o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report |
John Layburn, Acting Chief Financial Officer and Chief Strategy and Compliance Officer Phone: +86 (10) 8438 1031 Email: john.layburn@agriacorp.com |
David Pasquale, Senior Vice President Phone: +1 914 337 1117 Email: david.pasquale@agriacorp.com |
|
21/F Tower B, PingAn International Finance Center, 1-3 Xinyuan South Road, Chaoyang District Beijing 100027, Peoples Republic of China |
Two Park Place Bronxville, New York 10708 United States of America |
Title of Each class | Name of Each Exchange on Which Registered | |
American Depositary Shares, each representing two ordinary shares, par value $0.0000001 per share |
New York Stock Exchange |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ |
US GAAP þ
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International Financial Reporting Standards as issued by the International Accounting Standards Board o |
Other o |
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Exhibit 4.40 | ||||||||
Exhibit 4.41 | ||||||||
Exhibit 4.42 | ||||||||
Exhibit 4.43 | ||||||||
Exhibit 4.44 | ||||||||
Exhibit 4.45 | ||||||||
Exhibit 4.46 | ||||||||
Exhibit 4.47 | ||||||||
Exhibit 4.48 | ||||||||
Exhibit 4.54 | ||||||||
Exhibit 4.55 | ||||||||
Exhibit 4.56 | ||||||||
Exhibit 4.57 | ||||||||
Exhibit 4.58 | ||||||||
Exhibit 8.1 | ||||||||
Exhibit 12.1 | ||||||||
Exhibit 12.2 | ||||||||
Exhibit 13.1 | ||||||||
Exhibit 13.2 | ||||||||
Exhibit 15.1 | ||||||||
Exhibit 15.2 | ||||||||
Exhibit 15.3 | ||||||||
Exhibit 15.4 |
| we, us, our company, the Company, our and Agria refer to Agria Corporation, a Cayman Islands company, and its predecessor entities, subsidiaries and, unless the context indicates otherwise, Guanli, our consolidated affiliated entity, and its subsidiaries and associates (including its 49% owned associate Wuwei Ganxin Seeds Company Limited, or Ganxin); |
| P3A refers to Taiyuan Primalights III Agriculture Development Co., Ltd., a limited liability company established in China, which was one of our consolidated affiliated entities until it was disposed of in July 2010; |
| Guanli refers to our consolidated affiliated entity, Shenzhen Guanli Agricultural Technology Co., Ltd., which is a limited liability company established in China; |
| PGW refers to PGG Wrightson Group, in which we hold 50.01% equity interest; |
| China or PRC refers to the Peoples Republic of China, excluding, for purposes of this annual report, Taiwan, Hong Kong and Macau; |
| shares or ordinary shares refers to our ordinary shares, and preferred shares refers to our series A redeemable convertible preferred shares, all of which were converted into our ordinary shares upon the completion of our initial public offering on November 13, 2007; |
| ADSs refers to our American depositary shares, each of which represents two ordinary shares; and |
| all references to RMB or Renminbi are to the legal currency of China; all references to $, US$, dollars and US dollars are to the legal currency of the United States. |
| our future business development, results of operations and financial condition; | ||
| changes in our revenues, cost and expense items; |
| our anticipated development strategies, which may include potential acquisitions and divestitures, expanding into new sectors within the agricultural industry, expanding sales into new regions, and expanding our product offerings; |
| our strategy to expand our research and development capability; |
| the growth in demand in China for corn and vegetable seeds; |
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| our ability to attract customers and end users and enhance our brand recognition; |
| future changes in government regulations affecting our business; |
| trends and competition in the agricultural industry, particularly in China, New Zealand, Australia and South America; and |
| our ability to retain and motivate existing management and other key personnel and to recruit and integrate additional qualified personnel into our operations. |
ITEM 1. | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. | OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. | KEY INFORMATION |
2
For the Year Ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||
RMB | RMB | RMB | $ | |||||||||||||
(In thousands, except share, per share and per ADS data) | ||||||||||||||||
Consolidated Statements of Operations Data: |
||||||||||||||||
Revenue |
3,000 | 3,013 | 29,022 | 4,397 | ||||||||||||
Cost of revenue |
(2,651 | ) | (5,285 | ) | (17,345 | ) | (2,628 | ) | ||||||||
Gross profit |
349 | (2,272 | ) | 11,677 | 1,769 | |||||||||||
Operating expenses: |
||||||||||||||||
Selling expenses |
| (166 | ) | (875 | ) | (132 | ) | |||||||||
General and administrative expenses |
(864,771 | ) | (89,453 | ) | (97,796 | ) | (14,818 | ) | ||||||||
Research and development expenses |
(1,932 | ) | (1,156 | ) | (114 | ) | (17 | ) | ||||||||
Total operating expenses |
(866,703 | ) | (90,775 | ) | (98,785 | ) | (14,967 | ) | ||||||||
Operating loss |
(866,354 | ) | (93,047 | ) | (87,108 | ) | (13,198 | ) | ||||||||
Other income (expenses): |
||||||||||||||||
Interest income |
33,744 | 8,489 | 22,448 | 3,401 | ||||||||||||
Interest expense |
(26 | ) | (40 | ) | (2,266 | ) | (343 | ) | ||||||||
Exchange loss |
(11,812 | ) | (16,602 | ) | (2,843 | ) | (431 | ) | ||||||||
Unrealized (loss) gain in investment |
| (548 | ) | 1,946 | 295 | |||||||||||
Other expense |
(2,119 | ) | (33 | ) | (1,341 | ) | (203 | ) | ||||||||
Other income |
90 | 2,799 | 20,634 | 3,126 | ||||||||||||
Loss from equity investments |
| | (2,223 | ) | (337 | ) | ||||||||||
Loss before income tax |
(846,477 | ) | (98,982 | ) | (50,753 | ) | (7,690 | ) | ||||||||
Income tax |
(25,577 | ) | (10,915 | ) | (7,104 | ) | (1,076 | ) | ||||||||
Loss from continuing operations |
(872,054 | ) | (109,897 | ) | (57,857 | ) | (8,766 | ) | ||||||||
Income (loss) from discontinued operations |
121,053 | (25,378 | ) | (1,314 | ) | (199 | ) | |||||||||
Net loss |
(751,001 | ) | (135,275 | ) | (59,171 | ) | (8,965 | ) | ||||||||
Loss per ordinary share: |
||||||||||||||||
Loss per share from continuing operations basic
and diluted |
(6.91 | ) | (0.88 | ) | (0.49 | ) | (0.07 | ) | ||||||||
Income (loss) per share from discontinued operations
basic and diluted |
0.96 | (0.20 | ) | (0.01 | ) | * | ||||||||||
Net loss per share basic and diluted |
(5.95 | ) | (1.08 | ) | (0.50 | ) | (0.08 | ) | ||||||||
Weighted average number of ordinary shares outstanding: |
||||||||||||||||
Basic |
126,262,529 | 125,271,946 | 118,377,357 | 118,377,357 | ||||||||||||
Diluted |
126,262,529 | 125,271,946 | 118,377,357 | 118,377,357 | ||||||||||||
* | Less than 0.01 per share |
As of December 31, | ||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||
RMB | RMB | RMB | $ | |||||||||||||
(In thousands) | ||||||||||||||||
Consolidated Balance Sheets Data: |
||||||||||||||||
Cash and cash equivalents |
1,176,767 | 737,825 | 358,228 | 54,277 | ||||||||||||
Accounts receivable |
162,820 | 109,265 | 284 | 43 | ||||||||||||
Total assets |
2,077,762 | 2,006,153 | 1,617,750 | 245,114 | ||||||||||||
Total current liabilities |
53,056 | 94,129 | 153,992 | 23,332 | ||||||||||||
Ordinary shares |
| | | | ||||||||||||
Additional paid-in capital |
2,368,520 | 2,381,377 | 2,285,611 | 346,305 | ||||||||||||
Total shareholders equity |
1,835,560 | 1,712,486 | 1,463,758 | 221,782 |
3
Noon Buying Rate | ||||||||||||||||
Period | Period End | Average(1) | Low | High | ||||||||||||
(RMB per $1.00) | ||||||||||||||||
2006 |
7.8041 | 7.9579 | 8.0702 | 7.8041 | ||||||||||||
2007 |
7.2946 | 7.5806 | 7.8127 | 7.2946 | ||||||||||||
2008 |
6.8225 | 6.9193 | 7.2946 | 6.7800 | ||||||||||||
2009 |
6.8259 | 6.8295 | 6.8470 | 6.8176 | ||||||||||||
2010 |
6.6000 | 6.7715 | 6.8330 | 6.6306 | ||||||||||||
November |
6.6670 | 6.6538 | 6.6892 | 6.6791 | ||||||||||||
December |
6.6000 | 6.6497 | 6.6745 | 6.6000 | ||||||||||||
2011 |
||||||||||||||||
January |
6.6017 | 6.5843 | 6.6017 | 6.5809 | ||||||||||||
February |
6.5713 | 6.5761 | 6.5965 | 6.5520 | ||||||||||||
March |
6.5483 | 6.5645 | 6.5743 | 6.5483 | ||||||||||||
April |
6.4900 | 6.5267 | 6.5477 | 6.4900 | ||||||||||||
May |
6.4786 | 6.4957 | 6.5073 | 6.4786 | ||||||||||||
June (through June 17) |
6.4700 | 6.4785 | 6.4830 | 6.4700 |
(1) | Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period. |
4
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| maintain our competitive position in China and compete in each of our business segments with Chinese and international companies, many of which have longer operating histories and greater financial resources than we do; |
| offer commercially successful seed products to attract and retain direct customers and ultimate users; |
| retain access to the farmland we currently use and obtain access to additional farmland for expansion; |
| continue our existing arrangements with village collectives that grow our corn seed products and enter into new arrangements with additional village collectives; |
| maintain effective control of our costs and expenses; and |
| retain and motivate our management and skilled technical staff and recruit and integrate additional qualified personnel into our operations. |
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7
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9
10
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| revoking Guanlis business and operating licenses; |
| confiscating relevant income and imposing fines and other penalties; |
| prohibiting or restricting Guanlis operations in China; |
| requiring us or Guanli to restructure Guanlis ownership structure or operations; |
| restricting or prohibiting our use of the proceeds from our initial public offering to finance our businesses and operations in China; or |
| imposing conditions or requirements with which we or our subsidiaries or Guanli may not be able to comply. |
15
16
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| announcement of securities law class action lawsuits against us and our directors and officers; |
| delays in our periodic earnings announcements; |
| announcements of technological or competitive developments; |
| regulatory developments in our target markets affecting us, our customers or our competitors; |
| actual or anticipated fluctuations in our quarterly operating results; |
| changes in financial estimates by securities research analysts; |
20
| changes in the economic performance or market valuations of our seeds; |
| additions to or departures of our executive officers and key personnel; |
| fluctuations in the exchange rates between the US dollar and RMB; and |
| sales or anticipated sales of additional ADSs. |
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| Our board of directors has the authority to establish from time to time one or more series of shares, including preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series, including the designation of the series; number of shares of the series; dividend rights, dividend rates, conversion rights, voting rights; and rights and terms of redemption and liquidation preferences. |
| Our board of directors may issue a series of preferred shares without action by our shareholders to the extent of available authorized but unissued shares. Accordingly, the issuance of preferred shares may adversely affect the rights of the holders of the ordinary shares. Issuance of preference shares may dilute the voting power of holders of ordinary shares. |
| Subject to applicable regulatory requirements, our board of directors may issue additional ordinary shares or rights to acquire ordinary shares without action by our shareholders to the extent of available authorized but unissued shares. |
ITEM 4. | INFORMATION ON THE COMPANY |
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26
27
% | ||||
Agria Group |
80.81 | % | ||
New Hope International |
11.95 | % | ||
Ngai Tahu |
7.24 | % |
28
| for the period from January 15, 2010 to December 31, 2011, 8.0% per annum on the principal amount of the notes; |
| for the period from January 1, 2012 to December 31, 2013, the two-year swap on December 31, 2011 plus a margin of 5.5%; |
| for subsequent two-year periods commencing on January 1, 2014, January 1, 2016 and so on, the two-year swap at the start of the relevant two-year period plus a margin of 6.5%. |
29
| Growing a focused seed business in China. We believe that the PRC government and the agricultural industry participants share the same goal of improving agricultural productivity, which is evidenced by strong foreign and domestic investment flowing into the agricultural industry in China. We consider that focusing on the seed sector will best position us to achieve sustainable growth in the future. |
| Developing strong expertise in operational management. The agricultural sector in China is highly fragmented with many small companies whose growth potential is hindered by a lack of experienced operational management. Our investment in and strategic partnership with PGW, which owns the largest seed company in the southern hemisphere gives us an access to a management team experienced in running modern international seed businesses. In June 2010, we also recruited Mr. Chuanli Zhou as the head of our seeds division. Mr. Zhou has over 20 years of experience in the seed industry in China and was previously the general manager of Shandong Denghai-PIONEER Seed Company, a joint venture between Pioneer Hi-Bred International Inc., a leading international agricultural company, and Shandong Denghai Seeds Co., Ltd. |
| Acquiring proprietary technologies. The seed industry is a technology-centered business and companies with sufficient quantity and quality of proprietary technologies have a significant competitive edge. We will continue to leverage our recent investment in and partnership with CNAAS to develop proprietary technologies. We are also at various stages of discussions regarding potential investments in seed companies with proprietary seed producers. |
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| exercise effective control over Guanli, Agria Agriculture and Zhongyuan; |
| receive substantially all of the earnings and other economic benefits from Guanli, Agria Agriculture and Zhongyuan to the extent permissible under PRC law in consideration for the services provided by Agria Brother; and |
| have an exclusive option to purchase all or part of the equity interests in P3A, Guanli, Agria Agriculture and Zhongyuan in each case when and to the extent permitted by PRC law. |
ITEM 4A. | UNRESOLVED STAFF COMMENTS |
ITEM 5. | OPERATING AND FINANCIAL REVIEW AND PROSPECTS |
39
For the Years Ended December 31, | ||||||||||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||||||
RMB | % of Revenues |
RMB | % of Revenues |
RMB | $ | % of Revenues |
||||||||||||||||||||||
(In thousands, except percentages) | ||||||||||||||||||||||||||||
Revenue |
3,000 | 100 | % | 3,013 | 100 | % | 29,022 | 4,397 | 100 | % | ||||||||||||||||||
Cost of revenue |
(2,651 | ) | (88.4 | )% | (5,285 | ) | (175.4 | )% | (17,345 | ) | (2,628 | ) | (59.8 | )% | ||||||||||||||
Gross profit |
349 | 11.6 | % | (2,272 | ) | (75.4 | )% | 11,677 | 1,769 | 40.2 | % | |||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||||||
Selling expenses |
| 0.0 | % | (166 | ) | (5.5 | )% | (875 | ) | (132 | ) | (3.0 | )% | |||||||||||||||
General and administrative expenses |
(864,771 | ) | (28,825.7 | )% | (89,453 | ) | (2,968.9 | )% | (97,796 | ) | (14,818 | ) | (337.0 | )% | ||||||||||||||
Research and development expenses |
(1,932 | ) | (64.4 | )% | (1,156 | ) | (38.4 | )% | (114 | ) | (17 | ) | (0.4 | )% | ||||||||||||||
Total operating expenses |
(866,703 | ) | (28,890.1 | )% | (90,775 | ) | (3,012.8 | )% | (98,785 | ) | (14,967 | ) | (340.4 | )% | ||||||||||||||
Operating loss |
(866,354 | ) | (28,878.5 | )% | (93,047 | ) | (3,088.2 | )% | (87,108 | ) | (13,198 | ) | (300.1 | )% | ||||||||||||||
Other income (expenses): |
||||||||||||||||||||||||||||
Interest income |
33,744 | 1,124.8 | % | 8,489 | 281.7 | % | 22,448 | 3,401 | 77.3 | % | ||||||||||||||||||
Interest expense |
(26 | ) | (0.9 | )% | (40 | ) | (1.3 | )% | (2,266 | ) | (343 | ) | (7.8 | )% | ||||||||||||||
Exchange loss |
(11,812 | ) | (393.7 | )% | (16,602 | ) | (551.0 | )% | (2,843 | ) | (431 | ) | (9.8 | %) | ||||||||||||||
Unrealized (loss) gain in investment |
| | (548 | ) | (18.2 | )% | 1,946 | 295 | 6.7 | % | ||||||||||||||||||
Other expense |
(2,119 | ) | (70.6 | )% | (33 | ) | (1.1 | )% | (1,341 | ) | (203 | ) | (4.6 | )% | ||||||||||||||
Other income |
90 | 3.0 | % | 2,799 | 92.9 | % | 20,634 | 3,126 | 71.1 | % | ||||||||||||||||||
Loss from equity investments |
| | | | (2,223 | ) | (337 | ) | (7.7 | )% | ||||||||||||||||||
Loss before income tax |
(846,477 | ) | (28,215.9 | )% | (98,982 | ) | (3,285.2 | )% | (50,753 | ) | (7,690 | ) | (174.9 | )% | ||||||||||||||
Income tax |
(25,577 | ) | (852.5 | )% | (10,915 | ) | (362.3 | )% | (7,104 | ) | (1,076 | ) | (24.5 | )% | ||||||||||||||
Loss from continuing operations |
(872,054 | ) | (29,068.4 | )% | (109,897 | ) | (3,647.5 | )% | (57,857 | ) | (8,766 | ) | (199.4 | )% | ||||||||||||||
Income (loss) from discontinued
operation |
121,053 | 4,035.1 | % | (25,378 | ) | (842.3 | )% | (1,314 | ) | (199 | ) | (4.5 | )% | |||||||||||||||
Net loss |
(751,001 | ) | (25,033.3 | )% | (135,275 | ) | (4,489.8 | )% | (59,171 | ) | (8,965 | ) | (203.9 | )% | ||||||||||||||
40
For the Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||||||
% of | % of | % of | ||||||||||||||||||||||||||||||||||||||
Sales | Total | Sales | Total | Sales | Total | |||||||||||||||||||||||||||||||||||
Volume | Revenue | Revenues | Volume | Revenue | Revenues | Volume | Revenue | $ | Revenues | |||||||||||||||||||||||||||||||
(Revenue in RMB thousands and sales volume in kg) | ||||||||||||||||||||||||||||||||||||||||
Edible corn seeds |
| | | 385 | 13 | 0.4 | % | 811,056 | 28,715 | 4,351 | 99.0 | % | ||||||||||||||||||||||||||||
Field corn seeds |
| | | | | | 2,464 | 8 | 1 | 0.0 | % | |||||||||||||||||||||||||||||
Vegetable seeds |
| | | | | | 481 | 299 | 45 | 1.0 | % | |||||||||||||||||||||||||||||
Royalty income |
| 3,000 | 100.0 | % | | 3,000 | 99.6 | % | | | | | ||||||||||||||||||||||||||||
Total |
| 3,000 | 100.0 | % | 385 | 3,013 | 100.0 | % | 814,001 | 29,022 | 4,397 | 100.0 | % |
| In September 2009, we acquired Nong Ke Yu, an edible corn seeds business engaged in research and development, production, distribution and sales of seeds for edible corn for human consumption. Due to the seasonal nature of this business and the timing of the acquisition, revenue derived from Nong Ke Yu in 2009 was very low. However, in 2010, we benefited fully from Nong Ke Yus business and operations. |
| In January 2010, we acquired BeOK, a company engaged in research, production and marketing of vegetable seeds. |
| In September 2010, we invested in Ganxin and entered into an exclusive sales agency agreement with them. Under the terms of the exclusive sales agency agreement, we have the exclusive right to sell the entire production volume of all current and future varieties of field corn seeds owned or developed by Ganxin. Due to the seasonal nature of this business and the timing of the acquisition, no material revenue was derived from field corn seeds in 2010. |
41
2008 | 2009 | 2010 | ||||||||||||||||||||||||||||||||||||||||||
Cost of | Gross | Gross | Cost of | Gross | Gross | Cost of | Cost of | Gross | Gross | Gross | ||||||||||||||||||||||||||||||||||
Revenue | Profit | Profit | Revenue | Profit | Profit | Revenue | Revenue | Profit | Profit | Profit | ||||||||||||||||||||||||||||||||||
RMB000 | RMB000 | % | RMB000 | RMB000 | % | RMB000 | USD000 | RMB000 | USD000 | % | ||||||||||||||||||||||||||||||||||
Edible Corn Seeds |
| | | 8 | 5 | 38.5 | % | 17,104 | 2,592 | 11,611 | 1,759 | 40.4 | % | |||||||||||||||||||||||||||||||
Field Corn Seeds |
| | | | | | 8 | 1 | 0 | 0 | 4.3 | % | ||||||||||||||||||||||||||||||||
Vegetable Seeds |
| | | | | | 233 | 35 | 66 | 10 | 22.1 | % | ||||||||||||||||||||||||||||||||
Other Cost of Revenue |
2,651 | 349 | 11.6 | % | 5,277 | (2,277 | ) | (75.9 | )% | | | | | | ||||||||||||||||||||||||||||||
Total |
2,651 | 349 | 11.6 | % | 5,285 | (2,272 | ) | (75.4 | )% | 17,345 | 2,628 | 11,677 | 1,769 | 40.2 | % |
