THE REGISTERED HOLDER OF THIS PURCHASE OPTION BY ITS ACCEPTANCE HEREOF,
AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS PURCHASE OPTION EXCEPT
AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS PURCHASE OPTION AGREES
THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS PURCHASE
OPTION FOR A PERIOD OF ONE YEAR FOLLOWING THE EFFECTIVE DATE (DEFINED BELOW)
TO ANYONE OTHER THAN (I) EARLYBIRDCAPITAL, INC. ("EBC") OR AN UNDERWRITER OR
A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE
OFFICER OR PARTNER OF EBC OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.
THIS PURCHASE OPTION IS NOT EXERCISABLE PRIOR TO THE LATER OF (I) THE
CONSUMMATION BY CHARDAN CHINA ACQUISITION CORP. II ("COMPANY") OF A MERGER,
CAPITAL STOCK EXCHANGE, ASSET ACQUISITION OR OTHER SIMILAR BUSINESS
COMBINATION ("BUSINESS COMBINATION") (AS DESCRIBED MORE FULLY IN THE
COMPANY'S REGISTRATION STATEMENT (DEFINED HEREIN)) AND (II) ______________,
2006. VOID AFTER 5:00 P.M. EASTERN TIME, _____________, 2010.
UNIT PURCHASE OPTION
For the Purchase of
__________ Units
of
CHARDAN CHINA ACQUISITION CORP. II
1. Purchase Option.
THIS CERTIFIES THAT, in consideration of $_____ duly paid by or
on behalf of ____________________ ("Holder"), as registered owner of this
Purchase Option, to Chardan China Acquisition Corp. II ("Company"), Holder is
entitled, at any time or from time to time upon the later of (i) the
consummation of a Business Combination and (ii) ___________, 2006
("Commencement Date"), and at or before 5:00 p.m., Eastern Time,
_____________, 2010 ("Expiration Date"), but not thereafter, to subscribe
for, purchase and receive, in whole or in part, up to ____________ (______)
units ("Units") of the Company, each Unit consisting of one share of common
stock of the Company, par value $.0001 per share ("Common Stock"), and two
warrants ("Warrant(s)") expiring four years from the effective date
("Effective Date") of the registration statement ("Registration Statement")
pursuant to which Units are offered for sale to the public ("Offering").
Each Warrant is the same as the warrants included in the Units being
registered for sale to the public by way of the Registration Statement
("Public Warrants") except that the Warrants have an exercise price of $___
per share. If the Expiration Date is a day on which banking institutions are
authorized by law to close, then this Purchase Option may be exercised on the
next succeeding day which is not such a day in accordance with the terms
herein. During the period ending on the Expiration Date, the Company agrees
not to take any action that would terminate the Purchase Option. This
Purchase Option is initially exercisable at $___ per Unit so purchased;
provided, however, that upon the occurrence of any of the events specified in
Section 6 hereof, the rights granted by this Purchase Option, including the
exercise price per Unit and the number of Units (and shares of Common Stock
and Warrants) to be received upon such exercise, shall be adjusted as therein
specified. The term "Exercise Price" shall mean the initial exercise price
or the adjusted exercise price, depending on the context.
1
2. Exercise.
2.1 Exercise Form. In order to exercise this Purchase Option, the
exercise form attached hereto must be duly executed and completed and
delivered to the Company, together with this Purchase Option and payment of
the Exercise Price for the Units being purchased payable in cash or by
certified check or official bank check. If the subscription rights
represented hereby shall not be exercised at or before 5:00 p.m., Eastern
time, on the Expiration Date this Purchase Option shall become and be void
without further force or effect, and all rights represented hereby shall
cease and expire.
2.2 Legend. Each certificate for the securities purchased under this
Purchase Option shall bear a legend as follows unless such securities have
been registered under the Securities Act of 1933, as amended ("Act"):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act")
or applicable state law. The securities may not be offered for
sale, sold or otherwise transferred except pursuant to an
effective registration statement under the Act, or pursuant to an
exemption from registration under the Act and applicable state
law."
