings Limited and its stockholders, and the transactions contemplated by the stock purchase agreement Only if you voted "AGAINST" Proposal Number 1 and you hold shares of Chardan common stock issued in the Chardan initial public offering, you may exercise your conversion rights and demand that Chardan convert your shares of common stock onto a pro rata portion of the trust account by marking the "Exercise Conversion Rights" box below. If you exercise your conversion rights, then you will be exchanging your shares of Chardan common stock for cash and will no longer own these shares. You will only be entitled to receive cash for these shares if the stock purchase is completed and you continue to hold these shares through the effective time of the stock purchase and the tender of your stock certificate to the combined company.EXERCISE CONVERSION RIGHTS |_| 2. To approve the reincorporation FOR AGAINST ABSTAIN merger for redomestication |_| |_| |_| purposes by Chardan's merger into Origin Agritech Limited, incorporated under British Virgin Islands law 3. To approve the Chardan 2005 |_| |_| |_| Performance Equity Plan 4. To approve adjournment of the |_| |_| |_| special meeting to a later date or dates, if necessary, to permit further solicitation of proxies in the event there are not sufficient votes at the time of the special meeting to approve the stock purchase agreement and redomestication merger. MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_| PLEASE MARK, DATE AND RETURN THIS PROXY PROMPTLY.
Exhibit
|
Description
|
2.1
|
Stock
Purchase Agreement (Included in Annex A of the proxy
statement/prospectus)
|
2.2
|
Form
of Agreement and Plan of Merger between Chardan China Acquisition
Corp.
and Registrant***
|
3.1
|
Memorandum
of Association of Registrant (Included in Annex B of the proxy
statement/prospectus)
|
3.2
|
Articles
of Association of Registrant (Included in Annex C of the proxy
statement/prospectus)
|
4.1
|
Specimen
Unit Certificate of Registrant***
|
4.2
|
Specimen
Common Stock Certificate of Registrant***
|
4.3
|
Specimen
Warrant Certificate***
|
4.4
|
Form
of Unit Purchase Option (Incorporated by reference from Registration
Statement 333-111970, dated February 23, 2004, Item
4.4)
|
4.5
|
Form
of Warrant Agreement between American Stock Transfer & Trust Company
and Chardan China Acquisition Corp. (Incorporated by reference
from
Registration Statement 333-111970, dated March 12, 2004, Item
4.5)
|
5.1
|
Opinion
of Maples & Calder***
|
8.1
|
Tax
Opinion of Graubard Miller***
|
10.1
|
Chardan/Agritech
2005 Performance Equity Plan (Included in Annex D of the
proxy
statement/prospectus)
|
10.2
|
Letter
Agreement among Chardan China Acquisition Corp., EarlyBirdCapital,
Inc.
and Dr. Richard D. Propper. (Incorporated by reference
from Registration
Statement 333-111970, dated January 16, 2004, Item
10.1)
|
10.3
|
Letter
Agreement among Chardan China Acquisition Corp., EarlyBirdCapital,
Inc.
and Kerry Jiangnan Huang. (Incorporated by reference from Registration
Statement 333-111970, dated January 16, 2004, Item
10.2)
|
10.4
|
Letter
Agreement among Chardan China Acquisition Corp., EarlyBirdCapital,
Inc.
and Li Zhang. (Incorporated by reference from Registration
Statement
333-111970, dated January 16, 2004, Item 10.3)
|
10.5
|
Letter
Agreement among Chardan China Acquisition Corp., EarlyBirdCapital,
Inc.
and Kerry Propper. (Incorporated by reference from Registration
Statement
333-111970, dated January 16, 2004, Item 10.4)
|
10.6
|
Letter
Agreement among Chardan China Acquisition Corp., EarlyBirdCapital,
Inc.
and Michael Urbach.
(Incorporated
by reference from Registration Statement 333-111970, dated
January 16,
2004, Item 10.5)
|
10.7
|
Letter
Agreement among Chardan China Acquisition Corp., EarlyBirdCapital,
Inc.
and Dan Beharry. (Incorporated by reference from Registration
Statement
333-111970, dated January 16, 2004, Item 10.6)
|
10.8
|
Letter
Agreement among Chardan China Acquisition Corp., EarlyBirdCapital,
Inc.
and Steven Urbach. (Incorporated by reference from Registration
Statement
333-111970, dated January 16, 2004, Item 10.7)
|
10.9
|
Letter
Agreement among Chardan China Acquisition Corp., EarlyBirdCapital,
Inc.
and Anthony D. Errico Jr.
(Incorporated by reference from Registration Statement 333-111970,
dated
January 16, 2004, Item 10.8)
|
10.10
|
Form
of Investment Management Trust Agreement between Continental
Stock
Transfer & Trust Company and Chardan China Acquisition
Corp..
(Incorporated by reference from Registration Statement 333-111970,
dated
February 23, 2004, Item 10.9)
|
10.11
|
Form
of Stock Escrow Agreement between Chardan China Acquisition
Corp.,
Continental Stock Transfer & Trust Company and the Initial
Stockholders.