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| an RMB20.3 million ($3.1 million) net profit from discontinued operations for the period through the date of disposal; |
| an RMB212.8 million ($32.2 million) loss on disposal of discontinued operations; and |
| an RMB191.2 million ($29.0 million) reversal of deferred tax liabilities released due to the divestiture of our discontinued operations. |
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Buildings and improvements |
5-30 years | |||
Plant and machinery |
5-10 years | |||
Furniture and office equipment |
5 years | |||
Motor vehicles |
5-6 years |
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For the Year Ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | ||||||||||||||
RMB | RMB | RMB | $ | |||||||||||||
(In thousands) | ||||||||||||||||
Net cash provided by/(used in) operating activities |
209,096 | (6,281 | ) | (9,210 | ) | (1,398 | ) | |||||||||
Net cash used in investing activities |
(337,636 | ) | (429,981 | ) | (277,153 | ) | (41,991 | ) | ||||||||
Net cash (used in)/provided by financing activities |
(13,612 | ) | (2,026 | ) | (76,396 | ) | (11,575 | ) | ||||||||
Effect of exchange rate changes on cash |
(68,234 | ) | (654 | ) | (16,838 | ) | (2,551 | ) | ||||||||
Net decrease in cash and cash equivalents |
(210,386 | ) | (438,942 | ) | (379,597 | ) | (57,515 | ) | ||||||||
Cash and cash equivalents at the beginning of the year |
1,387,153 | 1,176,767 | 737,825 | 111,792 | ||||||||||||
Cash and cash equivalents at the end of the year |
1,176,767 | 737,825 | 358,228 | 54,277 |
50
As of December 31, | ||||||||||||
2008 Pro forma | 2009 Pro forma | 2010 | ||||||||||
(Unaudited) | (Unaudited) | Actual | ||||||||||
(RMB000) | (RMB000) | (RMB000) | ||||||||||
Assets: |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
1,169,732 | 670,623 | 358,228 | |||||||||
Restricted cash |
| | 136,000 | |||||||||
Accounts receivable |
1,500 | 104 | 284 | |||||||||
Inventories |
| 21,668 | 74,368 | |||||||||
Prepayments and other current assets |
10,415 | 8,854 | 19,046 | |||||||||
Amounts due from related parties |
| | 1,300 | |||||||||
Assets held for sale current |
231,565 | 257,699 | | |||||||||
Total current assets |
1,413,212 | 958,948 | 589,226 | |||||||||
51
As of December 31, | ||||||||||||
2008 Pro forma | 2009 Pro forma | 2010 | ||||||||||
(Unaudited) | (Unaudited) | Actual | ||||||||||
(RMB000) | (RMB000) | (RMB000) | ||||||||||
Non-current assets: |
||||||||||||
Property, plant and equipment, net |
24,741 | 26,145 | 6,245 | |||||||||
Investment at fair value |
| 414,047 | 403,490 | |||||||||
Investment under equity method |
| | 47,894 | |||||||||
Investments under cost method |
| 7,000 | 165,444 | |||||||||
Intangible assets, net |
191,650 | 373,913 | 353,026 | |||||||||
Goodwill |
| 9,818 | 10,135 | |||||||||
Non-current prepayments |
244,904 | 40,458 | 40,258 | |||||||||
Deferred tax assets |
438 | 3,480 | 2,032 | |||||||||
Assets held for sale noncurrent |
202,816 | 172,344 | | |||||||||
Total non-current assets |
664,549 | 1,047,205 | 1,028,524 | |||||||||
Total assets |
2,077,761 | 2,006,153 | 1,617,750 | |||||||||
Liabilities and shareholders equity |
||||||||||||
Current liabilities: |
||||||||||||
Short-term bank borrowings |
| | 59,604 | |||||||||
Tax payable |
2,488 | | 338 | |||||||||
Accounts payable |
| 1,442 | 177 | |||||||||
Accrued expenses and other liabilities |
7,532 | 45,167 | 51,030 | |||||||||
Amounts due to related parties |
| | 42,843 | |||||||||
Deferred tax liability |
| 63 | | |||||||||
Liabilities associated with assets held for sale current |
43,037 | 47,457 | | |||||||||
Total current liabilities |
53,057 | 94,129 | 153,992 | |||||||||
Non-current liabilities: |
||||||||||||
Liabilities associated with held for sale noncurrent |
189,145 | 199,538 | | |||||||||
Total non-current liabilities |
189,145 | 199,538 | | |||||||||
Total liabilities |
242,202 | 293,667 | 153,992 | |||||||||
Total shareholders equity |
1,835,559 | 1,712,486 | 1,463,758 | |||||||||
Total liabilities and shareholders equity |
2,077,761 | 2,006,153 | 1,617,750 | |||||||||
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Payment Due by December 31, | ||||||||||||||||||||||||
Total | 2011 | 2012 | 2013 | 2014 | Thereafter | |||||||||||||||||||
(in RMB thousands) | ||||||||||||||||||||||||
Short-term borrowings(1) |
||||||||||||||||||||||||
- principal |
59,604 | 59,604 | ||||||||||||||||||||||
- interest |
20 | 20 | ||||||||||||||||||||||
Building and premises lease obligations(2) |
11,038 | 2,898 | 2,371 | 561 | 347 | 4,861 | ||||||||||||||||||
Purchase obligations(3) |
80 | 80 | | | | | ||||||||||||||||||
Commitment for further investment in PGW(4) |
743,820 | 743,820 | | | | | ||||||||||||||||||
Investment into Zhongnong(5) |
28,000 | 28,000 | ||||||||||||||||||||||
Capital expenditure commitment(6) |
24 | 24 | ||||||||||||||||||||||
Total |
842,586 | 834,446 | 2,371 | 561 | 347 | 4,861 | ||||||||||||||||||
(1) | Includes short-term borrowings and future interest obligations. | |
(2) | Includes lease obligations for our office premises, buildings under non-cancelable leases and land used to test seed varieties. | |
(3) | Represents commitments for the purchase of seeds. | |
(4) | Represents commitments to make a partial offer to increase Agria Singapores stake in PGW to 50.01% at an offer price of NZ$0.60 per share and associated expenses for the subscription in a convertible redeemable note that was issued by PGW in January 2010. In December, 2010, we and New Hope Group entered into an agreement whereby both we and New Hope International would be jointly and severally liable for funding the acquisition. Prior to completion of the acquisition, this agreement were superseded by the agreements described in Item 4 Business Overview Structure of our investment in PGW. | |
(5) | Represents commitments to make remaining investment into Zhongnong. | |
(6) | Represents commitments for the purchase of equipment. |
| our future business development, results of operations and financial condition; |
| changes in our revenues, cost and expense items; |
54
| our anticipated development strategies, which may include potential acquisitions and divestitures, expanding into new sectors within the agricultural industry, expanding sales into new regions, and expanding our product offerings; |
| our strategy to expand our research and development capability; |
| the growth in demand in China for corn and vegetable seeds; |
| our ability to attract customers and end users and enhance our brand recognition; |
| future changes in government regulations affecting our business; |
| trends and competition in the agricultural industry, particularly in China, New Zealand, Australia and South America; and |
| our ability to retain and motivate existing management and other key personnel and to recruit and integrate additional qualified personnel into our operations. |
ITEM 6. | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES |
Directors and Executive Officers | Age | Position/Title | ||||
Guanglin Lai
|
47 | Chairman of the Board of Directors | ||||
Xie Tao
|
48 | Chief Executive Officer and Director | ||||
Gary Kim Ting Yeung
|
45 | Director | ||||
Kenneth J. DeWoskin
|
68 | Independent Director | ||||
Shangzhong Xu
|
61 | Independent Director | ||||
Jiuran Zhao
|
49 | Independent Director | ||||
Joo Hai Lee
|
55 | Independent Director | ||||
Sean Shao
|
54 | Independent Director | ||||
John Layburn
|
36 | Acting Chief Financial Officer and Chief Strategy and Compliance Officer | ||||
Weizhong Wang
|
48 | Chief Strategy Officer, Corn Seed | ||||
Kean Seng U
|
44 | Head of Corporate and Legal Affairs | ||||
David Pasquale
|
40 | Senior Vice President |
55
56
57
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| selecting the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; |
| reviewing with the independent auditors any audit problems or difficulties and managements response; |
| reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; |
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| discussing the annual audited financial statements with management and the independent auditors; |
| reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; |
| annually reviewing and reassessing the adequacy of our audit committee charter; |
| meeting separately and periodically with management and the independent auditors; and |
| reporting regularly to the board of directors. |
| reviewing and recommending to the board total compensation packages for our senior executives; |
| approving and overseeing the total compensation packages for our chief executive officer; |
| reviewing and recommending director compensation to the board; and |
| periodically reviewing and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, employee pension and welfare benefit plans. |
| selecting and recommending nominees for election or re-election to the board or appointments to fill any vacancy; |
| annually reviewing with the board the current composition of the board with regards to characteristics such as independence, age, skills, experience and availability of service to us; |
| periodically advising the board with regard to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken; and |
| monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. |
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Number of full- | Percentage of | Number of part- | Percentage of | |||||||||||||
time Employees | Total Employees | time Employees | Total Employees | |||||||||||||
China Seeds |
62 | 45 | % | 28 | 20 | % | ||||||||||
Administration |
48 | 35 | % | | | |||||||||||
Total |
110 | 80 | % | 28 | 20 | % |
| each of our directors and executive officers as of the date of this annual report; and |
| each person known to us to own beneficially more than 5% of our ordinary shares as of June 8, 2011. |
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Ordinary Shares Beneficially Owned | ||||||||
Number(1) | %(2) | |||||||
Directors and Executive Officers: |
||||||||
Guanglin Lai(3) |
48,788,667 | 43.9 | ||||||
Xie Tao |
* | * | ||||||
Gary Kim Ting Yeung |
* | * | ||||||
Kenneth J. DeWoskin |
* | * | ||||||
Shangzhong Xu |
* | * | ||||||
Jiuran Zhao |
* | * | ||||||
Joo Hai Lee |
| | ||||||
Sean Shao |
* | * | ||||||
John Layburn |
* | * | ||||||
Weizhong Wang |
* | * | ||||||
Kean Seng U |
* | * | ||||||
David Pasquale |
* | * | ||||||
All directors and executive officers as a group(4) |
52,852,533 | 45.9 | ||||||
Principal Shareholders: |
||||||||
Morgan Finanz Capital Limited(5) |
31,076,750 | 28.1 | ||||||
Brothers Capital Limited(6) |
17,445,250 | 15.7 | ||||||
Heartland Advisors, Inc.(7) |
10,231,970 | 9.2 | ||||||
TPG Capital, L.P.(8) |
8,650,000 | 7.8 | ||||||
Zhixin Xue(9) |
7,549,640 | 6.8 | ||||||
Dubai Group Limited(10) |
6,600,000 | 6.0 |
* | Less than 1% or our total issued and outstanding shares | |
(1) | Beneficial ownership is determined in accordance with Rule 13d-3 of the General Rules and Regulations under the Exchange Act and includes voting or investment power with respect to the securities. | |
(2) | For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of 110,766,600, being the number of ordinary shares outstanding as of June 8, 2011, and the number of ordinary shares underlying share options held by such person or group that are exercisable within 60 days after the date of this annual report if any. | |
(3) | Includes (i) 17,445,250 ordinary shares owned by BCL, a British Virgin Islands company wholly owned by Mr. Lai, and (ii) 31,076,750 ordinary shares owned by Morgan Finanz Capital Limited, a British Virgin Islands company wholly owned by BCL. The business address of Mr. Lai is Room 21/F Tower B, PingAn International Finance Center, 1-3 Xinyuan South Road, Chaoyang District, Beijing 100027, Peoples Republic of China. | |
(4) | Certain directors and executive officers have been granted options pursuant to our 2007 Share Incentive Plan. See B. Compensation of Directors and Executive OfficersShare Incentives. | |
(5) | Morgan Finanz Capital Limited is a company incorporated in the British Virgin Islands. Morgan Finanz Capital Limited is wholly owned by BCL, which in turn is wholly owned by Mr. Guanglin Lai. Mr. Guanglin Lai is the sole director of Morgan Finanz Capital Limited. | |
(6) | Includes 17,445,250 ordinary shares held by BCL, a British Virgin Islands company wholly owned by Mr. Lai, The business address of BCL is 21/F Tower B, PingAn International Finance Center, 1-3 Xinyuan South Road, Chaoyang District, Beijing 100027, Peoples Republic of China. | |
(7) | In the form of ADSs, each representing two ordinary shares, based on Form 13-F filed with the SEC by Heartland Advisors, Inc. for the quarter ended March 31, 2011. The business address of Heartland Advisors, Inc. is 789 North Water Street. Suite 500, Milwaukee, WI 53202. | |
(8) | In the form of ADSs, each representing two ordinary shares, based on Form 13-F filed with the SEC by TPG Capital, L.P. for the quarter ended March 31, 2010. TPG Capital, L.P. is ultimately owned by Tarrant Capital Advisors, Inc., a Delaware company, whose shareholders are David Bonderman and James Coulter. The registered address for both of these companies is c/o Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. | |
(9) | Based on the Schedule D filed with the SEC on July 23, 2008. The business address of Mr. Xue is Floor 25, Golden Port Hotel, No. 35 North Bing Zhou Road, Tai Yuan City, Shanxi Province 030012, Peoples Republic of China. |
62
(10) | Based on the Schedule 13G/A filed with the SEC on February 17, 2009. Dubai Ventures Group Limited, a company incorporated in Cayman Islands, holds 3,300,000 ADS, representing 6,600,000 ordinary shares of the company. Dubai Ventures Group Limited is wholly owned by Dubai Ventures Group L.L.C., whose General Manager is Dubai Group Limited, which has the authority, among other things, to acquire, purchase, subscribe for, sell, assign and/or transfer any shares owned by Dubai Ventures Group L.L.C. The directors of Dubai Group Limited are Fadhel Abdulbaqi Abu Al Hassan Al Qaed Al Ali, Hashim Abdulla Ahmad Al Babal, Soud Ahmad Abdulrahman Baalawi and Mohammad Abdulla Ali Al Gergawi. The address for Dubai Group Limited is c/o Paget Brown Trust Company Ltd., West Wind Building, Harbour Drive, George Town, Grand Cayman, British West Indies. |
ITEM 7. | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
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ITEM 8. | FINANCIAL INFORMATION |
67
ITEM 9. | THE OFFER AND LISTING |
Sales Price ($) | ||||||||
High | Low | |||||||
Yearly Highs and Lows |
||||||||
2007 (starting from November 7, 2007) |
17.00 | 7.00 | ||||||
2008 |
11.75 | 1.21 | ||||||
2009 |
4.53 | 0.75 | ||||||
2010 |
3.31 | 1.20 | ||||||
Quarterly Highs and Lows |
||||||||
First Quarter 2009 |
1.85 | 0.75 | ||||||
Second Quarter 2009 |
3.77 | 1.05 | ||||||
Third Quarter 2009 |
2.62 | 1.69 | ||||||
Four Quarter 2009 |
4.53 | 1.90 | ||||||
First Quarter 2010 |
3.31 | 1.77 | ||||||
Second Quarter 2010 |
1.56 | 1.18 | ||||||
Third Quarter 2010 |
1.83 | 1.11 | ||||||
Fourth Quarter 2010 |
2.07 | 1.33 | ||||||
Monthly Highs and Lows |
||||||||
December 2010 |
1.97 | 1.41 | ||||||
January 2011 |
2.12 | 1.71 | ||||||
February 2011 |
1.89 | 1.53 | ||||||
March 2011 |
2.10 | 1.26 | ||||||
April 2011 |
1.57 | 1.18 | ||||||
May 2011 |
1.38 | 1.20 | ||||||
June 2011 (through June 23, 2011) |
1.32 | 0.94 |
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ITEM 10. | ADDITIONAL INFORMATION |
69
| banks and other financial institutions; |
| insurance companies; |
| regulated investment companies; |
| real estate investment trusts; |
| broker-dealers; |
| traders that elect to use a mark-to-market method of accounting; |
| U.S. expatriates; |
| tax-exempt entities; |
| persons liable for alternative minimum tax; |
| persons holding an ADS or ordinary share as part of a straddle, hedging, conversion or integrated transaction; |
70
| persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock; |
| partnerships or other pass-through entities, or persons holding ADSs or ordinary shares through such entities; or |
| persons who acquired ADSs or ordinary shares pursuant to the exercise of any employee share option or otherwise as compensation. |
| an individual who is a citizen or resident of the United States; | ||
| a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia; |
| an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or |
| a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
| at least 75% of its gross income for such year is passive income, or |
| at least 50% of the value of its assets (based on an average of the quarterly values of the assets) during such year is attributable to assets that produce passive income or are held for the production of passive income (the asset test). |
71
| the excess distribution or recognized gain will be allocated ratably over your holding period for the ADSs or ordinary shares, |
| the amount allocated to the current taxable year, and any taxable years in your holding period prior to the first taxable year in which we became a PFIC, will be treated as ordinary income, and |
| the amount allocated to each other taxable year will be subject to tax at the highest tax rate in effect for individuals or corporations, as applicable, for each such year, and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year. |
72
73
74
ITEM 11. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
75
ITEM 12. | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES |
Persons depositing or withdrawing shares must pay: | For: | |
$5.00 (or less) per 100 ADSs (or portion of 100
ADSs)
|
Issuance of ADSs, including issuances
resulting from a distribution of shares or
rights or other property |
|
Cancellation of ADSs for the purpose of
withdrawal, including if the deposit agreement
terminates |
76
Persons depositing or withdrawing shares must pay: | For: | |
$.02 (or less) per ADS
|
Any cash distribution to ADS registered holders |
|
A fee equivalent to the fee that would be payable
if securities distributed to you had been shares
and the shares had been deposited for issuance of
ADSs
|
Distribution of securities distributed to
holders of deposited securities that are
distributed by the depositary to ADS
registered holders |
|
$.02 (or less) per ADSs per calendar year
|
Depositary services |
|
Registration or transfer fees
|
Transfer and registration of shares on our
share register to or from the name of the
depositary or its agent when you deposit or
withdraw shares |
|
Expenses of the depositary
|
Cable, telex and facsimile transmissions (when
expressly provided in the deposit agreement) |
|
Converting foreign currency to US dollars |
||
Taxes and other governmental charges the
depositary or the custodian have to pay on any
ADS or share underlying an ADS, for example,
stock transfer taxes, stamp duty or withholding
taxes
|
As necessary |
|
Any charges incurred by the depositary or its agents for servicing the deposited securities |
As necessary |
ITEM 13. | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES |
ITEM 14. | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS |
77
ITEM 15. | CONTROLS AND PROCEDURES |
| Controls designed to ensure that significant transactions were appropriately accounted for did not operate effectively due to the lack of sufficient qualified and trained personnel to review and test the application of U.S. GAAP, and significant turnover of senior management and personnel in the finance related functions during the second half of 2009. |
78
| We have strengthened our monitoring control over financial reporting to include additional review by our chief financial officer and senior finance staff over the application of U.S. GAAP accounting knowledge, the selection and evaluation of U.S. GAAP accounting policies, critical accounting judgments and estimates, reporting and disclosures. |
| We implemented a series of review and monitoring controls over the financial statement closing process which will ensure complete and accurate reporting of transactions, in particular, those unusual or non-recurring events, in compliance with U.S. GAAP. |