2.3 Cashless Exercise.
2.3.1 Determination of Amount. In lieu of the payment of the
Exercise Price multiplied by the number of Units for which this Purchase
Option is exercisable (and in lieu of being entitled to receive Common Stock
and Warrants) in the manner required by Section 2.1, the Holder shall have
the right (but not the obligation) to convert any exercisable but unexercised
portion of this Purchase Option into Units ("Conversion Right") as follows:
upon exercise of the Conversion Right, the Company shall deliver to the
Holder (without payment by the Holder of any of the Exercise Price in cash)
that number of Units (or that number of shares of Common Stock and Warrants
comprising that number of Units) equal to the quotient obtained by dividing
(x) the "Value" (as defined below) of the portion of the Purchase Option
being converted by (y) the Current Market Value (as defined below). The
"Value" of the portion of the Purchase Option being converted shall equal the
remainder derived from subtracting (a) (i) the Exercise Price multiplied by
(ii) the number of Units underlying the portion of this Purchase Option being
converted from (b) the Current Market Value of a Unit multiplied by the
number of Units underlying the portion of the Purchase Option being
converted. As used herein, the term "Current Market Value" per Unit at any
date means: (A) in the event that neither the Units nor Public Warrants are
still trading, the remainder derived from subtracting (x) the exercise price
of the Warrants multiplied by the number of shares of Common Stock issuable
upon exercise of the Warrants underlying one Unit from (y) (i) the Current
Market Price of the Common Stock multiplied by (ii) the number of shares of
Common Stock underlying one Unit, which shall include the shares of Common
Stock underlying the Warrants included in such Unit; (B) in the event that
the Units, Common Stock and Public Warrants are still trading, (i) if the
Units are listed on a national securities exchange or quoted on the Nasdaq
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National Market, Nasdaq SmallCap Market or NASD OTC Bulletin Board (or
successor exchange), the last sale price of the Units in the principal
trading market for the Units as reported by the exchange, Nasdaq or the NASD,
as the case may be, on the last trading day preceding the date in question;
or (ii) if the Units are not listed on a national securities exchange or
quoted on the Nasdaq National Market, Nasdaq SmallCap Market or the NASD OTC
Bulletin Board (or successor exchange), but is traded in the residual
over-the-counter market, the closing bid price for Units on the last trading
day preceding the date in question for which such quotations are reported by
the Pink Sheets, LLC or similar publisher of such quotations; and (C) in the
event that the Units are not still trading but the Common Stock and Public
Warrants underlying the Units are still trading, the Current Market Price of
the Common Stock plus the product of (x) the Current Market Price of the
Public Warrants and (y) the number of shares of Common Stock underlying the
Warrants included in one Unit. The "Current Market Price" shall mean (i) if
the Common Stock (or Public Warrants, as the case may be) is listed on a
national securities exchange or quoted on the Nasdaq National Market, Nasdaq
SmallCap Market or NASD OTC Bulletin Board (or successor exchange), the last
sale price of the Common Stock (or Public Warrants) in the principal trading
market for the Common Stock as reported by the exchange, Nasdaq or the NASD,
as the case may be, on the last trading day preceding the date in question;
(ii) if the Common Stock (or Public Warrants, as the case may be) is not
listed on a national securities exchange or quoted on the Nasdaq National
Market, Nasdaq SmallCap Market or the NASD OTC Bulletin Board (or successor
exchange), but is traded in the residual over-the-counter market, the closing
bid price for the Common Stock (or Public Warrants) on the last trading day
preceding the date in question for which such quotations are reported by the
Pink Sheets, LLC 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 Board of Directors of the Company shall
determine, in good faith. In the event the Public Warrants have expired and
are no longer exercisable, no "Value" shall be attributed to the Warrants
underlying this Purchase Option. Additionally, in the event that this
Purchase Option is exercised pursuant to this Section 2.3 and the Public
Warrants are still trading, the "Value" shall be reduced by the difference
between the Warrant Exercise Price and the exercise price of the Public
Warrants multiplied by the number of Warrants underlying the Units included
in the portion of this Purchase Option being converted.
2.3.2 Mechanics of Cashless Exercise. The Cashless Exercise
Right may be exercised by the Holder on any business day on or after the
Commencement Date and not later than the Expiration Date by delivering the
Purchase Option with the duly executed exercise form attached hereto with the
cashless exercise section completed to the Company, exercising the Cashless
Exercise Right and specifying the total number of Units the Holder will
purchase pursuant to such Cashless Exercise Right.