(Incorporated by reference from Registration Statement 333-111970,
dated
February 23, 2004, Item 10.10)
|
10.12
|
Form
of Registration Rights Agreement among Chardan China Acquisition
Corp. and
the Initial Stockholders.
(Incorporated by reference from Registration Statement 333-111970,
dated
January 16, 2004, Item 10.13)
|
10.13
|
Letter
amendment to Letter Agreements between Chardan China Acquisition
Corp.,
EarlyBirdCapital, Inc. and each of Dr. Richard D. Propper,
Jiangnan Huang,
Li Zhang, Kerry Propper, Michael Urbach, Dan Beharry, Steven
Urbach and
Anthony D. Errico Jr.
(Incorporated by reference from Registration Statement 333-111970,
dated
March 8, 2004, Item 10.16)
|
10.14
|
Technology
Service Agreement between Origin Biotechnology and Beijing
Origin
***
|
10.15
|
Technology
Service Agreement between Origin Biotechnology and Henan
Origin***
|
10.16
|
Technology
Service Agreement between Origin Biotechnology and Changchun
Origin***
|
10.17
|
Form
of Stock Consignment Agreement***
|
10.18
|
List
of Schedules to Stock Purchase Agreement***
|
10.19
|
Agreement
to provide or file Schedules, Supplements and Exhibits
to Stock Purchase
Agreement***
|
10.20
|
Employment
Agreement between State Harvest and Dr. Han Gengchen***
|
10.21
|
Employment
Agreement between State Harvest and Mr. Yang Yasheng***
|
10.22
|
Employment
Agreement between State Harvest and Mr. Yuan Liang***
|
10.23
|
Consulting
Agreement between Chardan and Best of the Best***
|
10.24
|
Form
of Voting Agreement among Registrant and Dr. Han and
Messrs. Yang and
Yuan***
|
10.25
|
Opinion
re Consignment Agreements of Guantao Law Firm***
|
10.26
|
Corn
Seed Production Booking Contract Form***
|
10.27
|
Technology
Transfer Agreement between Henan Agricultural University
and Beijing
Origin Seed Limited (YuYu22)***
|
10.28
|
Joint
Development agreement with Corn Research Institute
of Li County
(1
st
Agreement)***
|
10.29
|
Joint
Development Agreement with Corn Research Institute
of Li County
(2
nd
Agreement)***
|
10.30
|
Joint
Development Agreement with Hubei Province Shiyan Agricultural
Sciences
Institute (EYu10)***
|
23.1
|
Consent
of Goldstein Golub Kessler LLP*
|
23.2
|
Consent
of Deloitte Touche Tohmatsu CPA
Ltd.*
|
23.3
|
Consent
of Maples & Calder (included in Exhibit 5.1)***
|
23.4
|
Consent
of Guantao Law Firm (included in Exhibit 10.25)***
|
23.5
|
Consent
of Graubard Miller (included in Exhibit 8.1)***
|
23.6
|
Consent
of Lehman, Lee & Xu***
|
*
|
Filed
herewith.
|
**
|
To
be filed by amendment.
|
***
|
Previously
filed
|
ORIGIN AGRITECH LIMITED | ||
|
|
|
By: | /s/ Kerry Propper | |
Kerry Propper |
||
President |
Name
|
Title
|
Date
|
||
/s/
Kerry Propper
Kerry
Propper
|
President,
Secretary and Treasurer (Principal Executive Officer and Chief
Financial
Officer) (Authorized Representative in the United States)
|
September
26, 2005
|
Exhibit 23.1
Goldstein Golub Kessler LLP
Consent of Independent Registered Public Accounting Firm
To the Board of Directors
Chardan China Acquisition Corp.
We hereby consent to the use in Amendment No. 5 to the Registration Statement on Form S-4 (No. 333-124709) of our report, dated March 10, 2005, except for Notes 4 and 5, as to which the date is June 16, 2005, on the financial statements of Chardan China Acquisition Corp. as of December 31, 2004 and 2003, and for the period from December 5, 2003 (inception) to December 31, 2004, the year ended December 31, 2004, and the period from December 5, 2003 (inception) to December 31, 2003, which appear in such Registration Statement. We also consent to the reference to our Firm under the caption "Experts" in such Registration Statement.
/S/ Goldstein Golub Kessler LLP Goldstein Golub Kessler LLP New York, New York September 23, 2005 |
Exhibit 23.2
Deloitte Touche Tohmatsu CPA Ltd.
Consent of Independent Registered Public Accounting Firm
We consent to the use in this Amendment No. 5 to Registration Statement on Form S-4 of Origin Agritech Limited of our report dated May 4, 2005 which report expresses an unqualified opinion and includes an explanatory paragraph relating to the translation of Renminbi into United States dollars for the convenience of the readers, relating to the consolidated financial statements of State Harvest Holdings Limited, which appear in such Registration Statement. We also consent to the reference to us under the heading "Experts" in such Registration Statement.
/S/ Deloitte Touche Tohmatsu CPA Ltd. Deloitte Touche Tohmatsu CPA Ltd. Beijing, China September 27, 2005 |