| We appointed external consultants with relevant expertise and experience in U.S. GAAP and internal control over financial reporting to assist our management in addressing the material weaknesses noted. These external consultants review on a top down basis the application of U.S. GAAP. The scope of this review had a particular focus on those areas identified by senior management and through discussions between senior management and our auditor as being unusual, non-recurring or of a higher risk of being stated in a manner not compliant with US GAAP. |
| Strengthened our internal audit team through the appointment of external consultants with relevant experience and expertise to train and review the work of our internal audit staff and to support our testing of internal controls over financial reporting. |
| Divested the consolidated entity in which the material misstatement from the misapplication of U.S. GAAP arose and restructured our head-office and remaining operating entities finance teams to ensure greater integration between our head-office finance team and our operating entities. |
| Our audit committee is monitoring the remediation plan on an ongoing basis and providing the necessary oversight to ensure that we are effectively addressing our material weakness. |
ITEM 16A. | AUDIT COMMITTEE FINANCIAL EXPERT |
ITEM 16B. | CODE OF ETHICS |
79
ITEM 16C. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
For the Year Ended December 31, | ||||||||
2009 | 2010 | |||||||
$ | $ | |||||||
Audit fees(1) |
1,037,233 | 886,813 | ||||||
Audit-related fees |
| | ||||||
Tax fees |
| | ||||||
1,037,233 | 886,813 |
(1) | Audit fees means the aggregate fees billed for professional services rendered by our principal auditors for the audit of our annual financial statements and the performance of agreed upon procedures on our comparative unaudited interim financial statements. |
ITEM 16D. | EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES |
80
ITEM 16E. | PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS |
Total Dollar Amount | Approximate Dollar | |||||||||||||||
of ADSs Purchased as | Value of ADSs that | |||||||||||||||
Total Number of | Average Price Paid | Part of Publicly | may Yet be Purchased | |||||||||||||
Period | ADSs Purchased | Per ADS(1) | Announced Plan(2) | Under the Plan(1) | ||||||||||||
August 15, 2008 |
33,949 | $ | 5.0644 | $ | 171,931 | $ | 9,828,069 | |||||||||
August 18, 2008 |
32,289 | $ | 5.0348 | $ | 162,569 | $ | 9,665,500 | |||||||||
August 25, 2008 |
36,393 | $ | 4.7657 | $ | 173,438 | $ | 9,492,062 | |||||||||
September 2, 2008 |
22,450 | $ | 4.4485 | $ | 99,869 | $ | 9,392,193 | |||||||||
September 8, 2008 |
25,000 | $ | 4.2728 | $ | 106,820 | $ | 9,285,373 | |||||||||
September 9, 2008 |
19 | $ | 4.2800 | $ | 81 | $ | 9,285,292 | |||||||||
September 30, 2008 |
26,261 | $ | 3.2976 | $ | 86,598 | $ | 9,198,693 | |||||||||
October 1, 2008 |
500 | $ | 3.3960 | $ | 1,698 | $ | 9,196,995 | |||||||||
October 2, 2008 |
23,139 | $ | 3.3367 | $ | 77,208 | $ | 9,119,788 | |||||||||
October 30, 2008 |
17,744 | $ | 1.9904 | $ | 35,318 | $ | 9,084,470 | |||||||||
December 12, 2008 |
27,256 | $ | 1.5475 | $ | 42,179 | $ | 9,042,291 | |||||||||
December 17, 2008 |
24,669 | $ | 1.6066 | $ | 39,633 | $ | 9,002,658 | |||||||||
December 18, 2008 |
2,400 | $ | 1.5900 | $ | 3,816 | $ | 8,998,842 | |||||||||
December 19, 2008 |
10,535 | $ | 1.6111 | $ | 16,973 | $ | 8,981,869 | |||||||||
December 22, 2008 |
12,396 | $ | 1.5155 | $ | 18,786 | $ | 8,963,083 | |||||||||
December 23, 2008 |
5,000 | $ | 1.4104 | $ | 7,052 | $ | 8,956,031 | |||||||||
February 20, 2009 |
10,000 | $ | 0.9982 | $ | 9,982 | $ | 8,946,049 | |||||||||
February 23, 2009 |
15,381 | $ | 0.9651 | $ | 14,844 | $ | 8,931,205 | |||||||||
February 24, 2009 |
15,381 | $ | 0.9998 | $ | 15,378 | $ | 8,915,827 | |||||||||
February 25, 2009 |
15,381 | $ | 0.9709 | $ | 14,933 | $ | 8,900,893 | |||||||||
February 26, 2009 |
15,381 | $ | 0.9624 | $ | 14,803 | $ | 8,886,091 | |||||||||
February 27, 2009 |
15,381 | $ | 0.9423 | $ | 14,494 | $ | 8,871,597 | |||||||||
March 2, 2009 |
21,893 | $ | 0.8815 | $ | 19,299 | $ | 8,852,299 | |||||||||
March 3, 2009 |
21,893 | $ | 0.8793 | $ | 19,251 | $ | 8,833,048 | |||||||||
March 4, 2009 |
21,293 | $ | 0.8927 | $ | 19,008 | $ | 8,814,040 | |||||||||
March 5, 2009 |
21,893 | $ | 0.8550 | $ | 18,719 | $ | 8,795,321 | |||||||||
March 6, 2009 |
21,893 | $ | 0.8237 | $ | 18,033 | $ | 8,777,288 | |||||||||
March 9, 2009 |
24,552 | $ | 0.8276 | $ | 20,319 | $ | 8,756,969 | |||||||||
March 10, 2009 |
24,552 | $ | 0.8324 | $ | 20,437 | $ | 8,736,532 | |||||||||
March 11, 2009 |
24,552 | $ | 0.8262 | $ | 20,285 | $ | 8,716,247 | |||||||||
March 12, 2009 |
24,552 | $ | 0.8137 | $ | 19,978 | $ | 8,696,269 | |||||||||
March 13, 2009 |
24,552 | $ | 0.8252 | $ | 20,260 | $ | 8,676,009 | |||||||||
April 20, 2009 |
1,470 | $ | 1.7482 | $ | 2,570 | $ | 8,673,439 | |||||||||
Total |
620,000 | $ | 2.1396 | $ | 1,326,561 | $ | 8,673,439 |
(1) | Each of our ADSs represents two ordinary shares. | |
(2) | On August 12, 2008, we announced that our board of directors had approved a share repurchase program to repurchase from the open market up to $10 million worth of our outstanding ADSs from time to time within the next 24 months. The timing and amount of any repurchase will be determined by our management, based on market conditions, ADS price and other factors, and will be subject to the restrictions relating to volume, price and timing under applicable law, including Rule 10b-18 under the Exchange Act. We have canceled the ADSs repurchased and their underlying ordinary shares. The approval of our board of directors for the stock repurchase program expired on August 6, 2010. |
ITEM 16F. | CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT |
81
ITEM 16G. | CORPORATE GOVERNANCE |
ITEM 17. | FINANCIAL STATEMENTS |
ITEM 18. | FINANCIAL STATEMENTS |
82
ITEM 19. | EXHIBITS |
Exhibit Number | Description of Document | |||
1.1 | Amended and Restated Memorandum and Articles of Association (incorporated
by reference to Exhibit 3.2 from our F-1 registration statement
(File No.
333-146785), as amended, initially filed with the Commission on October
18, 2007) |
|||
2.1 | Registrants Specimen American Depositary Receipt (incorporated by
reference to Exhibit A to Exhibit 4.3 from our F-1 registration statement
(File No. 333-146785), as amended, initially filed with the Commission on
October 18, 2007) |
|||
2.2 | Registrants Specimen Certificate for Ordinary Shares (incorporated by
reference to Exhibit 4.2 from our F-1 registration statement (File No.
333-146785), as amended, initially filed with the Commission on October
18, 2007) |
|||
2.3 | Form of Deposit Agreement among the Registrant, the owners and holders of
American Depositary Shares and The Bank of New York (incorporated by
reference to Exhibit 4.3 from our F-1 registration statement (File No. 333-146785), as amended, initially filed with the Commission on October
18, 2007) |
|||
4.1 | Deed of Agreement, dated as of May 31, 2008, among Brothers Capital
Limited, Guanglin Lai, Zhaohua Qian and the Registrant (incorporated by
reference to Exhibit 99.2 from our form 6-K (File No. 001-33766) filed
with the Commission on June 2, 2008) |
|||
4.2 | Acknowledgement and Waiver Agreement, dated as of May 27, 2008, among
Brothers Capital Limited, Zhixin Xue, Guanglin Lai and Zhaohua Qian
(incorporated by reference to Exhibit 99.3 from our form 6-K (File No.
001-33766) filed with the Commission on June 2, 2008) |
|||
4.3 | Employment Agreement, dated as of May 31, 2008, between Primalights III
Agriculture Development Co., Ltd. and Zhixin Xue (incorporated by
reference to Exhibit 99.4 from our form 6-K (File No. 001-33766) filed
with the Commission on June 2, 2008) |
|||
4.4 | Deed of Agreement, dated as of May 31, 2008, among Zhixin Xue, Mingshe
Zhang, Yan Lv and the Registrant (incorporated by reference to Exhibit
99.5 from our form 6-K (File No. 001-33766) filed with the Commission on
June 2, 2008) |
|||
4.5 | Subscription Agreement, dated as of October 16, 2009, between PGG
Wrightson Limited and Agria Corporation (incorporated by reference to
Exhibit 4.20 of our annual report on Form 20-F filed with the Commission
on December 29, 2009) |
|||
4.6 | Subscription Agreement for Convertible Redeemable Notes, dated as of
November 18, 2009, between PGG Wrightson Limited and Agria Corporation
(incorporated by reference to Exhibit 4.21 of our annual report on Form
20-F filed with the Commission on December 29, 2009) |
|||
4.7 | English Translation of Exclusive Technology Development, Technology
Support and Technology Services Agreement, dated as of November 7, 2008,
between Agria Brother Biotech (Shenzhen) Co., Ltd. and Shenzhen Guanli
Agricultural Technology Co., Ltd. (incorporated by reference to Exhibit
4.22 of our annual report on Form 20-F filed with the Commission on June
29, 2010) |
|||
4.8 | English Translation of Loan Contract, dated as of October 6, 2008, between
Agria Brother Biotech (Shenzhen) Co., Ltd. and Juan Li (incorporated by
reference to Exhibit 4.23 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.9 | English Translation of Equity Pledge Agreement, dated as of November 7,
2008, among Agria Brother Biotech (Shenzhen) Co., Ltd., Juan Li and
Shenzhen Guanli Agricultural Technology Co., Ltd. (incorporated by
reference to Exhibit 4.24 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.10 | English Translation of Exclusive Call Option Agreement, dated as of
November 7, 2008, among Agria Brother Biotech (Shenzhen) Co., Ltd., Juan
Li and Shenzhen Guanli Agricultural Technology Co., Ltd. (incorporated by
reference to Exhibit 4.25 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.11 | English Translation of Letter of Undertaking, dated as of November 7,
2008, from Juan Li (incorporated by reference to Exhibit 4.26 of our
annual report on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.12 | English Translation of Power of Attorney, dated as of November 7, 2008,
from Juan Li (incorporated by reference to Exhibit 4.27 of our annual
report on Form 20-F filed with the Commission on June 29, 2010) |
83
Exhibit Number | Description of Document | |||
4.13 | English Translation of Statement of Spouse, dated as of November 7, 2008,
from Guanglin Lai (incorporated by reference to Exhibit 4.28 of our annual
report on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.14 | English Translation of Loan Contract, dated as of July 22, 2009, between
Agria Brother Biotech (Shenzhen) Co., Ltd. and Juan Li (incorporated by
reference to Exhibit 4.29 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.15 | English Translation of Supplemental Agreement to Exclusive Call Option
Contract, dated as of July 22, 2009, among Agria Brother Biotech
(Shenzhen) Co., Ltd., Juan Li and Shenzhen Guanli Agricultural Technology
Co., Ltd. (incorporated by reference to Exhibit 4.30 of our annual report
on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.16 | English Translation of Loan Contract, dated as of August 4, 2009, between
Agria Brother Biotech (Shenzhen) Co., Ltd. and Juan Li (incorporated by
reference to Exhibit 4.31 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.17 | English Translation of Equity Pledge Agreement, dated as of August 4,
2009, among Agria Brother Biotech (Shenzhen) Co., Ltd., Juan Li and
Shenzhen Guanli Agricultural Technology Co., Ltd. (incorporated by
reference to Exhibit 4.32 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.18 | English Translation of Exclusive Call Option Agreement, dated as of August
4, 2009, among Agria Brother Biotech (Shenzhen) Co., Ltd., Juan Li and
Shenzhen Guanli Agricultural Technology Co., Ltd. (incorporated by
reference to Exhibit 4.33 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.19 | English Translation of Letter of Undertaking, dated as of August 4, 2009,
from Juan Li (incorporated by reference to Exhibit 4.34 of our annual
report on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.20 | English Translation of Power of Attorney, dated as of August 4, 2009, from
Juan Li (incorporated by reference to Exhibit 4.35 of our annual report on
Form 20-F filed with the Commission on June 29, 2010) |
|||
4.21 | English Translation of Statement of Spouse, dated as of August 4, 2009,
from Guanglin Lai (incorporated by reference to Exhibit 4.35 of our annual
report on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.22 | English Translation of Loan Contract, dated as of August 4, 2009, between
Agria Brother Biotech (Shenzhen) Co., Ltd. and Yachao Cui (incorporated by
reference to Exhibit 4.37 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.23 | English Translation of Equity Pledge Agreement, dated as of August 4,
2009, among Agria Brother Biotech (Shenzhen) Co., Ltd., Yachao Cui and
Shenzhen Guanli Agricultural Technology Co., Ltd. (incorporated by
reference to Exhibit 4.38 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.24 | English Translation of Exclusive Call Option Agreement, dated as of August
4, 2009, among Agria Brother Biotech (Shenzhen) Co., Ltd., Yachao Cui and
Shenzhen Guanli Agricultural Technology Co., Ltd. (incorporated by
reference to Exhibit 4.39 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.25 | English Translation of Letter of Undertaking, dated as of August 4, 2009,
from Yachao Cui (incorporated by reference to Exhibit 4.40 of our annual
report on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.26 | English Translation of Power of Attorney, dated as of August 4, 2009, from
Yachao Cui (incorporated by reference to Exhibit 4.41 of our annual report
on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.27 | English Translation of Statement of Spouse, dated as of August 4, 2009,
from Aiying Zhang (incorporated by reference to Exhibit 4.42 of our annual
report on Form 20-F filed with the Commission on June 29, 2010) |
84
Exhibit Number | Description of Document | |||
4.28 | English Translation of Equity Transfer Agreement, dated as of August 12,
2009, among Agria Brother Biotech (Shenzhen) Co., Ltd., Juan Li and Yachao
Cui (incorporated by reference to Exhibit 4.43 of our annual report on
Form 20-F filed with the Commission on June 29, 2010) |
|||
4.29 | English Translation of Supplemental Agreement to Loan Contract, dated as
of November 3, 2009, among Agria Brother Biotech (Shenzhen) Co., Ltd.,
Yachao Cui and Jie Zhen Chen (incorporated by reference to Exhibit 4.44 of
our annual report on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.30 | English Translation of Loan Contract, dated as of November 3, 2009,
between Agria Brother Biotech (Shenzhen) Co., Ltd. and Jie Zhen Chen
(incorporated by reference to Exhibit 4.45 of our annual report on Form
20-F filed with the Commission on June 29, 2010) |
|||
4.31 | English Translation of Equity Pledge Agreement, dated as of November 3,
2009, among Agria Brother Biotech (Shenzhen) Co., Ltd., Jie Zhen Chen and
Shenzhen Guanli Agricultural Technology Co., Ltd. (incorporated by
reference to Exhibit 4.46 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.32 | English Translation of Exclusive Call Option Agreement, dated as of
November 3, 2009, among Agria Brother Biotech (Shenzhen) Co., Ltd., Jie
Zhen Chen and Shenzhen Guanli Agricultural Technology Co., Ltd.
(incorporated by reference to Exhibit 4.47 of our annual report on Form
20-F filed with the Commission on June 29, 2010) |
|||
4.33 | English Translation of Letter of Undertaking, dated as of November 3,
2009, from Jie Zhen Chen (incorporated by reference to Exhibit 4.48 of our
annual report on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.34 | English Translation of Power of Attorney, dated as of November 3, 2009,
from Jie Zhen Chen (incorporated by reference to Exhibit 4.49 of our
annual report on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.35 | English Translation of Equity Transfer Agreement, dated as of November 5,
2009, between Yachao Cui and Jie Zhen Chen (incorporated by reference to
Exhibit 4.50 of our annual report on Form 20-F filed with the Commission
on June 29, 2010) |
|||
4.36 | English Translation of Equity Pledge Agreement, dated as of June 30, 2008,
among Aero Biotech Science & Technology Co., Ltd., Hua Huang and Taiyuan
Primalights III Agriculture Development Co., Ltd. (incorporated by
reference to Exhibit 4.51 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.37 | English Translation of Exclusive Call Option Agreement, dated as of June
30, 2008, among Aero Biotech Science & Technology Co., Ltd., Hua Huang and
Taiyuan Primalights III Agriculture Development Co., Ltd. (incorporated by
reference to Exhibit 4.52 of our annual report on Form 20-F filed with the
Commission on June 29, 2010) |
|||
4.38 | English Translation of Letter of Undertaking, dated as of June 30, 2008,
from Hua Huang (incorporated by reference to Exhibit 4.53 of our annual
report on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.39 | English Translation of Power of Attorney, dated as of June 30, 2008, from
Hua Huang (incorporated by reference to Exhibit 4.54 of our annual report
on Form 20-F filed with the Commission on June 29, 2010) |
|||
4.40 | * | English Translation of Share Purchase Agreement, dated as of July 13,
2010, between Zhixin Xue and Agria Corporation |
||
4.41 | * | English Translation of Assignment and Assumption Agreement regarding the
Exclusive Call Option, dated as of July 13, 2010, between Zhixin Xue and
Aero Biotech Science & Technology Co., Ltd. |
||
4.42 | * | English Translation of Proprietary Technology License Agreement, dated as
of July 13, 2010, between Zhixin Xue and Primalights III Agriculture
Development Co., Ltd. |
||
4.43 | * | English Translation of Assignment and Assumption Agreement regarding the
Exclusive Technology Development, Technology Support and Technology
Service Agreement between Primalights III Agriculture Development Co.,
Ltd. and Aero Biotech Science & Technology Co., Ltd., dated as of July 13,
2010, between Zhixin Xue and Aero Biotech Science & Technology Co., Ltd. |
85
Exhibit Number | Description of Document | |||
4.44 | * | English Translation of Termination Notice to Terminate the Proprietary
Technology License Agreement, dated as of July 13, 2010, between Zhixin
Xue and Primalights III Agriculture Development Co., Ltd. |
||
4.45 | * | English Translation of Exclusive Consultancy Service Agreement, dated as
of July 13, 2010, between Zhixin Xue and Primalights III Agriculture
Development Co., Ltd. |
||
4.46 | * | English Translation of Termination Notice to Terminate the Exclusive
Consultancy Service Agreement, dated as of July 13, 2010, issued by Aero
Biotech Science & Technology Co., Ltd. |
||
4.47 | * | English Translation of Termination Notice to Terminate the Equity Pledge
Agreement, dated as of July 13, 2010, issued by Aero Biotech Science &
Technology Co., Ltd. |
||
4.48 | * | English Translation of Letter of Undertaking, dated as of July 13, 2010,
issued by Aero Biotech Science & Technology Co., Ltd., |
||
4.49 | Subscription Agreement, dated as of April 14, 2011, among Agria Asia
Investments Limited, New Hope International (Hong Kong) Limited, Agria
Group Limited and Agria Singapore Pte Ltd. (incorporated by reference to
Exhibit 99.2 from our form 6-K (File No. 001-33766) filed with the
Commission on April 18, 2011) |
|||
4.50 | Shareholders Agreement, dated as of April 14, 2011, among Agria Asia
Investments Limited, Agria Group Limited, New Hope International (Hong
Kong) Limited and Agria (Singapore) Pte Ltd. (incorporated by reference to
Exhibit 99.3 from our form 6-K (File No. 001-33766) filed with the
Commission on April 18, 2011) |
|||
4.51 | Subscription Agreement, dated as of April 17, 2011, among Agria Asia
Investments Limited, New Hope International (Hong Kong) Limited, Agria
Group Limited and Agria Singapore Pte Ltd. (incorporated by reference to
Exhibit 99.2 from our form 6-K (File No. 001-33766) filed with the
Commission on April 18, 2011) |
|||
4.52 | Shareholders Agreement, dated as of April 17, 2011, among Agria Asia
Investments Limited, Agria Group Limited, New Hope International (Hong
Kong) Limited, Ngai Tahu Capital Limited and Agria (Singapore) Pte Ltd.
(incorporated by reference from Exhibit 99.3 of our form 6-K (File No.
001-33766) filed with the Commission on April 18, 2011) |
|||
4.53 | Form of Employment Agreement with Senior Executive Officers(incorporated
by reference to Exhibit 10.3 from our F-1 registration statement (File No.