3
3. Transfer.
3.1 General Restrictions. The registered Holder of this Purchase
Option, by its acceptance hereof, agrees that it will not sell, transfer,
assign, pledge or hypothecate this Purchase Option for a period of one year
following the Effective Date to anyone other than (i) EBC or an underwriter
or a selected dealer in connection with the Offering, or (ii) a bona fide
officer or partner of EBC or of any such underwriter or selected dealer. On
and after the first anniversary of the Effective Date, transfers to others
may be made subject to compliance with or exemptions from applicable
securities laws. In order to make any permitted assignment, the Holder must
deliver to the Company the assignment form attached hereto duly executed and
completed, together with the Purchase Option and payment of all transfer
taxes, if any, payable in connection therewith. The Company shall within
five business days transfer this Purchase Option on the books of the Company
and shall execute and deliver a new Purchase Option or Purchase Options of
like tenor to the appropriate assignee(s) expressly evidencing the right to
purchase the aggregate number of Units purchasable hereunder or such portion
of such number as shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Act. The securities evidenced by
this Purchase Option shall not be transferred unless and until (i) the
Company has received the opinion of counsel for the Holder that the
securities may be transferred pursuant to an exemption from registration
under the Act and applicable state securities laws, the availability of which
is established to the reasonable satisfaction of the Company (the Company
hereby agreeing that the opinion of Xxxxxxxx Xxxxxx shall be deemed
satisfactory evidence of the availability of an exemption), or (ii) a
registration statement or a post-effective amendment to the Registration
Statement relating to such securities has been filed by the Company and
declared effective by the Securities and Exchange Commission and compliance
with applicable state securities law has been established.
4. New Purchase Options to be Issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in
Section 3 hereof, this Purchase Option may be exercised or assigned in whole
or in part. In the event of the exercise or assignment hereof in part only,
upon surrender of this Purchase Option for cancellation, together with the
duly executed exercise or assignment form and funds sufficient to pay any
Exercise Price and/or transfer tax, the Company shall cause to be delivered
to the Holder without charge a new Purchase Option of like tenor to this
Purchase Option in the name of the Holder evidencing the right of the Holder
to purchase the number of Units purchasable hereunder as to which this
Purchase Option has not been exercised or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Purchase Option and of reasonably satisfactory indemnification or the posting
of a bond, the Company shall execute and deliver a new Purchase Option of
like tenor and date. Any such new Purchase Option executed and delivered as
a result of such loss, theft, mutilation or destruction shall constitute a
substitute contractual obligation on the part of the Company.
4
5. Registration Rights.
5.1 Demand Registration.
5.1.1 Grant of Right. The Company, upon written demand ("Initial
Demand Notice") of the Holder(s) of at least 50.1% of the Purchase Options
and/or the underlying Units and/or the underlying securities ("Majority
Holders"), agrees to register on one occasion, all or any portion of the
Purchase Options requested by the Majority Holders in the Initial Demand
Notice and all of the securities underlying such Purchase Options, including
the Units, Common Stock, the Warrants and the Common Stock underlying the
Warrants (collectively, the "Registrable Securities"). On such occasion, the
Company will file a registration statement or a post-effective amendment to
the Registration Statement covering the Registrable Securities within sixty
days after receipt of the Initial Demand Notice and use its best efforts to
have such registration statement or post-effective amendment declared
effective as soon as possible thereafter. The demand for registration may be
made at any time during a period of five years beginning on the Effective
Date. The Company covenants and agrees to give written notice of its receipt
of any Initial Demand Notice by any Holder(s) to all other registered Holders
of the Purchase Options and/or the Registrable Securities within ten days
from the date of the receipt of any such Initial Demand Notice.
5.1.2 Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, including the expenses
of any legal counsel selected by the Majority Holders to represent them in
connection with the sale of the Registrable Securities, but the Holders shall
pay any and all underwriting commissions. The Company agrees to use its
reasonable best efforts to qualify or register the Registrable Securities in
such States as are reasonably requested by the Majority Holder(s) (and any
other Holders whose Registrable Securities are included in the Registration
Statement pursuant to Section 5.2 hereof); provided, however, that in no
event shall the Company be required to register the Registrable Securities in
a State in which such registration would cause (i) the Company to be
obligated to qualify to do business in such State, or would subject the
Company to taxation as a foreign corporation doing business in such
jurisdiction or (ii) the principal stockholders of the Company to be
obligated to escrow their shares of capital stock of the Company. The
Company shall cause any registration statement or post-effective amendment
filed pursuant to the demand rights granted under Section 5.1.1 to remain
effective for a period of nine consecutive months from the effective date of
such registration statement or post-effective amendment.
5.2 "Piggy-Back" Registration.
5.2.1 Grant of Right. In addition to the demand right of
registration, the Holders of the Purchase Options shall have the right for a
period of seven years commencing on the Effective Date, to include the
Registrable Securities as part of any other registration of securities filed
by the Company (other than in connection with a transaction contemplated by
Rule 145(a) promulgated under the Act or pursuant to Form S-8); provided,
however, that if, in the written opinion of the Company's managing
underwriter or underwriters, if any, for such offering, the inclusion of the
Registrable Securities, when added to the securities being registered by the
Company or the selling stockholder(s), will exceed the maximum amount of the
Company's securities which can be marketed (i) at a price reasonably related
to their then current market value, and (ii) without materially and adversely
affecting the entire offering, then the Company will still be required to
include the Registrable Securities, but may require the Holders to agree, in
writing, to delay the sale of all or any portion of the Registrable
Securities for a period of 90 days from the effective date of the offering,
provided, further, that if the sale of any Registrable Securities is so
delayed, then the number of securities to be sold by all stockholders in such
public offering during such 90 day period shall be apportioned pro rata among
all such selling stockholders, including all holders of the Registrable
Securities, according to the total amount of securities of the Company owned
by said selling stockholders, including all holders of the Registrable
Securities.