333-146785), as amended, initially filed with the Commission on October
18, 2007) |
|||
4.54 | * | Letter
dated June 28, 2011 from Ernst &Young Hua Ming |
||
4.55 | * | Shareholders Agreement, dated as of June 28, 2011, among Agria Group
Limited, New Hope International (Hong Kong) Limited and Agria Corporation |
||
4.56 | * | Charge over Shares in Agria Asia Investments Limited, dated as of June 28,
2011, between Agria Group Limited as Chargor and New Hope International
(Hong Kong) Limited as Chargee |
||
4.57 | * | Deed of Guarantee, dated as of June 28, 2011, between Guanglin Lai as
Guarantor and New Hope International (Hong Kong) Limited as Beneficiary |
||
4.58 | * | Deed of Indemnification, dated as of June 28, 2011, between Agria
Corporation and Guanglin Lai |
||
8.1 | * | Subsidiaries of the Registrant |
||
11.1 | Code of Business Conduct and Ethics of the Registrant (incorporated by
reference to Exhibit 99.1 from our F-1 registration statement (File No.
333-146785), as amended, initially filed with the Commission on October
18, 2007) (incorporated by reference to Exhibit 11.1 of our annual report
on Form 20-F filed with the Commission on June 29, 2010) |
|||
12.1 | * | CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
||
12.2 | * | CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
||
13.1 | * | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
||
13.2 | * | CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
86
Exhibit Number | Description of Document | |||
15.1 | * | Consent of Commerce & Finance Law Offices |
||
15.2 | * | Consent of Maples and Calder |
||
15.3 | * | Consent of Ernst & Young Hua Ming |
||
15.4 | * | Consent of GHP Horwath P.C. |
* | Filed with this annual report on Form 20-F |
87
AGRIA CORPORATION |
||||
By: | /s/ Xie Tao | |||
Name: | Xie Tao | |||
Title: | Chief Executive Officer |
Page | ||||
Consolidated financial statements |
||||
1-2 | ||||
3 | ||||
4 | ||||
5-6 | ||||
7 | ||||
8-41 |
/s/ GHP Horwath, P.C.
|
||
GHP HORWATH, P.C. |
||
Denver, Colorado June 28, 2011 |
1
2
Note | 2009 | 2010 | 2010 | |||||||||||||
(RMB) | (RMB) | (US$) | ||||||||||||||
ASSETS |
||||||||||||||||
Current assets: |
||||||||||||||||
Cash and cash equivalents |
13 | 737,825 | 358,228 | 54,277 | ||||||||||||
Restricted cash |
| 136,000 | 20,606 | |||||||||||||
Accounts receivable (net of allowance for
doubtful accounts of RMB10,670 and RMB139
(US$21) at December 31, 2009 and 2010,
respectively) |
7 | 109,265 | 284 | 43 | ||||||||||||
Inventories |
8 | 73,372 | 74,368 | 11,268 | ||||||||||||
Prepayments and other current assets
(net of allowance for doubtful
accounts related to other current
assets of RMB1,723 and RMB60 (US$9)
at December 31, 2009 and 2010,
respectively) |
9 | 36,621 | 19,046 | 2,886 | ||||||||||||
Amounts due from related parties |
19 | 1,865 | 1,300 | 197 | ||||||||||||
Total current assets |
958,948 | 589,226 | 89,277 | |||||||||||||
Non-current assets: |
||||||||||||||||
Property, plant and equipment, net |
10 | 88,222 | 6,245 | 946 | ||||||||||||
Investment at fair value |
3 | 414,047 | 403,490 | 61,135 | ||||||||||||
Investment under equity method |
5 | | 47,894 | 7,257 | ||||||||||||
Investment under cost method |
7,205 | | | |||||||||||||
Convertible redeemable notes |
3 | | 165,444 | 25,067 | ||||||||||||
Intangible assets, net |
11 | 389,101 | 353,026 | 53,488 | ||||||||||||
Goodwill |
4 | 9,817 | 10,135 | 1,536 | ||||||||||||
Non-current prepayments |
9 | 40,738 | 40,258 | 6,100 | ||||||||||||
Deferred tax assets |
17 | 3,480 | 2,032 | 308 | ||||||||||||
Other assets, net |
12 | 94,595 | | | ||||||||||||
Total non-current assets |
1,047,205 | 1,028,524 | 155,837 | |||||||||||||
Total assets |
2,006,153 | 1,617,750 | 245,114 | |||||||||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||||||||||
Current liabilities: |
||||||||||||||||
Short-term bank borrowings |
13 | 8,750 | 59,604 | 9,031 | ||||||||||||
Income tax payable |
17 | | 338 | 51 | ||||||||||||
Accounts payable |
8,126 | 177 | 27 | |||||||||||||
Accrued expenses and other liabilities |
14 | 77,184 | 51,030 | 7,732 | ||||||||||||
Amounts due to related parties |
19 | 6 | 42,843 | 6,491 | ||||||||||||
Deferred tax liability |
17 | 63 | | | ||||||||||||
Total current liabilities |
94,129 | 153,992 | 23,332 | |||||||||||||
Non-current liabilities: |
||||||||||||||||
Deferred tax liability |
17 | 191,154 | | | ||||||||||||
Amounts due to related parties |
19 | 8,384 | | | ||||||||||||
Total non-current liabilities |
199,538 | | | |||||||||||||
Total liabilities |
293,667 | 153,992 | 23,332 | |||||||||||||
Commitments and contingencies |
22 | |||||||||||||||
Shareholders equity: |
||||||||||||||||
Ordinary shares (par value US$0.0000001
per share; 499,900,000,000 shares
authorized; 125,160,000 and 110,766,600
shares issued and outstanding at December
31, 2009 and December 31, 2010,
respectively) |
15 | | | | ||||||||||||
Additional paid-in capital |
2,381,377 | 2,285,611 | 346,305 | |||||||||||||
Statutory reserves |
16 | 76,953 | 237 | 36 | ||||||||||||
Accumulated other comprehensive loss |
(78,309 | ) | (95,147 | ) | (14,417 | ) | ||||||||||
Accumulated deficit |
(667,535 | ) | (726,943 | ) | (110,142 | ) | ||||||||||
Total shareholders equity |
1,712,486 | 1,463,758 | 221,782 | |||||||||||||
Total liabilities and shareholders equity |
2,006,153 | 1,617,750 | 245,114 | |||||||||||||
3
Note | 2008 | 2009 | 2010 | 2010 | ||||||||||||||||
(RMB) | (RMB) | (RMB) | (US$) | |||||||||||||||||
Revenue |
3,000 | 3,013 | 29,022 | 4,397 | ||||||||||||||||
Cost of revenue |
(2,651 | ) | (5,285 | ) | (17,345 | ) | (2,628 | ) | ||||||||||||
Gross profit |
349 | (2,272 | ) | 11,677 | 1,769 | |||||||||||||||
Operating expenses: |
||||||||||||||||||||
Selling expenses |
| (166 | ) | (875 | ) | (132 | ) | |||||||||||||
General and administrative expenses |
(864,771 | ) | (89,453 | ) | (97,796 | ) | (14,818 | ) | ||||||||||||
Research and development expenses |
(1,932 | ) | (1,156 | ) | (114 | ) | (17 | ) | ||||||||||||
Total operating expenses |
(866,703 | ) | (90,775 | ) | (98,785 | ) | (14,967 | ) | ||||||||||||
Operating loss |
(866,354 | ) | (93,047 | ) | (87,108 | ) | (13,198 | ) | ||||||||||||
Other income(expense) |
||||||||||||||||||||
Interest income |
33,744 | 8,489 | 22,448 | 3,401 | ||||||||||||||||
Interest expense |
(26 | ) | (40 | ) | (2,266 | ) | (343 | ) | ||||||||||||
Exchange loss |
(11,812 | ) | (16,602 | ) | (2,843 | ) | (431 | ) | ||||||||||||
Unrealized (loss) gain in investment |
3, 24 | | (548 | ) | 1,946 | 295 | ||||||||||||||
Other expense |
(2,119 | ) | (33 | ) | (1,341 | ) | (203 | ) | ||||||||||||
Other income |
9 | 90 | 2,799 | 20,634 | 3,126 | |||||||||||||||
Loss from equity investments |
| | (2,223 | ) | (337 | ) | ||||||||||||||
Loss before income tax |
(846,477 | ) | (98,982 | ) | (50,753 | ) | (7,690 | ) | ||||||||||||
Income tax |
17 | (25,577 | ) | (10,915 | ) | (7,104 | ) | (1,076 | ) | |||||||||||
Loss from continuing operations |
(872,054 | ) | (109,897 | ) | (57,857 | ) | (8,766 | ) | ||||||||||||
Income(loss) from discontinued operations |
6 | 121,053 | (25,378 | ) | (1,314 | ) | (199 | ) | ||||||||||||
Net loss |
(751,001 | ) | (135,275 | ) | (59,171 | ) | (8,965 | ) | ||||||||||||
Loss per ordinary share: |
||||||||||||||||||||
Loss per share from continuing
operations basic and diluted |
18 | (6.91 | ) | (0.88 | ) | (0.49 | ) | (0.07 | ) | |||||||||||
Income (loss) per share from
discontinued operations basic and
diluted |
18 | 0.96 | (0.20 | ) | (0.01 | ) | * | |||||||||||||
Net Loss per share basic and diluted |
18 | (5.95 | ) | (1.08 | ) | (0.50 | ) | (0.08 | ) | |||||||||||
Weighted average number of ordinary
shares outstanding: |
||||||||||||||||||||
Basic |
18 | 126,262,529 | 125,271,946 | 118,377,357 | 118,377,357 | |||||||||||||||
Diluted |
18 | 126,262,529 | 125,271,946 | 118,377,357 | 118,377,357 | |||||||||||||||
* | Less than .01 per share. |
4
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB) | (RMB) | (RMB) | (US$) | |||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Net loss |
(751,002 | ) | (135,275 | ) | (59,171 | ) | (8,965 | ) | ||||||||
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities: |
||||||||||||||||
P3A Settlement (Note 20) |
768,540 | | | | ||||||||||||
Loss on disposal of P3A |
| | 21,598 | 3,272 | ||||||||||||
Loss from equity investments |
| | 2,223 | 337 | ||||||||||||
Deferred income tax |
23,088 | 10,915 | 8,489 | 1,286 | ||||||||||||
Unrealized loss (gain) in investment |
| 548 | (1,946 | ) | (295 | ) | ||||||||||
Share-based compensation |
45,299 | 14,833 | 9,835 | 1,490 | ||||||||||||
Loss on disposal of property, plant and equipment
and other assets |
7,496 | 20,325 | 536 | 81 | ||||||||||||
Depreciation |
13,766 | 16,479 | 2,985 | 452 | ||||||||||||
Amortization of intangible assets |
12,636 | 24,292 | 25,003 | 3,788 | ||||||||||||
Allowance for doubtful accounts |
12,815 | 7,346 | 138 | 21 | ||||||||||||
Write-down of inventories |
16,622 | 22,508 | | | ||||||||||||
Imputed interest on amounts due to related parties |
615 | 601 | | | ||||||||||||
Changes in operating assets and liabilities: |
||||||||||||||||
Accounts receivable |
25,122 | 47,404 | (21 | ) | (3 | ) | ||||||||||
Inventories |
(5,173 | ) | (34,936 | ) | (54,496 | ) | (8,257 | ) | ||||||||
Prepayments and other current assets |
35,237 | (8,697 | ) | (10,182 | ) | (1,543 | ) | |||||||||
Amounts due from related parties |
(3,027 | ) | 1,719 | (1,300 | ) | (197 | ) | |||||||||
Deferred revenue |
414 | (1,536 | ) | (1,042 | ) | (158 | ) | |||||||||
Income tax payable |
2,488 | (2,507 | ) | 338 | 51 | |||||||||||
Accounts payable |
(5,511 | ) | 3,939 | (1,523 | ) | (231 | ) | |||||||||
Accrued expenses and other liabilities |
5,262 | 6,163 | 6,283 | 952 | ||||||||||||
Amounts due to related parties |
(1,025 | ) | (805 | ) | 42,843 | 6,491 | ||||||||||
Non-current prepayments |
5,434 | 403 | 200 | 30 | ||||||||||||
Net cash provided by (used in) operating activities |
209,096 | (6,281 | ) | (9,210 | ) | (1,398 | ) | |||||||||
Cash flows from investing activities: |
||||||||||||||||
Payment for investment in PGW (Note 3) |
| (414,595 | ) | | | |||||||||||
Payment for Investment in PGW convertible
redeemable note (Note 3) |
| | (165,446 | ) | (25,067 | ) | ||||||||||
Payment for investment in associates |
| (7,000 | ) | (40,000 | ) | (6,061 | ) | |||||||||
Business acquisitions (net of cash received) (Note 4) |
| 516 | (663 | ) | (100 | ) | ||||||||||
Cash disposed of with the P3A disposal |
| | (87,486 | ) | (13,254 | ) | ||||||||||
Acquisition of property, plant and equipment and
other assets |
(69,215 | ) | (3,400 | ) | (568 | ) | (86 | ) | ||||||||
Prepayment for acquisition of property, plant and
equipment and intangible assets |
(256,361 | ) | | | | |||||||||||
Acquisition of intangible assets |
(25,227 | ) | (5,502 | ) | | | ||||||||||
Proceeds from disposal of property, plant and
equipment and other assets |
13,167 | | 17,010 | 2,577 | ||||||||||||
Net cash used in investing activities |
(337,636 | ) | (429,981 | ) | (277,153 | ) | (41,991 | ) | ||||||||
5
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB) | (RMB) | (RMB) | (US$) | |||||||||||||
Cash flows from financing activities: |
||||||||||||||||
Proceeds from short-term borrowings |
17,600 | 8,750 | 119,209 | 18,062 | ||||||||||||
Repayment of short-term borrowings |
(23,960 | ) | (8,800 | ) | (59,605 | ) | (9,031 | ) | ||||||||
Cash pledged for short-term borrowings |
| | (136,000 | ) | (20,606 | ) | ||||||||||
Repurchase of shares |
(7,252 | ) | (1,976 | ) | | | ||||||||||
Net cash (used in) provided by financing activities |
(13,612 | ) | (2,026 | ) | (76,396 | ) | (11,575 | ) | ||||||||
Effect of exchange rate changes on cash and cash
equivalents |
(68,234 | ) | (654 | ) | 16,838 | (2,551 | ) | |||||||||
Net decrease in cash and cash equivalents |
(210,386 | ) | (438,942 | ) | (379,597 | ) | (57,515 | ) | ||||||||
Cash and cash equivalents at the beginning of year |
1,387,153 | 1,176,767 | 737,825 | 111,792 | ||||||||||||
Cash and cash equivalents at the end of year |
1,176,767 | 737,825 | 358,228 | 54,277 | ||||||||||||
Supplemental disclosure of cash flow information: |
||||||||||||||||
Cash paid during the year for interest |
1,147 | | 980 | 148 | ||||||||||||
Cash paid during the year for income taxes |
| | 1,729 | 262 | ||||||||||||
Supplemental disclosure of non-cash investing activities: |
||||||||||||||||
Acquisition of property, plant and equipment, intangible
assets and other assets through utilization of non-current
prepayment |
802 | 209,311 | | | ||||||||||||
Non-cash exchange of other assets breeder sheep (Note 12) |
| 11,859 | | | ||||||||||||
Disposal of P3A (Notes 6 and 15): |
||||||||||||||||
Repurchase of shares |
| | 182,600 | 27,700 | ||||||||||||
Carrying amount of net assets,
including cash of RMB87,500 |
| | 204,200 | 30,900 | ||||||||||||
Loss on Disposal |
| | (21,600 | ) | (3,300 | ) | ||||||||||
6
Accumulated | ||||||||||||||||||||||||||||
Additional | Other | Retained | Total | |||||||||||||||||||||||||
Number of | Ordinary | Paid-in | Statutory | Comprehensive | Earnings | Shareholders | ||||||||||||||||||||||
Ordinary Shares | Shares | Capital | Reserves | Loss | (deficit) | Equity | ||||||||||||||||||||||
(RMB) | (RMB) | (RMB) | (RMB) | (RMB) | (RMB) | |||||||||||||||||||||||
Balance as of December 31, 2007 |
126,400,000 | | 1,561,933 | 76,953 | (9,421 | ) | 218,742 | 1,848,207 | ||||||||||||||||||||
Comprehensive loss |
||||||||||||||||||||||||||||
Net loss for the year |
| | | | | (751,002 | ) | (751,002 | ) | |||||||||||||||||||
Foreign currency translation adjustments |
| | | | (68,232 | ) | (68,232 | ) | ||||||||||||||||||||
Total comprehensive loss |
(819,234 | ) | ||||||||||||||||||||||||||
P3A Payment (Note 20) |
| | 768,540 | | | | 768,540 | |||||||||||||||||||||
Repurchase of shares (Note 15) |
(600,000 | ) | | (7,252 | ) | | | | (7,252 | ) | ||||||||||||||||||
Share based compensation |
| | 45,299 | | | | 45,299 | |||||||||||||||||||||
Balance as of December 31, 2008 |
125,800,000 | | 2,368,520 | 76,953 | (77,653 | ) | (532,260 | ) | 1,835,560 | |||||||||||||||||||
Comprehensive income |
||||||||||||||||||||||||||||
Net loss for the year |
| | | | | (135,275 | ) | (135,275 | ) | |||||||||||||||||||
Foreign currency translation adjustments |
| | | | (656 | ) | | (656 | ) | |||||||||||||||||||
Total comprehensive loss |
(135,931 | ) | ||||||||||||||||||||||||||
Repurchase of shares (Note 15) |
(640,000 | ) | | (1,976 | ) | | | | (1,976 | ) | ||||||||||||||||||
Share based compensation |
| | 14,833 | | | | 14,833 | |||||||||||||||||||||
Balance as of December 31, 2009 |
125,160,000 | | 2,381,377 | 76,953 | (78,309 | ) | (667,535 | ) | 1,712,486 | |||||||||||||||||||
Comprehensive loss |
||||||||||||||||||||||||||||
Net loss for the year |
| | | | | (59,171 | ) | (59,171 | ) | |||||||||||||||||||
Foreign currency translation adjustments |
| | | | (16,838 | ) | | (16,838 | ) | |||||||||||||||||||
Total comprehensive loss |
(76,010 | ) | ||||||||||||||||||||||||||
Reverse statutory reserves due to disposal of P3A |
| | 76,953 | (76,953 | ) | | | | ||||||||||||||||||||
Statutory reserves |
| | | 237 | | (237 | ) | | ||||||||||||||||||||
Repurchase of shares (Note 15) |
(14,393,400 | ) | | (182,554 | ) | | | | (182,554 | ) | ||||||||||||||||||
Share based compensation |
| | 9,835 | | | | 9,835 | |||||||||||||||||||||
Balance as of December 31, 2010 |
110,766,600 | | 2,285,611 | 237 | (95,147 | ) | (726,943 | ) | 1,463,758 | |||||||||||||||||||
Balance as
of December 31, 2010, in US$ |
| 346,305 | 36 | (14,417 | ) | (110,142 | ) | 221,782 | ||||||||||||||||||||
7
1. | Corporation Information and Basis of Presentation |
Agria Corporation (the Company or Agria) conducts operations in China and internationally
through its subsidiaries and variable interest entities (VIEs) (collectively the Group). Within
China, the Group is primarily involved in the research and development, production and sale of
agricultural seed products. The international operations of the Group are undertaken through our
investment PGG Wrightson Group Ltd (PGG Wrightson or PGW). The Company does not conduct any
substantive operations of its own in the PRC and conducts its primary business operations in the
PRC through VIEs. PRC Laws and regulations prohibit or restrict foreign ownership of research and
development, production and sale of hybrid food crop businesses. To comply with these foreign
ownership restrictions, the Group operates its research and development, production and sale of
upstream agricultural productions in the PRC through its VIEs. |
Taiyuan Primalights III Modern Agriculture Development Co., Ltd (P3A), a company incorporated
under the laws of the Peoples Republic of China (the PRC) on April 20, 2000, is involved in the
development, production and sale of corn seeds, sheep products and seedlings. In October 2003,
China Victory International Holdings Limited (China Victory), a company incorporated under the
laws of Hong Kong, entered into a purchase agreement (the Acquisition) with the shareholders of
P3A to acquire all of the dividend and voting rights in P3A without obtaining legal ownership over
its ordinary shares. The Acquisition was structured in this manner because of the aforementioned
legal restrictions placed on foreign ownership. |
In June 2007, China Victory underwent certain restructuring events wherein it transferred its
voting rights in P3A into its newly incorporated and wholly-owned subsidiary, Aero Biotech Science
& Technology Co., Ltd (the WOFE or Agria China). In addition, the WOFE entered into an equity
pledge agreement, exclusive call option agreement, power of attorney agreements and exclusive
consultancy service, technology license and other service agreements (collectively, the
Contractual Agreements) with P3A and its shareholders. Together, these contractual agreements
enable the WOFE to: a) exercise effective control over P3A through its ability to exercise all the
rights of P3As shareholders, including voting and transfer rights; b) receive substantially all
of the earnings and other economic benefits to the extent permissible under PRC law and the
management of the Group intends to do so; and c) have an exclusive option to purchase all or part
of the equity interests in P3A held by the shareholders, to the extent permitted under PRC law for
the higher of RMB100,000 or the minimum amount of consideration permitted by PRC law. The power of
attorney agreements allow the WOFE to cause P3A to change the terms of the consultancy service,
technology license and other service agreements at any time. In addition, P3As shareholders have
entered into an agreement to remit all of the dividends and other distributions received from P3A
to the WOFE, subject to satisfaction of P3A shareholders personal income tax and other statutory
obligations arising from receiving such dividends or other distributions. During 2008, the number
of shareholders in P3A changed from 4 individuals to 5 individuals, all of whom have entered into
the Contractual Agreements. Agria China has a legal obligation to provide funding for all losses
incurred by P3A. On July 13, 2010, the Company completed the disposition of P3A to Mr. Frank Xue,
the president and a director of P3A. As a result of the transaction, Agria acquired from Mr. Xue
and cancelled shares representing 11.5% of its issued and outstanding share capital immediately
prior to the transaction (Note 6).P3A has been presented as discontinued operations for all
periods presented in the Companys consolidated financial statements |
In November 2008, Shenzhen Guanli Agricultural Technology Co., Ltd. (Guanli) was set up using
contractual agreements substantially consistent with those described above such that Agria Brother
Biotech (Shenzhen) Co., Ltd. (Agria Brother) effectively controlled Guanli. As of December 31,
2009 and 2010, the 100% legal interest in Guanli is held by two PRC individuals. |
8
1. | Corporation Information and Basis of Presentation (continued) |
In September 2009, Shenzhen Agria Agricultural Co., Ltd (Agria Agricultural) was set up with 51%
interests legally held by Guanli and 49% interest legally held by another individual. In September
2009, Shenzhen Zhongyuan Agriculture Ltd. Co. (Zhongyuan) was set up with 95% interests legally
held by Ms. Li Juan, the wife of Mr. Guanglin Lai, the chairman of board of directors, and 5%
interests legally held by another individual shareholder. Agria Brother has entered into the
aforementioned Contractual Agreements with the individual legal shareholders of Agria Agricultural
and Zhongyuan, respectively. Agria Brother has a legal obligation to provide funding to all losses
incurred by Guanli, Agria Agricultural and Zhongyuan. |
Through the aforementioned agreements, WOFE and Agria Brother demonstrate their ability and
intention to exercise the ability to absorb substantially all of the profits and all of the
expected losses of P3A (through the date of disposal) Guanli, Agria Agricultural and Zhongyuan.