5
5.2.2 Terms. The Company shall bear all fees and expenses
attendant to registering the Registrable Securities, including the expenses
of any legal counsel selected by the Holders to represent them in connection
with the sale of the Registrable Securities but the Holders shall pay any and
all underwriting commissions related to the Registrable Securities. In the
event of such a proposed registration, the Company shall furnish the then
Holders of outstanding Registrable Securities with not less than fifteen days
written notice prior to the proposed date of filing of such registration
statement. Such notice to the Holders shall continue to be given for each
applicable registration statement filed (during the period in which the
Purchase Option is exercisable) by the Company until such time as all of the
Registrable Securities have been registered and sold. The holders of the
Registrable Securities shall exercise the "piggy-back" rights provided for
herein by giving written notice, within ten days of the receipt of the
Company's notice of its intention to file a registration statement. The
Company shall cause any registration statement filed pursuant to the above
"piggyback" rights to remain effective for at least nine months from the date
that the Holders of the Registrable Securities are first given the
opportunity to sell all of such securities.
5.3 Damages. Should the registration or the effectiveness thereof
required by Sections 5.1 and 5.2 hereof be delayed by the Company or the
Company otherwise fails to comply with such provisions, the Company shall, in
addition to any other equitable or other relief available to the Holder(s),
be liable for any and all incidental, special and consequential damages
sustained by the Holder(s), including, but not limited to, the loss of any
profits that might have been received by the holder upon the sale of shares
of Common Stock or Warrants (and shares of Common Stock underlying the
Warrants) underlying this Purchase Option.
5.4 General Terms.
5.4.1 Indemnification. The Company shall indemnify the Holder(s)
of the Registrable Securities to be sold pursuant to any registration
statement hereunder and each person, if any, who controls such Holders within
the meaning of Section 15 of the Act or Section 20(a) of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), against all loss, claim,
damage, expense or liability (including all reasonable attorneys' fees and
other expenses reasonably incurred in investigating, preparing or defending
against litigation, commenced or threatened, or any claim whatsoever whether
arising out of any action between the underwriter and the Company or between
the underwriter and any third party or otherwise) to which any of them may
become subject under the Act, the Exchange Act or otherwise, arising from
such registration statement but only to the same extent and with the same
effect as the provisions pursuant to which the Company has agreed to
indemnify the underwriters contained in Section 5 of the Underwriting
Agreement between the Company, EBC and the other underwriters named therein
dated the Effective Date. The Holder(s) of the Registrable Securities to be
sold pursuant to such registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, its
officers and directors and each person, if any, who controls the Company
within the meaning of Section 15 of the Act or Section 20(a) of the Exchange
Act, against all loss, claim, damage, expense or liability (including all
reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which
they may become subject under the Act, the Exchange Act or otherwise, arising
from information furnished by or on behalf of such Holders, or their
successors or assigns, in writing, for specific inclusion in such
registration statement to the same extent and with the same effect as the
provisions contained in Section 5 of the Underwriting Agreement pursuant to
which the underwriters have agreed to indemnify the Company.
6
5.4.2 Exercise of Purchase Options. Nothing contained in this
Purchase Option shall be construed as requiring the Holder(s) to exercise
their Purchase Options or Warrants underlying such Purchase Options prior to
or after the initial filing of any registration statement or the
effectiveness thereof.
5.4.3 Documents Delivered to Holders. The Company shall furnish
EBC, as representative of the Holders participating in any of the foregoing
offerings, a signed counterpart, addressed to the participating Holders, of
(i) an opinion of counsel to the Company, dated the effective date of such
registration statement (and, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under any
underwriting agreement related thereto), and (ii) a "cold comfort" letter
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, a letter dated the
date of the closing under the underwriting agreement) signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to underwriters in underwritten
public offerings of securities. The Company shall also deliver promptly to
EBC, as representative of the Holders participating in the offering, the
correspondence and memoranda described below and copies of all correspondence
between the Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff with
respect to the registration statement and permit EBC, as representative of
the Holders, to do such investigation, upon reasonable advance notice, with
respect to information contained in or omitted from the registration
statement as it deems reasonably necessary to comply with applicable
securities laws or rules of the National Association of Securities Dealers,
Inc. ("NASD"). Such investigation shall include access to books, records and
properties and opportunities to discuss the business of the Company with its
officers and independent auditors, all to such reasonable extent and at such
reasonable times and as often as EBC, as representative of the Holders, shall
reasonably request. The Company shall not be required to disclose any
confidential information or other records to EBC, as representative of the
Holders, or to any other person, until and unless such persons shall have
entered into reasonable confidentiality agreements (in form and substance
reasonably satisfactory to the Company), with the Company with respect
thereto.