Accordingly, WOFE and Agria Brother are the primary beneficiaries of P3A, Guanli, Agria
Agricultural and Zhongyuan and consolidates their operating results in accordance with Accounting
Standards Codification (ASC) 810 Consolidation (Pre-codification: Financial Accounting
Standards board (FASB) Interpretation No. 46R, Consolidation of Variable Interest Entities, and
Interpretation of ARB NO. 51). |
On April 1 2008, Agria Brother was established in the PRC as a wholly-owned subsidiary by China
Victory with a registered capital of US$29,000,000. The principal activity of Agria Brother is to
provide biotechnology related services. |
On September 30, 2009, Guanli acquired from a third party, a 100% equity interest in Beijing NKY
Seeding Development Co., Ltd (NKY). |
On January 31, 2010, Guanli acquired a 70% equity interest in Tianjin Beiao Seed Technology
Development Co., Ltd. (Beiao), and NKY acquired 30% equity interest in this company. (Note 4) |
On October 21, 2010, NKY Seeds International established a wholly owned subsidiary named Wuwei NKY
Seeds Co., Ltd., in Wuwei city of Gansu province in China. The principal activity of Wuwei NKY
Seeds Co., Ltd. is to act as an exclusive sales agent of Wuwei Ganxin Seeds Co., Ltd., the major
production company for Agria. |
The Group formed Southrich Limited, a wholly-owned subsidiary of Agria Group Limited, in
September 2009 under the laws of the British Virgin Islands to hold our convertible redeemable
notes issued by PGW in 2010. Agria (Singapore) Pte. Ltd., or Agria Singapore, a wholly-owned
subsidiary of Southrich Limited, was incorporated in November 2009 under the laws of Singapore
to hold our 19.01% equity interest in PGW. In January 2010, Southrich Limited changed its name
to Agria Asia Investments Limited. In January 2011, Agria Singapore made an offer to the
shareholders of PGW to acquire an additional 31% of the shares in PGW at the offer price of
NZ$0.60 per share. On April 29, 2011 the Group completed this acquisition and increased our
shareholding of PGW to 50.01% (Note 3). In April 2011, New Hope International (Hong Kong)
Limited invested US$20 million in the equity of Agria Asia Investments, upon which our equity
interest in Agria Asia Investments was 88.05%. In April 2011, we also entered a conditional
sale and purchase agreement to sell a 7.24% stake in Agria Asia Investments to Ngai Tahu
Holdings. This sale became unconditional when the shareholders of PGW approved the transaction
in June 2011. Upon the completion of this sale, our equity interest in Agria Asia Investments
will be 80.81%. |
As of December 31, 2010, the Companys subsidiaries consisted of the following entities: |
9
1. | Corporation Information and Basis of Presentation (continued) |
Date of | Place of | Percentage of | Principal | |||||||
Name | incorporation | incorporation | shareholdings | Activities | ||||||
Agria China
|
March 29, 2007 | PRC | 100 | % | Research and development | |||||
Agria Group Ltd
|
July 6, 2005 | BVI | 100 | % | Investment holding | |||||
China Victory
|
September 19, 2003 | Hong Kong | 100 | % | Investment holding | |||||
Agria Brother
|
April 11, 2008 | PRC | 100 | % | Service of biotechnology and investment holding | |||||
Agria Biotech Overseas Ltd (Agria Overseas)
|
November 5, 2009 | Hong Kong | 100 | % | Sale of upstream agricultural products and investment holding | |||||
Southrich Limited (Agria Asia Investment Ltd.)
|
September 29, 2009 | BVI | 100 | % | Investment holding | |||||
Agria (Singapore) Pte. Ltd (Agria Singapore)
|
December 19, 2009 | BVI | 100 | % | Investment holding |
As of December 31, 2010, the Company consolidates the following VIEs and their consolidated
subsidiaries which comprised substantially all of the Groups operations: |
Date of | Place of | |||||
Name | incorporation | incorporation | Principal Activities | |||
Guanli
|
November 6, 2008 | PRC | Investment holding | |||
NKY Seeds International Co., Ltd.*
|
August 31, 1998 | PRC | Research, production and marketing of edible corn seeds | |||
Agria Asia International Ltd (Agria Asia) *
|
November 5, 2009 | Hong Kong | Sale of upstream agricultural products | |||
Agria Agricultural
|
September 16, 2009 | PRC | Research and development | |||
Zhongyuan
|
September 16, 2009 | PRC | Research and development, service, sales and investment | |||
Agria Hong Kong Ltd (Agria Hong Kong) **
|
November 5, 2009 | Hong Kong | Investment holding | |||
Tianjin beiao seed technology development co ltd
|
Aug 1, 2008 | PRC | Research, production and marketing of vegetable seeds | |||
Wuwei NKY Seeds Co., Ltd.
|
Oct 21, 2010 | PRC | Sales of corn seeds |
* | Agria Asia and NKY are 100% owned by Guanli |
|
** | Agria Hong Kong is 100% owned by Zhongyuan |
The carrying amount of the total assets and total liabilities of VIEs as of December 31, 2010
were RMB329.8 million (US$49.8 million), and RMB174.6 million (US$26.4 million) respectively.
There was no pledge or collateralization of the VIEs assets. Creditors of the VIEs have no
recourse to the general credit of the Company, which is the primary beneficiary of the VIEs.
The amount of the net assets of VIEs as of December 31, 2010 was RMB155.2 million (US$23.4
million). In addition, the Group has not provided any financial or other support that it was
not previously contractually required to provide during the periods presented to VIEs. |
10
2. | Summary of Significant Accounting Policies |
|
Principles of Consolidation |
The consolidated financial statements include the financial statements of the Company, its
subsidiaries and VIEs for which the Company is the primary beneficiary. All significant
intercompany transactions and balances between the Company, its subsidiaries and its VIEs are
eliminated upon consolidation. |
||
Foreign Currency |
The functional currency of the Company, Aero-Biotech, China Victory, Agria Hong Kong, Agria Asia,
Agria Overseas, Agria Asia Investment and Agria Singapore is the United States dollar. The
functional currency of Agria China, Agria Brother and VIEs is RMB as determined based on the
criteria of ASC 830-10, Foreign Currency Matters: Overall. The reporting currency of the Company
is RMB. Transactions denominated in foreign currencies are remeasured into the functional
currency at the exchange rates prevailing on the transaction dates. Foreign currency denominated
financial assets and liabilities are remeasured at the balance sheet date exchange rate. Exchange
gains and losses are included in foreign exchange gains and losses in the consolidated statements
of operations. |
On consolidation, the financial statements of the Group that use the United States dollar as their
functional currency are translated into RMB at the exchange rate in effect at the balance sheet
date for assets and liabilities, and at the average exchange rate during the year for income and
expense items except for individually significant transactions whereby the exchange rates on the
date the transactions are recognized are used. Translation differences are recorded in
accumulated other comprehensive loss, a component of shareholders equity. |
||
Convenience Translation |
Translations of amounts from RMB into United States dollars for the convenience of the reader were
calculated at the noon buying rate of US$1.00 to RMB6.6 on December 31, 2010 in the city of New
York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of
New York. No representation is made that the RMB amounts could have been, or could be, converted
into United States dollars at such rate. |
||
Use of Estimates |
The preparation of financial statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the period. Actual results could differ from
these estimates. Significant estimates and assumptions reflected in the Groups consolidated
financial statements include, but are not limited to revenue recognition, allowance for doubtful
accounts, inventory write downs, impairment assessment and useful lives determination of property
plant and equipment, valuation of intangible assets, goodwill and other long-lived assets,
recognition of deferred income taxes, impairment assessments of investments and consolidation of
VIEs. |
||
Cash and Cash Equivalents |
Cash and cash equivalents consist of cash on hand and bank deposits with original maturities of
three months or less which are unrestricted as to withdrawal and use. |
11
2. | Summary of Significant Accounting Policies (continued) |
|
Accounts Receivable |
An allowance for doubtful accounts is recorded in the period in which a loss is determined to be
probable based on an assessment of specific evidence indicating troubled collection, historical
experience, account balance aging and prevailing economic conditions. An accounts receivable
balance is written off after all collection efforts have ceased. |
||
Inventories |
Inventories are stated at the lower of cost or market value. Cost is determined by the weighted
average method. Raw materials and supplies consist of feed ingredients, packaging materials and
operating supplies, while work-in-progress and finished goods include direct materials, direct
labor and the allocation of manufacturing overhead costs. |
||
Property, Plant and Equipment |
Property, plant and equipment are stated at cost and are depreciated using the straight-line
method over the estimated useful lives of the assets, as follows: |
Buildings and improvements |
5-30 years | |||
Plant and machinery |
5-10 years | |||
Furniture and office equipment |
5 years | |||
Motor vehicles |
5-6 years |
Repair and maintenance costs are charged to expense when incurred, whereas the cost of renewals
and betterments that extend the useful life of fixed assets are capitalized as additions to the
related assets. Retirement, sale and disposals of assets are recorded by removing the cost and
accumulated depreciation with any resulting gain or loss reflected in the consolidated statements
of operations. |
All facilities purchased or constructed which require a period of time before completion are
accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition
cost, including cost of facilities, installation costs and interest costs. Capitalization of
interest costs ceases when the asset is substantially complete and ready for its intended use.
Interest capitalized for the year ended December 31, 2008, 2009 and 2010 amounted to RMB861,976,
RMB168,578 and Nil, respectively. |
||
Intangible Assets |
||
Land use rights |
Prepaid land use rights are recorded at the amount paid less accumulated amortization.
Amortization is provided on a straight-line basis over the term of the agreement ranging from 10
to 46 years. |
||
On July 13, 2010, the Company sold substantially all assets of P3A, net of certain
liabilities, to Mr. Frank Xue, the president and a director of P3A. As a result of the transaction, Agria received shares
held by Mr. Xue representing 11.5% of the Groups issued and outstanding share capital immediately prior to the transaction.
These shares were then cancelled by the Company. The Company retained existing leases of nine parcels of land totaling
approximately 13,500 acres previously held by P3A. To ensure the Companys rights to the land leases and the performance
of P3As obligations under the lease transfers to Agria Group, Agria Group received a power of attorney over P3As action
in respect of the lease transfers, an indemnity from P3A for losses in relation to the lease transfer and a personal guarantee
from Mr. Xue of P3As obligation under that indemnity. |
||
Acquired technologies |
Acquired technologies, which consist primarily of purchased technology know-how related to
the production of corn seeds and breeder sheep, are stated at cost less accumulated amortization.
Amortization is calculated on a straight-line basis over the estimated useful lives of 3 to 15
years. |
||
Software |
Software consists of computer software purchased from third-party developers for internal use
with an estimated useful life of 5 years. |
12
2. | Summary of Significant Accounting Policies (continued) |
Investments |
||
Investments in privately held entities, which are not readily marketable or have quoted
market prices, are recorded at cost. Distributions received, other than for return of capital,
are recorded as other income in the consolidated statements of operations. The Company assesses
its investments for other than temporary impairments when indicators of impairment arise,
including adverse changes to financial condition and the market environment of the investees. |
In accordance with ASC 825-10 Financial Instruments overall the Company elected to
account for its PGW equity investee in which the Company exercises significant influence using
fair value as determined by the investees quoted market price (Note 3, 24). Accordingly, the
investment is reflected on the balance sheet at its fair value, with changes in fair value between
reporting periods reflected in the consolidated statements of operations. The Company accounts
for its other equity investees under the equity method of accounting. Accordingly, the
investments are reflected at original cost and adjusted for the Companys share of earnings or
losses of the investees. There are no significant differences between the carrying amounts and
the underlying equity in the net assets of the investees. |
||
Goodwill |
Goodwill represents the excess of the purchase price over the estimated fair value of net
tangible and identifiable intangible assets acquired. The Companys goodwill outstanding at
December 31, 2010 was related to the Companys acquisition of NKY at September 30, 2009 and Beiao
at January 31, 2010 (Note 4). In accordance with the provisions of ASC 350-20, Intangibles,
Goodwill and Other goodwill amounts are not amortized, but rather are tested for impairment at
least annually or more frequently if there are indicators of impairment present. If the carrying
value of the reporting unit to which goodwill is allocated is less than the reporting units fair
value, goodwill is considered to be impaired. A reporting units fair value is determined based
on its expected cash flows. The amount of goodwill impairment loss is measured as the excess of
the carrying value of goodwill over its implied fair value. Subsequent reversal of goodwill
impairment loss is prohibited. Goodwill has been assigned to NKY, a component of the Companys
corn seeds operating segment, and Beiao, a component of the Companys vegetable seeds operating
segment, for purposes of impairment testing. No impairment charges have been recognized for the
years ended December 31, 2009 and 2010. |
||
Revenue Recognition |
The Groups primary business activity is to produce and sell seeds. The Company records
revenue when the criteria of ASC 605-10 Revenue Recognition: Overall are met. These criteria
include all of the following: persuasive evidence of an arrangement exists, delivery has occurred,
the sales price is fixed or determinable and collectability is reasonably assured. |
More specifically, the Groups sales arrangements are evidenced by individual sales
agreements for each transaction. The customer takes title and assumes the risks and rewards of
ownership of the products upon delivery of products which generally occurs at shipping point.
Other than warranty obligations, the Company does not have any substantive performance obligations
to deliver additional products or services to the customers. The product sales price stated in the
sales contract is final and not subject to adjustment. The Company generally does not accept sales
returns and does not provide customers with price protection. The Company assesses a customers
creditworthiness before accepting sales orders. Based on the above, the Company records revenue
related to product sales upon delivery of the product to the customers. |
13
2. | Summary of Significant Accounting Policies (continued) |
Cost of Revenue |
||
Cost of revenue includes direct and indirect production costs, as well as transportation and
handling costs for products sold. |
||
Research and Development Costs |
Research and development costs are expensed as incurred. |
||
Income Taxes |
Deferred tax assets and liabilities are determined based on the difference between the
financial reporting and tax bases of assets and liabilities using enacted tax rates that will be
in effect in the period in which the differences are expected to reverse. The Company records a
valuation allowance to offset deferred tax assets if based on the weight of available evidence, it
is more-likely-than-not that some portion, or all, of the deferred tax assets will not be
realized. The effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date. |
||
Accounting for Uncertain Income Tax Positions |
The Company has elected to classify interest due on any underpayment of income taxes and penalties
in interest expense and penalties, if and when required, within general and administrative
expenses. |
||
Share-based Compensation |
Stock awards granted to employees and non-employee are accounted for under ASC 718-10,
Compensation-Stock Compensation: Overall, and ASC 505-50, Equity: Equity-based Payments to
Non-Employees, respectively. |
In accordance with ASC 718-10, all grants of equity awards to employees are recognized in the
financial statements based on their grant date fair values. The Company elected to recognize
compensation cost for equity awards with only service conditions on a straight-line basis over the
requisite service period for the entire award with the limitation that the amount of compensation
cost recognized at any date must at least equal the portion of the grant-date value of the award
that is vested at that date. |
ASC 718-10 requires forfeitures to be estimated at the time of grant and revised, if necessary,
in subsequent period if actual forfeitures differ from initial estimates. Share-based
compensation expense was recorded net of estimated forfeitures such that expense is recorded
only for those share-based awards that are expected to vest. |
Where the terms of an equity-settled award are modified, the minimum expense recognized is the
expense as if the terms had not been modified. An additional expense is recognised for any
modification, which increases the total fair value of the share-based payment arrangement, or
is otherwise beneficial to the employee as measured at the date of modification. |
Where an equity-settled award is cancelled and is not accompanied by a concurrent grant of a
replacement award or other valuable consideration, it shall be accounted for as a repurchase
for no consideration. Accordingly, any previously unrecognized compensation cost shall be
charged to expense at the cancellation date. |
14
2. | Summary of Significant Accounting Policies (continued) |
Comprehensive Income (loss) |
Comprehensive income (loss) is defined as the change in equity of the Company during a period
from transactions and other events and circumstances excluding transactions resulting from
investments by owners and distributions to owners. |
||
Leases |
Leases are classified at inception date as either a capital lease or an operating lease. A
lease is a capital lease if any of the following conditions exist: a) ownership is transferred
to the lessee by the end of the lease term, b) there is a bargain purchase option, c) the lease
term is at least 75% of the propertys estimated remaining economic life or d) the present
value of the minimum lease payments at the beginning of the lease term is 90% or more of the
fair value of the leased property to the lessor at the inception date. A capital lease is
accounted for as if there was an acquisition of an asset and an incurrence of an obligation at
the inception of the lease. All other leases are accounted for as operating leases wherein
rental payments are expensed over the lease term. The Group has no capital leases for any of
the years stated herein. |
||
Earnings (loss) Per Share |
Basic earnings (loss) per ordinary share is computed by dividing income attributable to
holders of ordinary shares by the weighted average number of ordinary shares outstanding during
the year. Diluted earnings (loss) per ordinary share reflects the potential dilution that could
occur if securities or other contracts to issue ordinary shares were exercised or converted into
ordinary shares. Ordinary shares issuable upon the conversion of the redeemable, convertible
preferred shares are included in the computation of diluted income per ordinary share on an
if-converted basis, when the impact is dilutive. The dilutive effect of outstanding share
options is reflected in the diluted earnings per share by application of the treasury stock
method. |
||
Impairment of Long-lived Assets |
The Company evaluates its long-lived assets or asset group, including finite-lived
intangibles, for impairment whenever events or changes in circumstances (such as a significant
adverse change to market conditions that will impact the future use of the assets) indicate that
the carrying amount of a group of long-lived assets may not be recoverable. When these events
occur, the Company evaluates the impairment by comparing the carrying amount of the assets to
future undiscounted net cash flows expected to result from the use of the assets and their
eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying
amount of the assets, the Group will recognize an impairment loss based on the excess of the
carrying amount of the asset group over its fair value based on discounted cash flows. There was
no impairment identified as of December 31, 2009 or 2010. |
||
Fair Value of Financial Instruments |
The carrying amounts of accounts receivable, accounts and notes payable, other liabilities,
short-term bank borrowings and amounts due to/from related parties approximate their fair value
due to the short-term maturity of these instruments. |
The long-term bank borrowings approximate their fair value, as their interest rates
approximate market interest rates. |
15
2. | Summary of Significant Accounting Policies (continued) |
Fair value accounting |
||
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No.