7
5.4.4 Underwriting Agreement. The Company shall enter into an
underwriting agreement with the managing underwriter(s), if any, selected by
any Holders whose Registrable Securities are being registered pursuant to
this Section 5, which managing underwriter shall be reasonably acceptable to
the Company. Such agreement shall be reasonably satisfactory in form and
substance to the Company, each Holder and such managing underwriters, and
shall contain such representations, warranties and covenants by the Company
and such other terms as are customarily contained in agreements of that type
used by the managing underwriter. The Holders shall be parties to any
underwriting agreement relating to an underwritten sale of their Registrable
Securities and may, at their option, require that any or all the
representations, warranties and covenants of the Company to or for the
benefit of such underwriters shall also be made to and for the benefit of
such Holders. Such Holders shall not be required to make any representations
or warranties to or agreements with the Company or the underwriters except as
they may relate to such Holders and their intended methods of distribution.
Such Holders, however, shall agree to such covenants and indemnification and
contribution obligations for selling stockholders as are customarily
contained in agreements of that type used by the managing underwriter.
Further, such Holders shall execute appropriate custody agreements and
otherwise cooperate fully in the preparation of the registration statement
and other documents relating to any offering in which they include securities
pursuant to this Section 5. Each Holder shall also furnish to the Company
such information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall be reasonably
required to effect the registration of the Registrable Securities.
5.4.5 Rule 144 Sale. Notwithstanding anything contained in this
Section 5 to the contrary, the Company shall have no obligation pursuant to
Section 5.1 or 5.2 for the registration of Registrable Securities held by any
Holder (i) where such Holder would then be entitled to sell under Rule 144
within any three-month period (or such other period prescribed under Rule 144
as may be provided by amendment thereof) all of the Registrable Securities
then held by such Holder, and (ii) where the number of Registrable Securities
held by such Holder is within the volume limitations under paragraph (e) of
Rule 144 (calculated as if such Holder were an affiliate within the meaning
of Rule 144).
5.4.6 Supplemental Prospectus. Each Holder agrees, that upon
receipt of any notice from the Company of the happening of any event as a
result of which the prospectus included in the Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing, such Holder will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Xxxxxx's receipt of the copies of a supplemental or
amended prospectus, and, if so desired by the Company, such Holder shall
deliver to the Company (at the expense of the Company) or destroy (and
deliver to the Company a certificate of such destruction) all copies, other
than permanent file copies then in such Holder's possession, of the
prospectus covering such Registrable Securities current at the time of
receipt of such notice.
5.4.7 Rule 144. The Company covenants that it shall file any
reports required to be filed by it under the Act and the Exchange Act and
shall take such further action as the holders of Registrable Securities may
reasonably request, all to the extent required from time to time to enable
such holders to sell Registrable Securities without registration under the
Act within the limitations of the exemptions provided by Rule 144, as such
rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission.
6. Adjustments.
6.1 Adjustments to Exercise Price and Number of Securities. The
Exercise Price and the number of Units underlying the Purchase Option shall
be subject to adjustment from time to time as hereinafter set forth:
6.1.1 Stock Dividends - Split-Ups. If after the date hereof, and
subject to the provisions of Section 6.4 below, the number of outstanding
shares of Common Stock is increased by a stock dividend payable in shares of
Common Stock or by a split-up of shares of Common Stock or other similar
event, then, on the effective date thereof, the number of shares of Common
Stock underlying each of the Units purchasable hereunder shall be increased
in proportion to such increase in outstanding shares. In such case, the
number of shares of Common Stock, and the exercise price applicable thereto,
underlying the Warrants underlying each of the Units purchasable hereunder
shall be adjusted in accordance with the terms of the Warrants. For example,
if the Company declares a two-for-one stock dividend and at the time of such
dividend this Purchase Option is for the purchase of one Unit at $6.60 per
whole Unit (and each Warrant underlying the Units is exercisable for $5.00
per share), upon effectiveness of the dividend, this Purchase Option will be
adjusted to allow for the purchase of one Unit at $6.60 per Unit, each Unit
entitling the holder to receive two shares of Common Stock and two Warrants
each to purchase two shares of Common Stock (for $2.50 per share).