820-10 (FASB ASC 820-10) establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3 measurements). As required
by FASB ASC 820-10, assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement. The three levels of the fair
value hierarchy under FASB ASC 820-10 are described below: |
Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or liabilities; |
Level 2 Quoted prices in markets that are not active, or inputs that are observable, either
directly or indirectly, for substantially the full term of the asset or liability; |
Level 3 Prices or valuation techniques that require inputs that are both significant to the
fair value measurement and unobservable (supported by little or no market activity). |
As of December 31, 2010, the Companys equity interest in PGG Wrightson is measured at fair
value on a recurring basis within Level 1 (Note 24). The Company did not have any assets or
liabilities measured on a recurring basis within Level 2 or Level 3. |
||
Segment Reporting |
In 2008, 2009, and through June 2010, the Company operated in corn seed, sheep products and
seedlings segments. In July 2010, the Company disposed of its sheep products and seedlings
business segments. From July 2010 to December 31, 2010, the Company operated and managed its
business only in the corn seed business segment. The operation of this segment is reflected in the
Groups financial statements. The accounting policies used in its segment reporting are the same
as those used in the preparation of its consolidated financial statements. In 2008, 2009 and 2010,
the Company generated substantially all of its revenues from customers in the PRC. Accordingly,
no geographical segments are presented. |
||
Recent Accounting Pronouncements |
In May 2011, the Financial Accounting Standard Board (FASB) issued Accounting Standards
Update (ASU) No. 2011-04, Amendments to Fair Value Measurement and Disclosure Requirements.
Accounting Standards Update (ASU) No. 2011-04 amends FASB Codification Topic 820 on fair value
measurements and disclosures to (1) clarify the boards intent in respect of existing measurement
guidance, (2) revise certain measurement guidance that changes or modifies a principle, and (3)
add disclosure requirements concerning the measurement uncertainty of level 3 measurements. For
public entities, the amendments to FASB ASC 820 made by ASU No. 2011-04 are effective for interim
and annual periods beginning after December 15, 2011, with early application not permitted. The
Group will adopt this amendment for its fiscal year commencing January 1, 2012. |
In January 2011, the FASB issued Accounting Standards Update (ASU) No. 2010-29, Pro Forma
Information for a Business Combination Occurring in the Current Period. The update clarifies that
pro forma revenue and earnings for a business combination occurring in the current year should be
presented as though the business combination occurred as of the beginning of the year or, if
comparative statements are presented, as though the business combination took place as of the
beginning of the comparative year. The new and amended disclosures should be applied prospectively
to business combinations consummated on or after the start of the first annual reporting period
beginning on or after December 15, |
16
2. | Summary of Significant Accounting Policies (continued) |
Recent Accounting Pronouncements (continued) |
2010, with earlier application permitted. The Company will adopt this amendment for its
fiscal year commencing January 1, 2011. |
In April 2010, the FASB (Financial Accounting Standards Board) issued Accounting Standards
Update 2010-13 (ASU 2010-13), Compensation-Stock Compensation (Topic 718): Effect of Denominating
the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the
Underlying Equity Security Trades a consensus of the FASB Emerging Issues Task Force. The
amendments in this Update are effective for fiscal years, and interim periods within those fiscal
years, beginning on or after December 15, 2010. Earlier application is permitted. The Company is
currently assessing the impact, if any, of this new standard on its consolidated financial
statements. |
In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue Recognition
(Topic 605): Multiple-Deliverable Revenue Arrangements. This update addressed the accounting for
multiple-deliverable arrangements to enable vendors to account for products or services
(deliverables) separately rather than a combined unit and will be separated in more circumstances
under existing US GAAP. This amendment has eliminated that residual method of allocation.
Effective prospectively for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010. Early adoption is permitted. The Company does not
expect the provisions of this new standard to have a material effect on its financial position,
results of operations or cash flows. |
||
Concentration of Risks |
||
Concentration of credit risk |
Financial instruments that potentially subject the Company to significant concentration of
credit risk consist primarily of cash and cash equivalents and accounts receivable. As of December
31, 2010, substantially all of the Companys cash and cash equivalents were deposited in several
financial institutions. Accounts receivable are typically unsecured and are derived from revenue
earned from customers in the PRC. The risk with respect to accounts receivable is mitigated by
credit evaluations the Company performs on its customers and ongoing monitoring process on
outstanding balances. |
||
Current vulnerability due to certain other concentrations |
The Group operations may be adversely affected by significant political, economic and social
uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies
for more than 20 years, no assurance can be given that the PRC government will continue to pursue
such policies or that such policies may not be significantly altered, especially in the event of a
change in leadership, social or political disruption or unforeseen circumstances affecting the
PRCs political, economic and social conditions. There is also no guarantee that the PRC
governments pursuit of economic reforms will be consistent or effective. |
Substantially all of the Companys businesses are transacted in RMB, which is not freely
convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual
rate system and introduced a single rate of exchange as quoted daily by the Peoples Bank of
China. However, the unification of the exchange rates does not imply the convertibility of RMB
into United States dollars or other foreign currencies. All foreign exchange transactions
continue to take place either through the Peoples Bank of China or other banks authorized to buy
and sell foreign currencies at the exchange rates quoted by the Peoples Bank of China. Approval
of foreign currency payments by the Peoples Bank of China or other institutions requires
submitting a payment application form together with suppliers invoices, shipping documents and
signed contracts. In June 2010, the PRC government indicated
that it would make the foreign exchange rate of the RMB more flexible. It is difficult to predict the
effect of this change to the foreign exchange rate of the RMB in the future. |
17
3. | Investment in PGW |
On October 16, 2009, the Company and PGW entered into an agreement to jointly work to create value
for both companies through the advancement of agricultural technology and the development of new
markets. |
In October 2009, the Company invested in PGW through the placement of 41.1 million newly-issued
shares representing 11.52% of PGWs share capital, at NZD$0.88 per share, at a value of NZ$36.2
million. (US$25.3 million) |
In November 2009, together with all existing shareholders of PGW (on a pro rata basis), the
Company subscribed for an additional 46.2 million shares at an aggregate price of NZ$20.8 million
(US$14.6 million) without changes in the percentage of shareholding before and after the
subscription. |
On December 23, 2009, one of the existing shareholders of PGW sold the Group 56.8 million of PGWs
share rights at NZ$0.025 per share right. The Company exercised these rights and subscribed for
56.8 million shares at an aggregate consideration of NZ$27.0 million (US$18.9 million). Upon the
completion of the acquisition, the Group held an equity interest of 19.0% in PGW which enable it
to have 2 directors on PGWs board. Accordingly, the Group determined that its representation on
the board of directors of this investee enables it to apply significant influence over PGW. |
The Company elected to apply the fair value option for its equity investment in PGW, which
otherwise would be accounted for using equity method accounting, because it believes a readily
determinable fair value based on the investees quoted market price provides investors with the
most relevant and reliable information in assessing its value. The Group recognized the increase
in fair value, which amounted to RMB1,946,739 (US$294,961), between December 31,2009 and December
31, 2010 in the consolidated statements of operations. |
Under the agreement signed between the Company and PGW in November 2009, PGW agreed to issue
Convertible Redeemable Notes (CRNs) having an aggregate principal amount of US$25 million to the
Group with the proceeds being invested as new capital into PGG Wrightson Finance, to enhance
regulatory capital and provide greater liquidity and capacity for growth in that business. As a
result, PGW issued the CRNs to Agria Asia on January 15, 2010. |
The key features of the convertible redeemable notes are as follows: |
||
Term |
The convertible redeemable notes have a perpetual term. |
Interest |
Interest payable under the convertible redeemable notes is: |
| For the period from January 15, 2010 to December 31, 2011, 8.0% per annum on the
principal amount of the notes; |
18
3. | Investment in PGW (continued) |
| For the period from January 1, 2012 to December 31, 2013, the two-year swap rate
quoted by Reuters on December 31, 2011 plus a margin of 5.5%; |
| For subsequent two-year periods commencing on January 1, 2014, January 1, 2016 and
thereafter, the two-year swap rate quoted by Reuters at the start of the relevant two-year
period plus a margin of 6.5%. |
PGG Wrightson can suspend the interest payments at its sole discretion. Suspended interest
accumulates and any suspended interest is payable on any subsequent interest payment date at
the sole discretion of PGG Wrightson. At any time when there is suspended interest, PGG
Wrightson may not declare or pay any dividend or make a distribution on its ordinary shares.
Once payment of interest on the notes is resumed, PGG Wrightson may not declare or pay any
dividend or make a distribution on its ordinary shares for a period of 12 months commencing
on the date on which the payment of interest is resumed, unless all suspended and unpaid
interest is paid. |
||
Conversion and Redemption |
Unless otherwise agreed by PGG Wrightson and us, PGG Wrightson may elect at its sole
discretion to convert or redeem the notes at any time following 18 months after January 15,
2010. |
In the event that PGG Wrightson elects to convert the notes into its ordinary shares, each
note will be converted into 2.1 ordinary shares of PGG Wrightson, subject to PGG Wrightsons
shareholder approval. |
In the event that PGG Wrightson elects to redeem the notes, we may choose whether the notes
will be redeemed in cash or exchanged into ordinary shares of PGG Wrightson Finance, a
wholly owned subsidiary of PGG Wrightson, which exchange is subject to PGG Wrightsons
shareholder approval. |
If the notes are redeemed in cash, PGG Wrightson will pay the Group 102% of the principal
amount of the notes if the redemption takes place on or before December 31, 2011, or 104%,
with each subsequent two-year period cash redemption amount accreting at an additional 2%,
if the redemption takes place during the two-year period after December 31, 2011. |
If the notes are exchanged into ordinary shares of PGG Wrightson Finance, the exchange ratio
at which each note is exchanged into PGG Wrightson Finance ordinary shares will be the
greater of (1) 1/(net tangible assets per PGG Wrightson Finance share on December 31, 2009),
and (2) 1/(net tangible assets per PGG Wrightson Finance share at the last day of the month
immediately prior to the time of exchange), provided that the exchange ratio shall be
between 30% to 50%, depending upon the performance of PGG Wrightson Finance. In addition to
the exchange, PGG Wrightson will also pay Agria 2% of the principal amount of the notes to
be redeemed if the redemption occurs on or before December 31, 2011, or 4%, with each
subsequent two-year exchange period redemption payment accreting at an additional 2%, if the
redemption occurs between January 1, 2012 and on or before December 31, 2013. |
In the event that shareholder approval, or any other regulatory or other approval or consent
required by either PGG Wrightson or us in order to effect the exchange of PGG Wrightson
Finance ordinary shares, cannot be obtained, we will have the option to have PGG Wrightson
redeem the notes in cash at the abovementioned cash redemption amount, or have PGG Wrightson
pay us in cash the cash equivalent value of the ordinary shares of PGG Wrightson Finance
sought to be transferred to us under the exchange arrangement. |
19
4. | Business Acquisitions |
2009 acquisition: |
In order to expand its spectrum of agricultural research, on September 30, 2009, Guanli acquired a
100% equity interest of NKY, an entity engaged in research and sales of agriculture products in
the PRC, for RMB5,000,000 (US$732,504). The acquisition has been accounted for as a business
acquisition in accordance with ASC 805-10, Business Combinations: Overall. The results of NKYs
operations have been included in the consolidated financial statements since its acquisition date. |
The following table summarizes the fair values of the assets acquired and liabilities assumed as
at the date of acquisition: |
As at September 30, 2009 | ||||||||
(RMB000) | (US$000) | |||||||
Cash |
5,516 | 808 | ||||||
Accounts receivable |
596 | 87 | ||||||
Inventory |
12,456 | 1,825 | ||||||
Other current assets |
6,446 | 944 | ||||||
Property and equipment, net |
1,355 | 199 | ||||||
Other non-current assets |
508 | 74 | ||||||
Payable for acquisition of technology |
(5,086 | ) | (745 | ) | ||||
Advance from customers |
(13,674 | ) | (2,003 | ) | ||||
Other current liabilities |
(16,233 | ) | (2,378 | ) | ||||
Deferred tax assets, non current |
3,362 | 494 | ||||||
Deferred tax liability, current |
(63 | ) | (9 | ) | ||||
Goodwill |
9,817 | 1,437 | ||||||
Purchase consideration |
5,000 | 733 | ||||||
The goodwill recognized represents expected synergies from combining operations of NKY and its
intangible assets that do not qualify for separate recognition with the operations of the Company.
Goodwill has been assigned to NKY, a component of the Companys corn seeds operating segment, for
purposes of impairment testing. |
Pro forma results of operation for this acquisition have not been presented because the effects of
the acquisition were not material to the Groups consolidated financial results. |
2010 acquisition: |
In 2010, the Company acquired 100% equity interest of Beiao, an entity engaged in research and
sales of vegetable seeds in the PRC, for cash consideration of RMB1,000,000 (US$151,515). The
Company recognized goodwill of RMB317,560 (US$48,115) for this acquisition. |
Purchase price allocation and pro forma results of operation for this acquisition have not been
presented because the effects of the acquisition were not material to the Groups consolidated
financial results. |
20
5. | Investment Under Equity Method |
2009 | 2010 | 2010 | ||||||||||
(RMB000) | (RMB000) | (US$000) | ||||||||||
Cost of associates |
| 47,000 | 7,122 | |||||||||
Share of post-acquisition profit or loss |
| 894 | 135 | |||||||||
| 47,894 | 7,257 | ||||||||||
Details of the Groups associates at December 31, 2010 are as follows: |
Share of post- | ||||||||||||||
Proportion of | Cost of | acquisition | ||||||||||||
ownership | investment | profit / (loss) | ||||||||||||
Name of Associates | interest | Principal activity | (RMB000) | (RMB000) | ||||||||||
Wuwei Ganxin Seeds
Co., Ltd. |
49.0 | % | Production of corn seeds | 40,000 | 1,183 | |||||||||
Beijing Zhongnong
Seed Industry Co., Ltd. |
18.9 | % | Research and development and co-operation with CNAAS | 7,000 | (289 | ) | ||||||||
47,000 | 894 | |||||||||||||
6. | P3A Disposition and Discontinued Operations |
On July 13, 2010, the Company sold substantially all assets of P3A, net of certain liabilities,
to Mr. Frank Xue, the president and a director of P3A. As a result of the transaction, Agria
received shares held by Mr. Xue representing 11.5% of the Groups issued and outstanding share
capital immediately prior to the transaction. These shares were then cancelled by the Company.
The Company retained existing leases of nine parcels of land totaling approximately 13,500
acres previously held by P3A. Mr. Xue is a related party of the Company since he is a director
and president of P3A. The assets and liabilities of P3A as of December 31, 2008 and 2009 are
comprised of the following: |
2008 | 2009 | 2009 | ||||||||||
(RMB000) | (RMB000) | (US$000) | ||||||||||
Current assets |
231,565 | 257,699 | 39,045 | |||||||||
Non-current assets |
202,815 | 172,344 | 26,113 | |||||||||
Accounts payable and other liabilities |
(232,182 | ) | (246,995 | ) | (37,423 | ) | ||||||
Net assets |
202,198 | 183,048 | 27,735 | |||||||||
Included in the loss from discontinued operations for the year ended December 31, 2010 is
RMB20.3 million operating income from January 1, 2010 through the date of disposal and a
RMB21.6 million loss on disposal, net of reversal deferred tax liabilities of approximately RMB191.2 million (Note 17). There is no other significant income tax on discontinued operations
for 2008, 2009, and 2010. |
21
6. | P3A Disposition and Discontinued Operations (continued) |
From January 1, 2010 to | ||||||||||||||||
Discontinued Operations | 2008 | 2009 | date of disposal | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
Revenue from discontinued operations |
465,064 | 173,956 | 112,277 | 17,012 | ||||||||||||
Pretax profit (loss) |
121,053 | (25,378 | ) | (192,468 | ) | (29,162 | ) | |||||||||
Income (loss) from discontinued operations |
121,053 | (25,378 | ) | (1,314 | ) | (199 | ) | |||||||||
7. | Accounts Receivable |
Accounts receivable consist of the following: |
2009 | 2010 | 2010 | ||||||||||
(RMB000) | (RMB000) | (US$000) | ||||||||||
Accounts receivable |
119,935 | 423 | 64 | |||||||||
Less: Allowance for doubtful accounts |
(10,670 | ) | (139 | ) | (21 | ) | ||||||
109,265 | 284 | 43 | ||||||||||
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
Movements in allowance for doubtful
accounts: |
||||||||||||||||
Balance at the beginning of the year |
(38 | ) | (12,853 | ) | (10,670 | ) | (1,617 | ) | ||||||||
Provision for doubtful collection |
(12,848 | ) | (14,664 | ) | (139 | ) | (21 | ) | ||||||||
Decrease due to disposal of P3A |
| | 10,670 | 1,617 | ||||||||||||
Collections of doubtful accounts
allowed for |
33 | 7,916 | | | ||||||||||||
Write-offs |
| 8,931 | | | ||||||||||||
Balance at the end of the year |
(12,853 | ) | (10,670 | ) | (139 | ) | (21 | ) | ||||||||
8. | Inventories |
Inventories consist of the following: |
2009 | 2010 | 2010 | ||||||||||
(RMB000) | (RMB000) | (US$000) | ||||||||||
Raw materials and supplies |
7,447 | 10,181 | 1,543 | |||||||||
Work in progress |
6,339 | 1,407 | 213 | |||||||||
Finished goods |
59,586 | 62,780 | 9,512 | |||||||||
73,372 | 74,368 | 11,268 | ||||||||||
22
9. | Prepayments and Other Current Assets |
Prepayments and other current assets consist of the following: |
2009 | 2010 | 2010 | ||||||||||
(RMB000) | (RMB000) | (US$000) | ||||||||||
Non-current assets |
||||||||||||
Non-current Prepayments (1) |
40,738 | 40,258 | 6,100 | |||||||||
Current assets |
||||||||||||
Prepayments |
4,985 | 106 | 16 | |||||||||
Advances to suppliers (2) |
29,732 | 1,586 | 240 | |||||||||
Individual income tax withholdings receivable |
1,005 | | | |||||||||
Other receivable (3) |
1,772 | 17,414 | 2,639 | |||||||||
Others |
850 | | | |||||||||
Less: Allowance for doubtful accounts |
(1,723 | ) | (60 | ) | (9 | ) | ||||||
36,621 | 19,046 | 2,886 | ||||||||||
(1) | As of December 31, 2009 and December 31, 2010, the Company prepaid RMB 40 million for
leasing one parcel of land for an extended lease term from December 31, 2028 (expiration of
its land use right) to December 31, 2038. |
|
(2) | This amount represents interest-free payments to suppliers associated with contracts the
Group enters into for the future scheduled delivery of corn seeds. The risk of loss arising
from non-performance by or bankruptcy of the suppliers is assessed prior to placing the
advance. To date, the Group has not experienced any loss on advances to suppliers. |
|
(3) | The amount as of December 31, 2010 primarily consists of a RMB7.1 million (US$1.1 million)
receivable from the Groups ADS depositary as reimbursement for legal fees and administrative
expenses (total of US2.2 million was recorded in other income in 2010), a RMB2 million
(US$0.3 million) receivable from the insurance companies in respect to legal costs incurred
in defending the Groups class action lawsuit and RMB3 million (US$0.5 million) interest
receivable on RMB time deposit account. |
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
Movements in allowance for doubtful
accounts: |
||||||||||||||||
Balance at the beginning of the year |
(1,480 | ) | (1,125 | ) | (1,723 | ) | (261 | ) | ||||||||
Provision for doubtful accounts |
| (598 | ) | | | |||||||||||
Decrease due to disposal of P3A |
| | 1,663 | 252 | ||||||||||||
Collections of doubtful accounts
previously allowed for |
355 | | | | ||||||||||||
Balance at the end of the year |
(1,125 | ) | (1,723 | ) | (60 | ) | (9 | ) | ||||||||
23
10. | Property, Plant and Equipment, Net |
Property, plant and equipment consist of the following: |
2009 | 2010 | 2010 | ||||||||||
(RMB000) | (RMB000) | (US$000) | ||||||||||
Buildings and improvements |
72,499 | 1,684 | 255 | |||||||||
Plant and machinery |
7,240 | 984 | 149 | |||||||||
Furniture and office equipment |
4,265 | 1,788 | 271 | |||||||||
Motor vehicles |
9,509 | 6,560 | 994 | |||||||||
Construction in progress |
12,937 | | | |||||||||
106,450 | 11,016 | 1,669 | ||||||||||
Less: Accumulated depreciation |
(18,228 | ) | (4,771 | ) | (723 | ) | ||||||
88,222 | 6,245 | 946 | ||||||||||
Depreciation expense was RMB5,124,550, RMB7,238,431 and RMB 2,985,402 (US$452,334) for each of the
years ended December 31, 2008, 2009 and 2010, respectively. |
11. | Intangible Assets, Net |
Intangible assets as of December 31, 2009 consist of the following: |
Gross | ||||||||||||||||
Carrying | Accumulated | Net Carrying | Net Carrying | |||||||||||||
Value | Amortization | Value | Value | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
Land use rights |
397,457 | (28,541 | ) | 368,916 | 54,046 | |||||||||||
Acquired technology |
42,273 | (22,217 | ) | 20,056 | 2,938 | |||||||||||
Software |
256 | (127 | ) | 129 | 19 | |||||||||||
Balance, end of year |
439,986 | (50,885 | ) | 389,101 | 57,003 | |||||||||||
Intangible assets as of December 31, 2010 consist of the following: |
Gross | ||||||||||||||||
Carrying | Accumulated | Net Carrying | Net Carrying | |||||||||||||
Value | Amortization | Value | Value | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
Land use rights |
395,637 | (45,186 | ) | 350,451 | 53,098 | |||||||||||
Acquired technology |
15,000 | (12,500 | ) | 2,500 | 379 | |||||||||||
Software |
258 | (183 | ) | 75 | 11 | |||||||||||
Balance, end of year |
410,895 | (57,869 | ) | 353,026 | 53,488 | |||||||||||
Amortization expense for the years ended December 31, 2008, 2009 and 2010, were RMB12,635,581,
RMB24,291,800 and RMB25,002,697 (US$3,788,287), respectively. |
The land use rights and acquired technology have weighted average amortization periods of 20 years
and 3 years, respectively. |
24
11. | Intangible Assets, Net (continued) |
Expected amortization expense on these intangible assets for each of the next five years and
thereafter is as follows: |
Year ending December 31 | (RMB000) | (US$000) | ||||||
2011 |
19,082 | 2,892 | ||||||
2012 |
16,561 | 2,509 | ||||||
2013 |
16,535 | 2,505 | ||||||
2014 |
16,535 | 2,505 | ||||||
2015 |
16,535 | 2,505 | ||||||
Thereafter |
267,778 | 40,572 | ||||||
353,026 | 53,488 | |||||||
12. | Other Assets, net |
Other Assets as of December 31, 2009, consisted of breeder sheep and date trees held by P3A. |
13. | Bank Borrowings |
2009 | 2010 | 2010 | ||||||||||
(RMB000) | (RMB000) | (US$000) | ||||||||||
Short-term |
8,750 | 59,604 | 9,031 | |||||||||
As of December 31, 2010, short-term bank borrowings were from one bank, repayable through January
12, 2011, and bearing an interest rate of LIBOR+0.7% (2009: 10.18%). Short-term bank borrowings as
of December 31, 2010 were guaranteed by Agria Brothers RMB pledged deposit, which is presented as
Restricted Cash as of December 31, 2010. The balance was paid off as of January 12, 2011. New
loans entered into subsequent to December 31, 2010 are discussed in note 25. |
14. | Accrued Expenses and Other Liabilities |
The components of accrued expenses and other liabilities are as follows: |
2009 | 2010 | 2010 | ||||||||||
(RMB000) | (RMB000) | (US$000) | ||||||||||
Salary, welfare, education and union fund |
8,601 | 373 | 56 | |||||||||
Individual income tax withholdings |
17,594 | 155 | 24 | |||||||||
Sales commission due to sales staff |
2,115 | | | |||||||||
Advances from customers(ii) |
11,494 | 28,347 | 4,296 | |||||||||
Business tax and other taxes |
6,684 | 1,133 | 172 | |||||||||
Deferred government grant (i) |
1,200 | | | |||||||||
Unrecognized tax benefit and related interest
and penalties (Note 17) |
8,696 | 6,725 | 1,019 | |||||||||
Accrued expenses |
12,151 | 9,805 | 1,483 | |||||||||
Payable for acquisition of technology (Note 4) |
5,086 | | | |||||||||
Other |
3,563 | 4,492 | 682 | |||||||||
77,184 | 51,030 | 7,732 | ||||||||||
(i) | The deferred government grant was conditional on the Company establishing an
agricultural products market network without specifying a requested date of completion or
repayment provision. The Deferred government grant was no longer a liability after the
disposal of P3A. |
|
(ii) | The advance from customers are cash received for purchasing of corn seeds. |
25
15. | Ordinary Shares |
On August 7, 2008, the Companys Board of Directors approved a repurchase of up to US$10 million
over the following 24 months by the Company its of American Depository Shares (ADSs) (the stock
repurchase program). The timing and amount of repurchase ADSs was determined by the Companys
management based on market conditions, ADS price and other factors, and will be subject to the
restrictions relating to volume, price and timing under applicable law, including Rule 10b-18
under the Securities Exchange Act of 1934. The approval of Companys Board of Directors for the
stock repurchase program expired on August 6, 2010. |
During the year ended December 31, 2009, the Company had repurchased 320,000 ADSs (2008: 300,000)
at an average price of US$0.90 (2008: US$3.55) per ADS, including transaction costs. Under Cayman
Islands law, the shares are cancelled upon repurchased. Accordingly, any excess of purchase
price over par value is recorded against the additional paid-in-capital account. |
On July 16, 2010, the Company entered into definitive agreements to divest Taiyuan Primalights III
Agriculture Development Co., Ltd., or P3A, to Mr. Frank Xue, the president and a director of P3A.
As a result of the transaction, Agria has acquired from Mr. Xue and cancelled 14,393,400 shares
representing 11.5% of its issued and outstanding share capital immediately prior to the
transaction. |
16. | Statutory Reserves |
According to the Company Law of the PRC and the Articles of Association of the Group in China,
any profit-generating company in China is required each year to transfer 10% of the profit
after tax as reported in its PRC statutory financial statements to the statutory common reserve
fund, except where the fund has reached 50% of the registered capital of the company. This fund
can be used to make up any losses incurred or be converted into paid-in capital, provided that
the fund does not fall below 25% of the registered capital. As of December 31, 2009, the
balance of statutory reserves consisted of funds provided by P3A. As a result of the disposal
of P3A, this fund balance was transferred to additional paid-in capital. As of December 31,
2010, the balance of statutory reserves is provided from the profit after tax of NKY. |
The statutory common reserve fund is not distributable except upon liquidation. |
17. | Income Taxes |
The amounts in this note are stated after reclassification of entries to the 2009 and 2008
financial statements to reflect the discontinued operations of P3A. |
Under the laws of the Cayman Islands and BVI, the Company, Agria Group Ltd., Agria Asia Investment
and Agria Singapore are not subject to tax on its income or capital gains. In addition, no
withholding tax on dividends or other distributions will be payable by an exempted company on its
operations. However, the Company is subject to PRC income tax at the rate of 25% on its taxable
income according to the Enterprise Income Tax Law (the New EIT Law) (as detailed below). |
Agria China, being a foreign invested enterprise, was initially granted a tax holiday for a full
exemption from Enterprise Income Tax for the fiscal years from 2007 to 2009 by the local tax
authority. On March 16, 2007, the National Peoples Congress enacted the New EIT Law, which
became effective on January 1, 2008 and replaced the old separate income tax laws for domestic
enterprises and foreign invested |
26
17. | Income Taxes (continued) |
enterprises (FIEs). The New EIT Law adopted a unified 25% enterprise income tax rate applicable
to all resident enterprises in China, including FIEs and foreign enterprises operating in the PRC,
except for certain entities that are eligible for tax holidays and are grandfathered by the New
EIT Law. The New EIT Law did not provide detailed implementation and administrative rules and
regulations. On December 28, 2007, the Circular of the State Council on the Implementation of
Transitional Preferential Policies for Enterprise Income Tax (Implementation Rules) was issued
to provide guidance on the transitional rules for preferential taxation policies (including tax
exemption periods). The Implementation Rules shortened the EIT tax exemption period applicable to
Agria China from a three year period beginning in 2007 and ending in 2009 to a one year period
expiring on December 31, 2007. As a result of the New EIT Law and its related implementation
rules, the Companys tax holiday exemption ceased on December 31, 2007. Agria China, is subject
to income tax at the rate of 25%, on its taxable income according to the New EIT Law with effect
from January 1, 2008. |
China Victory, Agria Overseas, Agria Asia and Agria Hong Kong were originally subject to an
applicable profits tax rate of 16.5% in Hong Kong. However, these companies mentioned above are
also subject to PRC income tax at the rate of 25% on their taxable income according to the NEW EIT
Law mentioned above. |
Further, also under the New EIT Law, enterprises established under the laws of foreign
countries or regions and whose place of effective management is located within the PRC
territory are considered PRC resident enterprises and subject to the PRC income tax at the rate
of 25% on worldwide income. The definition of place of effective management shall refer to an
establishment that exercises, in substance, overall management and control over the production
and business, personnel, accounting, properties, etc. of an enterprise. As of December 31,
2010, no detailed interpretation or guidance has been issued to define place of effective
management. Furthermore, as of December 31, 2010, the administrative practice associated with
interpreting and applying the concept of place of effective management is unclear. The Group
has analyzed the applicability of this law and will continue to monitor the related development
and application. |
Agria Agricultural, Guanli, Agria Brother, and Zhongyuan are subject to PRC income tax at a
statutory rate of 25% on their respective taxable income. |
NKY obtained the High New Technology Business certificate on December 14, 2009. As a result, it
is subject to PRC income tax at a lower rate of 15% on its taxable income for the years for which
a valid High New Technology Business certificate is maintained. The certificate will expire 3
years from the date of issue and needs to be re-applied for upon expiration. |
||
Deferred tax liabilities arising from undistributed earnings |
The New EIT Law also imposes a 10% withholding income tax for dividends distributed by a foreign
invested enterprise to its immediate holding company outside China, which were exempted under the
previous income tax law and regulations. A lower withholding tax rate will be applied if there is
a tax treaty arrangement between mainland China and the jurisdiction of the foreign holding
company. The foreign invested enterprise became subject to the withholding tax starting from
January 1, 2008. Given that the undistributed profits of the Groups operations in China are
intended to be retained in China for business development and expansion purposes, no withholding
tax accrual has been made. |
Deferred tax liabilities arising from investment in undistributed earnings of the VIEs that are
available for distribution to PRC tax resident parent companies (Agria China and Agria Brother)
amounted to RMB191,154,010 (US$28,004,221) as of December 31, 2009 (2008: RMB180,557,715). As a
result of the disposal of P3A in July 2010, the amount of deferred tax liabilities was fully
reversed. |
27
17. | Income Taxes (continued) |
Loss from continuing operations before income taxes consists of: |
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
PRC |
(30,479 | ) | (29,013 | ) | (24,856 | ) | (3,766 | ) | ||||||||
Non-PRC |
(815,998 | ) | (69,969 | ) | (25,897 | ) | (3,924 | ) | ||||||||
(846,477 | ) | (98,982 | ) | (50,753 | ) | (7,690 | ) | |||||||||
The loss from the non-PRC operations consists primarily of operating costs, administration
expense, interest income and charges. |
Income taxes applicable to continuing operations consist of: |
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
Current income tax |
2,488 | | 5,719 | 866 | ||||||||||||
Deferred income tax |
23,089 | 10,915 | 1,385 | 210 | ||||||||||||
25,577 | 10,915 | 7,104 | 1,076 | |||||||||||||
The reconciliation between income taxes computed by applying the statutory income tax rate of 25%
for 2008, 2009 and 2010 applicable to the Groups PRC operations to income tax expense is: |
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
Loss before income tax |
(846,477 | ) | (98,982 | ) | (50,753 | ) | (7,690 | ) | ||||||||
Income tax computed at the
applicable statutory tax rate
of 25% |
(211,619 | ) | (24,746 | ) | (12,688 | ) | (1,923 | ) | ||||||||
Expense not deductable for tax |
205,365 | 5,597 | 838 | 127 | ||||||||||||
Effect of tax exemptions |
| | (50 | ) | (8 | ) | ||||||||||
Effect of tax rate differences |
| | 568 | 86 | ||||||||||||
Effect of tax law changes and
recognition of outside basis
differences |
28,722 | 10,596 | 4,502 | 682 | ||||||||||||
Changes in valuation allowance |
2,787 | 19,523 | 13,838 | 2,097 | ||||||||||||
Other |
322 | (55 | ) | 96 | 15 | |||||||||||
Income tax expense reported
in the consolidated
statements of operations,
applicable to continuing
operations |
25,577 | 10,915 | 7,104 | 1,076 | ||||||||||||
The tax effects of temporary differences that give rise to the deferred tax asset (liability)
balances at December 31, 2009 and 2010 are as follows: |
28
17. | Income Taxes (continued) |
2009 | 2010 | 2010 | |||||||||||
(RMB000) | (RMB000) | (US$000) | |||||||||||
Property, plant and equipment |
131 | 11 | 2 | ||||||||||
Acquired technology |
5,144 | 802 | 122 | ||||||||||
Allowance for doubtful accounts |
1,513 | 1,184 | 179 | ||||||||||
Deferred expense |
137 | | | ||||||||||
Net operating loss carry-forward |
19,406 | 13,838 | 2,097 | ||||||||||
Other |
219 | 35 | 5 | ||||||||||
Deferred tax assets |
26,550 | 15,870 | 2,405 | ||||||||||
Valuation allowance |
(23,070 | ) | (13,838 | ) | (2,097 | ) | |||||||
Deferred tax assets, net (all non-current) |
3,480 | 2,032 | 308 | ||||||||||
Inventories |
(63 | ) | | | |||||||||
Deferred tax liability, current |
(63 | ) | | | |||||||||
Investment basis in VIEs |
(191,154 | ) | | | |||||||||
Deferred tax liability, non current |
(191,154 | ) | | | |||||||||
As of December 31, 2010, the Group had gross deferred tax assets of approximately RMB15,870,000
(US$2,405,000). A valuation allowance on the deferred tax assets of approzimetly RMB13,838,000
(US$2,097,000) was recorded as the Group did not believe that sufficient objective positive
evidence currently exists to conclude that the recoverability of the total deferred tax asset is
more likely than not. |
Based on existing PRC tax regulations, the PRC entities remain subject to examination by the tax
authorities for fiscal year 2006 through 2010. |
A reconciliation of the beginning and ending amounts of unrecognized tax benefits and liabilities,
exclusive of related interest and penalties, is as follows: |
2009 | 2010 | 2010 | ||||||||||
(RMB) | (RMB) | (US$) | ||||||||||
Balance at beginning of fiscal year |
7,751 | 12,492 | 1,893 | |||||||||
Additions based on tax positions related to the current year |
983 | | | |||||||||
Addition arising from business acquisition |
1,271 | | | |||||||||
Additions based on tax positions related to the previous year * |
2,487 | | | |||||||||
Reversal due to disposal of P3A |
| (8,733 | ) | (1,323 | ) | |||||||
Balance at the end of fiscal year |
12,492 | 3,759 | 570 | |||||||||
* | The amount of RMB2,487,000 (US$365,000) was previously recorded under tax payable as of
December 31, 2008. |
The Groups unrecognized tax benefits are presented in the consolidated balance sheet within
accrued expenses and other liabilities. |
It is possible that the amount of unrecognized tax benefits will change in the next twelve months.
However, an estimate of the range of the possible change cannot be made at this time. |
If the unrecognized tax benefits as of December 31, 2010 were realized in a future period, it
would result in a tax benefit and a reduction of the Groups effective tax rate. |
29
17. | Income Taxes (continued) |
|
During the years ended December 31, 2008 2009 and 2010, the Group recognized nil, RMB576,496 and
RMB686,037(US$103,945), respectively, in general and administrative expenses for interest, and RMB
315,000, RMB2,706,555 and RMB827,000 (US$125,303), respectively, in general and administrative
expenses for penalties related to uncertain tax positions. As at December 31, 2009 and 2010, the
Group recognized total interest and potential penalties relating to uncertain tax positions
amounting to RMB3,283,051 and RMB2,965,937 (US$449,384), respectively. |
18. | Earnings (Loss) Per Share |
For the years ended December 31, 2008, 2009, and 2010, all of the ordinary shares issuable upon
exercising employee share options were not included in the calculation of dilutive earnings (loss)
per share because the effect of inclusion would be anti-dilutive. Options over 5,494,500 and
6,373,567 ordinary shares were exercisable as at December 31, 2009 and 2010, respectively. |
19. | Related Party Transactions |
Name of Related Parties | Relationship with the Group | |
Taiyuan Relord
|
A company owned by a director of P3A | |
Taiyuan Baojia Agriculture Science &
Technology Development Co., Ltd. (Taiyuan
Baojia)
|
A subsidiary of Taiyuan Relord | |
Xue Zhi Xin
|
A director of P3A | |
Zhang Ming She*
|
A director of P3A | |
Yan Lv
|
A director of P3A | |
Wuwei Ganxin Seeds Co., Ltd. (Wuwei Ganxin)
|
A 49% Associate | |
Beijing Zhongnong Seed Industry Co., Ltd.
(Beijing Zhongnong)
|
A 18.9% Associate | |
PGG Wrightson
|
A 19.0% Associate |
* | Zhang Ming She resigned as a director of P3A on July 31, 2008. |
|
(1) | The Group had the following related party transactions during the years presented: |
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
Sales of seedlings to: |
||||||||||||||||
Taiyuan Relord * |
4,180 | | | | ||||||||||||
Purchase of corn seeds from: |
||||||||||||||||
Wuwei Ganxin |
| | 65,427 | 9,913 | ||||||||||||
Directors fee and expense charged to: |
||||||||||||||||
PGG Wrightson |
| | 1,179 | 179 | ||||||||||||
Collection of amounts due from: |
||||||||||||||||
PGG Wrightson |
| | 789 | 119 | ||||||||||||
Taiyuan Relord * |
| 1,652 | | | ||||||||||||
Yan Lv * |
| 28 | | | ||||||||||||
| 1,680 | 789 | 119 | |||||||||||||
30
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
Payment of amounts due to: |
||||||||||||||||
Wuwei Ganxin |
| | 26,019 | 3,942 | ||||||||||||
Beijing Zhongnong |
| | 3,044 | 461 | ||||||||||||
Taiyuan Relord * |
| 204 | 102 | 15 | ||||||||||||
Yan Lv * |
| 6 | | | ||||||||||||
Xue Zhi Xin * |
| 6 | | | ||||||||||||
| 216 | 29,165 | 4,418 | |||||||||||||
Loan to Beijing Zhongnong |
| | 910 | 138 | ||||||||||||
Loan from Beijing Zhongnong |
| | 6,464 | 979 | ||||||||||||
* | Taiyuan Relord, Yan Lv and Xue Zhixin, were determined to be a related parties by virtue
of their relationships with P3A. Following the disposal of P3A, they are no longer
considered to be related parties. |
|
(2) | The Company had the following related party balances at the end of the year: |
2009 | 2010 | 2010 | ||||||||||
(RMB000) | (RMB000) | (US$000) | ||||||||||
Amounts due from related parties: |
||||||||||||
Taiyuan Relord |
1,865 | | | |||||||||
Beijing Zhongnong |
| 910 | 138 | |||||||||
PGG Wrightson |
| 390 | 59 | |||||||||
1,865 | 1,300 | 197 | ||||||||||
Amounts due to related parties: |
||||||||||||
Included in current liabilities |
||||||||||||
PGG Wrightson |
| 14 | 2 | |||||||||
Beijing Zhongnong |
| 3,420 | 518 | |||||||||
Wuwei Ganxin |
| 39,408 | 5,971 | |||||||||
Yan Lv (i) |
6 | | | |||||||||
6 | 42,842 | 6,491 | ||||||||||
The balances with related parties are unsecured, non-interest bearing and repayable on demand. | ||||||||||||
Amounts due to related parties: |
||||||||||||
Included in non-current liabilities |
||||||||||||
Taiyuan Relord(ii) |
8,384 | | | |||||||||
(i) | The balances represent cash advances paid to or due from directors for reimbursable
company expenses. |
|
(ii) | The non-current amount due to Taiyuan Relord represents the consideration for the
purchase of date trees repayable over the next 45 years. Imputed interest relating to the
balance is calculated using the incremental borrowing rate at the transaction date of 6.84%
per annum. Taiyuan Relord was determined to be a related party of the Company by virtue of
its relationships with P3A. Following the disposal of P3A, it is no longer related party of
the Group. |
31
20. | Share-based Awards Plan |
In July 2007, the Company adopted the 2007 Share Incentive Plan (the Plan). The Plan provides
for the granting of share options and restricted ordinary shares to employees and consultants of
the Company. Options granted under the Plan may be either incentive share options or nonqualified
share options. The Company reserved 15,000,000 ordinary shares for issuance under the Plan. Under
the Plan, options granted generally vest 30% after the first year of service, 30% after the second
year of service, 20% after the third year of service and 20% after the fourth year of service.