8
6.1.2 Aggregation of Shares. If after the date hereof, and
subject to the provisions of Section 6.4, the number of outstanding shares of
Common Stock is decreased by a consolidation, combination or reclassification
of shares of Common Stock or other similar event, then, on the effective date
thereof, the number of shares of Common Stock underlying each of the Units
purchasable hereunder shall be decreased in proportion to such decrease in
outstanding shares. In such case, the number of shares of Common Stock, and
the exercise price applicable thereto, underlying the Warrants underlying
each of the Units purchasable hereunder shall be adjusted in accordance with
the terms of the Warrants.
6.1.3 Replacement of Securities upon Reorganization, etc. In
case of any reclassification or reorganization of the outstanding shares of
Common Stock other than a change covered by Section 6.1.1 or 6.1.2 hereof or
that solely affects the par value of such shares of Common Stock, or in the
case of any merger or consolidation of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and that does not result in any reclassification or
reorganization of the outstanding shares of Common Stock), or in the case of
any sale or conveyance to another corporation or entity of the property of
the Company as an entirety or substantially as an entirety in connection with
which the Company is dissolved, the Holder of this Purchase Option shall have
the right thereafter (until the expiration of the right of exercise of this
Purchase Option) to receive upon the exercise hereof, for the same aggregate
Exercise Price payable hereunder immediately prior to such event, the kind
and amount of shares of stock or other securities or property (including
cash) receivable upon such reclassification, reorganization, merger or
consolidation, or upon a dissolution following any such sale or transfer, by
a Holder of the number of shares of Common Stock of the Company obtainable
upon exercise of this Purchase Option and the underlying Warrants immediately
prior to such event; and if any reclassification also results in a change in
shares of Common Stock covered by Section 6.1.1 or 6.1.2, then such
adjustment shall be made pursuant to Sections 6.1.1, 6.1.2 and this Section
6.1.3. The provisions of this Section 6.1.3 shall similarly apply to
successive reclassifications, reorganizations, mergers or consolidations,
sales or other transfers.
6.1.4 Changes in Form of Purchase Option. This form of Purchase
Option need not be changed because of any change pursuant to this Section,
and Purchase Options issued after such change may state the same Exercise
Price and the same number of Units as are stated in the Purchase Options
initially issued pursuant to this Agreement. The acceptance by any Holder of
the issuance of new Purchase Options reflecting a required or permissive
change shall not be deemed to waive any rights to an adjustment occurring
after the Commencement Date or the computation thereof.
6.2 [Intentionally Omitted]
6.3 Substitute Purchase Option. In case of any consolidation of the
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not
result in any reclassification or change of the outstanding Common Stock),
the corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental Purchase Option providing that the
holder of each Purchase Option then outstanding or to be outstanding shall
have the right thereafter (until the stated expiration of such Purchase
Option) to receive, upon exercise of such Purchase Option, the kind and
amount of shares of stock and other securities and property receivable upon
such consolidation or merger, by a holder of the number of shares of Common
Stock of the Company for which such Purchase Option might have been exercised
immediately prior to such consolidation, merger, sale or transfer. Such
supplemental Purchase Option shall provide for adjustments which shall be
identical to the adjustments provided in Section 6. The above provision of
this Section shall similarly apply to successive consolidations or mergers.
9
6.4 Elimination of Fractional Interests. The Company shall not be
required to issue certificates representing fractions of shares of Common
Stock or Warrants upon the exercise of the Purchase Option, nor shall it be
required to issue scrip or pay cash in lieu of any fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of
Warrants, shares of Common Stock or other securities, properties or rights.
7. Reservation and Listing. The Company shall at all times reserve and
keep available out of its authorized shares of Common Stock, solely for the
purpose of issuance upon exercise of the Purchase Options or the Warrants
underlying the Purchase Option, such number of shares of Common Stock or
other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the
Purchase Options and payment of the Exercise Price therefor, all shares of
Common Stock and other securities issuable upon such exercise shall be duly
and validly issued, fully paid and non-assessable and not subject to
preemptive rights of any stockholder. The Company further covenants and
agrees that upon exercise of the Warrants underlying the Purchase Options and
payment of the respective Warrant exercise price therefor, all shares of
Common Stock and other securities issuable upon such exercise shall be duly
and validly issued, fully paid and non-assessable and not subject to
preemptive rights of any stockholder. As long as the Purchase Options shall
be outstanding, the Company shall use its best efforts to cause all (i) Units
and shares of Common Stock issuable upon exercise of the Purchase Options,
(ii) Warrants issuable upon exercise of the Purchase Options and (iii) shares
of Common Stock issuable upon exercise of the Warrants included in the Units
issuable upon exercise of the Purchase Option to be listed (subject to
official notice of issuance) on all securities exchanges (or, if applicable
on the Nasdaq National Market, SmallCap Market, OTC Bulletin Board or any
successor trading market) on which the Units, the Common Stock or the Public
Warrants issued to the public in connection herewith may then be listed
and/or quoted.
10
8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be
construed as conferring upon the Holders the right to vote or consent as a
stockholder for the election of directors or any other matter, or as having
any rights whatsoever as a stockholder of the Company. If, however, at any
time prior to the expiration of the Purchase Options and their exercise, any
of the events described in Section 8.2 shall occur, then, in one or more of
said events, the Company shall give written notice of such event at least
fifteen days prior to the date fixed as a record date or the date of closing
the transfer books for the determination of the stockholders entitled to such
dividend, distribution, conversion or exchange of securities or subscription
rights, or entitled to vote on such proposed dissolution, liquidation,
winding up or sale. Such notice shall specify such record date or the date
of the closing of the transfer books, as the case may be. Notwithstanding
the foregoing, the Company shall deliver to each Holder a copy of each notice
given to the other stockholders of the Company at the same time and in the
same manner that such notice is given to the stockholders.
8.2 Events Requiring Notice. The Company shall be required to give
the notice described in this Section 8 in connection with one or more of the
following events: (i) if the Company shall take a record of the holders of
its shares of Common Stock for the purpose of entitling them to receive a
dividend or distribution payable otherwise than in cash, or a cash dividend
or distribution payable otherwise than out of retained earnings, as indicated
by the accounting treatment of such dividend or distribution on the books of
the Company, or (ii) the Company shall offer to all the holders of its Common
Stock any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company,
or any option, right or warrant to subscribe therefor, or (iii) a
dissolution, liquidation or winding up of the Company (other than in
connection with a consolidation or merger) or a sale of all or substantially
all of its property, assets and business shall be proposed.
8.3 Notice of Change in Exercise Price. The Company shall, promptly
after an event requiring a change in the Exercise Price pursuant to Section 6
hereof, send notice to the Holders of such event and change ("Price
Notice"). The Price Notice shall describe the event causing the change and
the method of calculating same and shall be certified as being true and
accurate by the Company's President and Chief Financial Officer.
8.4 Transmittal of Notices. All notices, requests, consents and
other communications under this Purchase Option shall be in writing and shall
be deemed to have been duly made when hand delivered, or mailed by express
mail or private courier service: (i) If to the registered Holder of the
Purchase Option, to the address of such Holder as shown on the books of the
Company, or (ii) if to the Company, to the following address or to such other
address as the Company may designate by notice to the Holders:
Chardan China Acquisition Corp. II
000 Xxxxxxxx
Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xx. Xxxxxxx X. Xxxxxxx, Chairman
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9. Miscellaneous.
9.1 Amendments. The Company and EBC may from time to time supplement
or amend this Purchase Option without the approval of any of the Holders in
order to cure any ambiguity, to correct or supplement any provision contained
herein that may be defective or inconsistent with any other provisions
herein, or to make any other provisions in regard to matters or questions
arising hereunder that the Company and EBC may deem necessary or desirable
and that the Company and EBC deem shall not adversely affect the interest of
the Holders. All other modifications or amendments shall require the written
consent of and be signed by the party against whom enforcement of the
modification or amendment is sought.
9.2 Headings. The headings contained herein are for the sole purpose
of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the terms or provisions of this Purchase
Option.
10. Entire Agreement. This Purchase Option (together with the other
agreements and documents being delivered pursuant to or in connection with
this Purchase Option) constitutes the entire agreement of the parties hereto
with respect to the subject matter hereof, and supersedes all prior
agreements and understandings of the parties, oral and written, with respect
to the subject matter hereof.
10.1 Binding Effect. This Purchase Option shall inure solely to the
benefit of and shall be binding upon, the Holder and the Company and their
permitted assignees, respective successors, legal representatives and
assigns, and no other person shall have or be construed to have any legal or
equitable right, remedy or claim under or in respect of or by virtue of this
Purchase Option or any provisions herein contained.
10.2 Governing Law; Submission to Jurisdiction. This Purchase Option
shall be governed by and construed and enforced in accordance with the laws
of the State of New York, without giving effect to conflicts of law
principles that would result in the application of the substantive laws of
another jurisdiction. The Company hereby agrees that any action, proceeding
or claim against it arising out of, or relating in any way to this Purchase
Option shall be brought and enforced in the courts of the State of New York
or of the United States of America for the Southern District of New York, and
irrevocably submits to such jurisdiction, which jurisdiction shall be
exclusive. The Company hereby waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. Any
process or summons to be served upon the Company may be served by
transmitting a copy thereof by registered or certified mail, return receipt
requested, postage prepaid, addressed to it at the address set forth in
Section 8 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the Company in any action, proceeding or claim. The
Company and the Holder agree that the prevailing party(ies) in any such
action shall be entitled to recover from the other party(ies) all of its
reasonable attorneys' fees and expenses relating to such action or proceeding
and/or incurred in connection with the preparation therefor.
10.3 Waiver, Etc. The failure of the Company or the Holder to at any
time enforce any of the provisions of this Purchase Option shall not be
deemed or construed to be a waiver of any such provision, nor to in any way
affect the validity of this Purchase Option or any provision hereof or the
right of the Company or any Holder to thereafter enforce each and every
provision of this Purchase Option. No waiver of any breach, non-compliance
or non-fulfillment of any of the provisions of this Purchase Option shall be
effective unless set forth in a written instrument executed by the party or
parties against whom or which enforcement of such waiver is sought; and no
waiver of any such breach, non-compliance or non-fulfillment shall be
construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
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10.4 Execution in Counterparts. This Purchase Option may be executed
in one or more counterparts, and by the different parties hereto in separate
counterparts, each of which shall be deemed to be an original, but all of
which taken together shall constitute one and the same agreement, and shall
become effective when one or more counterparts has been signed by each of the
parties hereto and delivered to each of the other parties hereto.
10.5 Exchange Agreement. As a condition of the Holder's receipt and
acceptance of this Purchase Option, Xxxxxx agrees that, at any time prior to
the complete exercise of this Purchase Option by Holder, if the Company and
EBC enter into an agreement ("Exchange Agreement") pursuant to which they
agree that all outstanding Purchase Options will be exchanged for securities
or cash or a combination of both, then Holder shall agree to such exchange
and become a party to the Exchange Agreement.
10.6 Underlying Warrants. At any time after exercise by the Holder of
this Purchase Option, the Holder may exchange his Warrants (with a $___
exercise price) for Public Warrants (with a $5.00 exercise price) upon
payment to the Company of the difference between the exercise price of his
Warrant and the exercise price of the Public Warrants.
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IN WITNESS WHEREOF, the Company has caused this Purchase Option
to be signed by its duly authorized officer as of the ____ day of __________,
2005.
CHARDAN CHINA ACQUISITION CORP. II
By:_________________________________
Name:
Title:
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Form to be used to exercise Purchase Option:
Chardan China Acquisition Corp. II
000 Xxxxxxxx
Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Date:_________________, 200__
The undersigned hereby elects irrevocably to exercise all or a
portion of the within Purchase Option and to purchase ____ Units of Chardan
China Acquisition Corp. II and hereby makes payment of $____________ (at the
rate of $_________ per Unit) in payment of the Exercise Price pursuant
thereto. Please issue the Common Stock and Warrants as to which this
Purchase Option is exercised in accordance with the instructions given below.
or
The undersigned hereby elects irrevocably to convert its right to
purchase _________ Units purchasable under the within Purchase Option by
surrender of the unexercised portion of the attached Purchase Option (with a
"Value" based of $_______ based on a "Market Price" of $_______). Please
issue the securities comprising the Units as to which this Purchase Option is
exercised in accordance with the instructions given below.
______________________________
Signature
______________________________
Signature Guaranteed
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name_____________________________________________________________
(Print in Block Letters)
Address__________________________________________________________
NOTICE: The signature to this form must correspond with the name
as written upon the face of the within Purchase Option in every particular
without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank, other than a savings bank, or by a trust company or by
a firm having membership on a registered national securities exchange.
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Form to be used to assign Purchase Option:
ASSIGNMENT
(To be executed by the registered Holder to effect a transfer of
the within Purchase Option):
FOR VALUE RECEIVED,______________________________________________
does hereby sell, assign and transfer unto __________________________________
the right to purchase __________ Units of Chardan China Acquisition Corp. II
("Company") evidenced by the within Purchase Option and does hereby authorize
the Company to transfer such right on the books of the Company.
Dated:___________________, 200_
______________________________
Signature
______________________________
Signature Guaranteed
NOTICE: The signature to this form must correspond with the name
as written upon the face of the within Purchase Option in every particular
without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank, other than a savings bank, or by a trust company or by
a firm having membership on a registered national securities exchange.
16