Certain options granted vest 50% after the first year of
service and 50% after the second year of service. Options may be granted for a term not exceeding
10 years from the date of grant. The option award provides for accelerated vesting if there is a
change in control (as defined in the Plan). |
For certain options granted with a four year graded vesting term as described above, in the
event of termination of employment or service for any reason after one year of employment or
service, the grantees right to vest in the option under the Plan will terminate twelve months
after the written notice of termination. The Group concluded that the termination clause
represents a non-substantive vesting term since it allows the grantee to continue to vest
options for a twelve month period after termination. For accounting purposes, 60% of these
options granted are vested after the first year of service, 20% after the second year of
service and 20% after the third year of service. |
On July 4, 2007, the Company granted 1,500,000 options with exercise price of US$4.80 per share
to two employees. 20% of the options will vest after the first year of service, 20% will vest
after two years of service, and for the remaining 60%, 10% will be vested semi-annually over
the next three years. In the event of termination of employment or service for any reason
after one year of employment or service, the grantees right to vest in the option under the
Plan will terminate twelve months after the written notice of termination. On July 19, 2007,
the grant to the two employees was modified such that the options granted were reduced from
1,500,000 to 1,200,000, and the exercise price was reduced from US$4.80 per share to US$2.40
per share. In addition, the modified options vest 30% after the first year of service, 30%
after the second year of service, 20% after the third year of service and 20% after the fourth
year of service. In the event of termination of employment or service for any reason after one
year of employment or service, the grantees right to vest in the option under the Plan will
terminate twelve months after the written notice of termination. The total incremental
compensation cost resulting from the modifications amounting to US$452,500 (RMB3,363,025) and
is recognized ratably over the new requisite service period. |
During 2008, a significant shareholder of the Company agreed to pay cash totaling US$18 million
and ordinary shares constituting 22% of the then issued and outstanding shares of the Company
to certain management personnel of P3A as recognition of their contribution to the success of
the Company. In addition, to provide additional incentives and retain the services of certain
employees, Zhixin Xue, Guanglin Lai and Zhaohua Qian, all shareholders of the Company agreed to
contribute 1.6 million options which are exercisable into 2.2 million ordinary shares of the
Group to a new management retention plan. No consideration was paid by the Company for this
contribution of options made by the shareholders. The fair value of the cash payment and
ordinary shares transferred to the P3A management personnel have been recorded as compensation
expense of approximately US$107,826,953 (RMB744,943,189) with a corresponding increase to
Additional Paid-in Capital. The return of the options back to the Company for no consideration
has been accounted for as a cancellation resulting in an immediate recognition of compensation
expense of US$2,743,405 (RMB18,881,760). |
During 2008, 600,000 stock options held by an executive of P3A were exchanged for 600,000
ordinary shares for no additional consideration. The exchange was accounted for as a
settlement, wherein the difference between the fair value of the ordinary shares and the stock
options, amounting to US$685,145 (RMB4,715,579), was recognized immediately as compensation
expense. |
32
20. | Share-based Awards Plan (continued) |
The following table summarizes the option activity for the years ended December 31, 2008, 2009 and
2010 (amounts in thousands of U.S. Dollars (US$), except for number of shares and exercise
price): |
Weighted- | ||||||||||||||||||||
Weighted- | Average | Aggregate | ||||||||||||||||||
Weighted- | average | Remaining | Intrinsic | |||||||||||||||||
Number of | average | grant-date | Contractual | Value | ||||||||||||||||
Share Option | Shares | Exercise Price | fair value | Term | (US$000) | |||||||||||||||
Outstanding, December 31, 2007 |
9,120,500 | 19,239 | ||||||||||||||||||
Granted |
2,434,000 | US$ | 0.87 | |||||||||||||||||
Forfeited |
(510,000 | ) | ||||||||||||||||||
Cancelled |
(2,200,000 | ) | ||||||||||||||||||
Outstanding, December 31, 2008 |
8,844,500 | US$ | 2.97 | | ||||||||||||||||
Granted |
2,340,000 | 0.92 | 0.44 | |||||||||||||||||
Forfeited |
(784,600 | ) | 2.81 | 1.59 | ||||||||||||||||
Expired |
(450,000 | ) | 2.40 | 1.65 | ||||||||||||||||
Outstanding, December 31, 2009 |
9,949,900 | 2.53 | 3.30 | 6.72 | 1,735 | |||||||||||||||
Vested and expected to vest at December 31, 2009 |
9,949,900 | 2.53 | 3.30 | 6.72 | 1,735 | |||||||||||||||
Exercisable at December 31, 2009 |
5,494,500 | 2.71 | 0.56 | 6.05 | 581 | |||||||||||||||
Outstanding, December 31, 2009 |
9,949,900 | US$ | 2.53 | 3.30 | | |||||||||||||||
Granted |
5,160,000 | 1.00 | 0.24 | |||||||||||||||||
Forfeited |
(735,000 | ) | 2.69 | 1.02 | ||||||||||||||||
Expired |
(1,136,800 | ) | 2.77 | 1.56 | ||||||||||||||||
Outstanding, December 31, 2010 |
13,238,100 | 1.90 | 2.38 | 8.18 | 94 | |||||||||||||||
Vested and expected to vest at
December 31, 2010 |
13,238,100 | 1.90 | 2.38 | 8.18 | 94 | |||||||||||||||
Exercisable at December 31, 2010 |
6,373,567 | US$ | 2.46 | US$ | 1.08 | 7.44 | 31 |
The aggregate intrinsic value in the table above represents the difference between the
Companys closing stock price on the last trading day at each balance sheet date and the
weighted-average exercise price. |
As of December 31, 2010, there was RMB11,120,756 (US$1,684,963) unrecognized share-based
compensation cost related to share options. That deferred cost is expected to be recognized over a
weighted-average vesting period of 1.72 years. To the extent the actual forfeiture rate is
different from the original estimate, actual share-based compensation related to these awards may
differ. |
The fair value of each option award was estimated on the date of grant using a binomial option
pricing model by the Groups management, with assistance from an external consultant. The
volatility assumption was estimated based on the implied volatilities of comparable public
companies due to the limited historical volatility of the Companys shares. The relevant
historical information is limited because the Company became a public company in November 2007.
The expected term was estimated based on the resulting output of the binomial option pricing
model. |
The risk-free interest rate for periods within the contractual term of the option is based on the
U.S. Treasury yield curve in effect at the time of grant. Forfeitures were estimated based on
historical experience. The option awards are not transferable and the grantee has a limited
amount of time subsequent to their termination of employment or service to exercise the options.
These post-vesting restrictions are considered in the binomial option pricing model as a
suboptimal exercise factor. The suboptimal exercise factor of 1.5 is based on the external
consultants research on the early exercise behavior of employees with stock options. |
33
20. | Share-based Awards Plan (continued) |
The following table presents the assumptions used to estimate the fair values of the share options
granted in the periods presented: |
2008 | 2009 | 2010 | ||||
Risk-free interest rate |
2.67% 4.23% | 3.17% | 3.26% 3.30% | |||
Dividend yield |
| | | |||
Expected volatility range |
34.91% 49.94% | 48.62% | 62.21% 62.35% | |||
Weighted average expected volatility |
40.19% | 48.62% | 62.33% | |||
Expected term (in years) |
3.31 5.58 | 2.77 | 3.93 |
The total fair value of option awards vested during the year ended December 31, 2008, 2009 and
2010 were RMB54,647,899, RMB17,926,430, RMB14,433,351.49 (USD2,131,475), respectively. |
Total compensation cost recognized for the years ended December 31, 2008, 2009 and 2010, is as
follows: |
For the years ended December 31, | ||||||||||||||||
2008 | 2009 | 2010 | 2010 | |||||||||||||
RMB000 | RMB000 | RMB000 | US$000 | |||||||||||||
Cost of revenues |
520 | 206 | | | ||||||||||||
General and administrative expenses |
44,732 | 14,596 | 9,835 | 1,490 | ||||||||||||
Research and development expenses |
47 | 31 | | | ||||||||||||
45,299 | 14,833 | 9,835 | 1,490 | |||||||||||||
21. | Employee Defined Contribution Plan |
Chinese labor regulations require companies in the PRC to participate in a government mandated
defined contribution plan pursuant to which certain pension benefits, medical care, unemployment
insurance, employee housing fund and other welfare benefits are provided to employees, and to make
contributions to the government for these benefits based on a certain percentage of the employees
salaries. The companies in China are required to make contributions to the government mandated
defined contribution plan for these benefits based on 28% ~ 45% of the employees salaries. The
Company has no legal obligation for the benefits beyond the contributions made. The total amounts
for such employee benefits, which were expensed as incurred, were RMB1,659,509, RMB1,394,630 and
RMB1,297,244 (US$196,552) respectively for each of the years ended December 31, 2008, 2009 and
2010, respectively. |
34
22. | Commitments and Contingencies |
Operating lease commitments |
||
Payments under operating leases for land and buildings, which are mainly used to test seed
varieties, are expensed on a straight-line basis over the periods of their respective leases. The
terms of the leases do not contain renewal options, rent escalation, restriction or contingent
rents and have lease periods ranging from 3 to 45 years. Future minimum lease payments for each of
the next five years and thereafter, under all non-cancelable operating leases, are as follows: |
Year ending December 31 | (RMB000) | (US$000) | ||||||
2011 |
2,898 | 439 | ||||||
2012 |
2,371 | 359 | ||||||
2013 |
561 | 85 | ||||||
2014 |
347 | 53 | ||||||
2015 |
347 | 53 | ||||||
Thereafter |
4,514 | 683 | ||||||
11,038 | 1,672 | |||||||
Total rental expense was RMB9,127,444, RMB15,350,133 and RMB3,794,407 (US$574,910) for the years
ended December 31, 2008, 2009 and 2010, respectively. |
||
Purchase commitments |
Purchase commitments mainly consist of service agreements entered into with corn seed companies to
purchase corn seeds. The terms of the agreements are for a period of one year. Future minimum
purchase payments for the year ending December 31, 2011, under all non-cancelable agreements are
RMB104 (US$16). |
The amount purchased under commitment obligations was RMB13,841,000, RMB13,841,000 and
RMB4,940,000 (US$748,485) for the years ended December 31, 2008, 2009 and 2010, respectively.
These amounts related substantially to P3A. |
||
Commitment for Investment in Beijing Zhongnong Seed Industry Co., Ltd |
In Octber 2009, the Company entered into a strategic co-operation framework agreement with the
China National Academy of Agricultural Sciences (CNAAS), one of the largest agricultural
research organization in the PRC, providing for future co-operation across the spectrum of
agricultural research. The Company also entered into an investment agreement with CNAAS and its
affiliates, under which the Company is to invest RMB35 million (of which RMB 7 million has been
paid as of December 31, 2009) for a 53.84% equity interest of Beijing Zhongnong Seed Industry Co.,
Ltd (Zhongnong), a company wholly owned by CNAAS and its affiliates. Zhongnong has priority
rights to accept the transfer of all existing and future cultivated seed varieties owned by CNAAS
and its affiliates for the purposes of commercialization. The Company did not make any further
payments for the investment in 2010. According to the investment agreement, CNAAS has the right to
cancel this agreement if Agria has not injected RMB35 million within 3 months after the signature
of the investment agreement and this 3 months period ended on January 27, 2010. However, as Agria
is co-operating with CNAAS in several areas through Zhongnong, management believes that the
probability of CNAAS cancelling the investment agreement is remote. |
||
Enterprise income tax |
All PRC incorporated entities are subject to enterprise income tax regulations promulgated by the
Ministry of Finance and the State Tax Bureau of the PRC. |
As of December 31, 2010, the Company recognized approximately RMB3,759,109 (US$569,562) of
liabilities for unrecognized tax benefits and, in addition, RMB2,965,937 (US$449,384) of related
interest and penalties. The final outcome of these tax uncertainties is dependent upon various
matters including tax examinations, legal proceedings, certain authority proceedings, changes in
regulatory tax laws and interpretations of those tax laws, or expiration of statutes of
limitation. |
35
22. | Commitments and Contingencies (continued) |
However, due to the uncertainties associated with litigation, and the status of examinations,
including the protocols of finalizing audits by the relevant tax authorities, which could include
formal legal proceedings,
there is a high degree of uncertainty regarding the future cash outflows associated with these tax
uncertainties. As of December 31, 2010, the Company classified of the above liabilities for
unrecognized tax benefits and related interest and penalties as current liabilities. |
||
Class action lawsuits |
On February 3, 2009, a consolidated class action lawsuit in the United States District Court for
the Southern District of New York was filed, alleging violations of various sections of the
Securities Act, against the Group, our executive officers, our directors and other defendants.
The lawsuit alleges that our initial public offering registration statement and prospectus failed
to disclose certain alleged discussions between two Agria executives relating to requests for
additional compensation and a threatened resignation. |
On December 1, 2009, the U.S. District Court for the Southern District of New York dismissed the
consolidated class action against the Company and the underwriters defendants, and the Court
issued a judgment in favor of the Company and the underwriter defendants. |
On June 4, 2010, the Group entered into a memorandum of understanding with the lead plaintiff
reflecting an agreement in principle and agreed to pay $3.75 million to settle all claims asserted
in the class action lawsuit. On September 20, 2010, the court granted a preliminary approval of
the settlement. The deadline for filing objections to the Settlement, Plan of Distribution of
settlement proceeds, and attorneys fee and expense request by Lead Plaintiffs counsel expired on
January 7, 2011, and no such objections were filed by Class Members. |
On June 7, 2011, the court granted final approval of the settlement and entered a final judgment
resolving the case. The settlement amount is within the limit of our applicable insurance
policies, and the settlement is not expected to have any significant impact on our financial
position, results of operation or cash flows. |
23. | Segment Reporting |
The Company is engaged in the development, production and sale of seeds. In accordance with ASC
280-10 Segment Reporting: Overall, the Companys chief operating decision maker evaluates
segment performance based on revenue and cost of revenue by segment. The Company has determined
that it has one operating and reportable segments which is China Seeds. |
The Company had no customers which accounted for 10% or more of the Companys revenues for any of
the years presented in the consolidated financial statements. |
24. | Fair Value Measurement |
Effective January 1, 2008, the Group adopted ASC 820-10 Fair Value Measurements and Disclosures:
Overall. ASC 820-10 defines fair value, establishes a framework for measuring fair value and
expands disclosures about fair value measurements. Although the adoption of ASC 820-10 did not
impact the Groups financial condition, results of operations, or cash flow, ASC 820-10 requires
additional disclosures to be provided on fair value measurement. |
36
24. | Fair Value Measurement (contined) |
ASC 820-10 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value as follows: |
Level 1 | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. | |||
Level 2 | Include other inputs that are directly or indirectly observable in the marketplace. | |||
Level 3 | Unobservable inputs which are supported by little or no market activity. |
ASC 820-10 describes three main approaches to measuring the fair value of assets and liabilities:
(1) market approach; (2) income approach and (3) cost approach. The market approach uses prices
and other relevant information generated from market transactions involving identical or
comparable assets or liabilities. The income approach uses valuation techniques to convert future
amounts to a single present value amount. The measurement is based on the value indicated by
current market expectations about those future amounts. The cost approach is based on the amount
that would currently be required to replace an asset. |
In accordance with ASC 820-10, the Company elects to measures its investment in PGW at fair value.
The investment in PGW is classified within Level 1 because it is valued based on PGWs quoted
trading price. |
Fair Value Measurement at December 31, 2009 | ||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||
in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | |||||||||||||||||||
Identical | Observable | Unobservable | Fair Value at | Fair Value at | ||||||||||||||||
Assets | Inputs | Inputs | December 31, | December 31, | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | 2009 | 2009 | ||||||||||||||||
(RMB000) | (RMB000) | (RMB000) | (RMB000) | (US000) | ||||||||||||||||
Investment in PGW |
414,047 | | | 414,047 | 60,658 | |||||||||||||||
Fair Value Measurement at December 31, 2010 | ||||||||||||||||||||
Quoted Prices | ||||||||||||||||||||
in | ||||||||||||||||||||
Active | Significant | |||||||||||||||||||
Markets for | Other | |||||||||||||||||||
Identical | Observable | Unobservable | Fair Value at | Fair Value at | ||||||||||||||||
Assets | Inputs | Inputs | December 31, | December 31, | ||||||||||||||||
(Level 1) | (Level 2) | (Level 3) | 2010 | 2010 | ||||||||||||||||
(RMB000) | (RMB000) | (RMB000) | (RMB000) | (US000) | ||||||||||||||||
Investment in PGW |
403,490 | 403,490 | 61,135 | |||||||||||||||||
25. | Subsequent Events |
a) | Purchase of additional equity interest in PGG Wrightson |
In January 2011, Agria Singapore purchased an additional 234,963,938 shares of PGG
Wrightson at the offer price of NZ$0.60 (US$0.46) per share to bring its total
shareholding in PGG Wrightston from 19.01% to 50.01%. The total consideration paid by
Agria Singapore, excluding transaction expenses, was NZ$141.0 million (US$108.4 million). |
37
25. | Subsequent Events (continued) |
Between January 2011 and April 2011, Agria Asia and Agria Singapore entered into
equity funding arrangements with Agria Group and with New Hope International (Hong Kong)
Limited, or New Hope
International, a subsidiary of New Hope Group to provide equity funding to Agria
Singapore to complete the above mentioned equity interest purchase. As part of the equity
interest purchase, Agria Asia and its wholly owned subsidiaries also borrowed NZ$10
million (US$7.7 million) from New Zealand-based Livestock Improvement Corporation Limited.
(LIC) and received bank borrowings amounting to NZ$53 million (US$40.7 million). |
Under the equity funding arrangements with Agria Group, Agria Group subscribed for
additional equity in Agria Asia valued at USD55.3 million for a combination of cash,
expenses already incurred on behalf of Agria Asia and expenses that Agria Group agreed to
incur on behalf of Agria Asia. |
Under New Hope Internationals equity funding arrangements, New Hope International
subscribed for equity in Agria Asia valued at USD20.0 million for cash. |
At the date of completion of the partial offer Agria Group held 88.05% of Agria Asia which
reflected the existing 19.01% stake in PGG Wrightson already owned by Agria Singapore and
the CRN already owned by Agria Asia as well as the additional equity subscribed for under
the equity funding arrangements with Agria Group. New Hope held 11.95% of Agria Asia. |
In April 2011, Agria Group also entered into a share purchase agreement with Ngai Tahu
Capital Limited, or Ngai Tahu, a long-term strategic investor with a particular focus on
New Zealands South Island commercial and rural ventures. Under the terms of the
agreement, Ngai Tahu agreed to purchase from us 7.24% of the total shares of Agria Asia
Investments for a consideration of NZ$15.0 million (approximately $10.8 million based on
the exchange rate in effect on December 31, 2009). This sale became unconditional when the
shareholders of PGW approved the transaction in June 2011. Upon the completion of this
sale, our equity interest in Agria Asia Investments will be 80.81%. |
In June 2011, the Group entered into an additional shareholders agreement with New Hope
International. Under this agreement, the Group granted New Hope International the rights
of first offer in the event that Agria Corporation proposes to
transfer all or part of its shares in Agria Group, as well as the tag-along rights in the event that Agria Group
proposes to transfer all or part of its shares in Agria Asia. Furthermore, New Hope
International has the right to sell its shares in Agria Asia to Agria Group on the terms
and conditions provided in the shareholders agreement at a certain repurchase price to be
determined pursuant to a supplemental agreement entered into between Agria Group and New
Hope International in June 2011. The supplemental agreement also provides a guarantee by
Agria Group to New Hope on a minimal level of income to be generated by their investment.
To secure the performance of Agria Groups obligation in connection with this put option
held by New Hope International, in June 2011, Agria Group pledged its shares in Agria Asia
to New Hope International and Mr. Guanglin Lai, the chairman of our board, made a personal
guarantee to New Hope International for Agria Groups payment obligation in the event that
New Hope International exercises its put option. Agria Corporation agreed to indemnify Mr.
Lai against all the obligations, losses, costs, damages, expenses, liabilities, actions
and demands that he may incur or sustain in connection with his personal guarantee. |
b) | Business acquisition / new equity investment |
In March 2011, Wuwei Ganxin Seeds Co., Ltd. increased its registered capital from RMB20 million
to RMB30 million pursuant to new regulations. Accordingly, the Company increased its investment
in Ganxin by RMB4.9 million (US$0.7 million) to maintain the Companys 49% equity interest. |
In May 2011, the Company began making investment in Zhongnong for RMB4 million. The process of
capital increase is still on going to date. |
38
25. | Subsequent Events (continued) |
In March 2011, Beiao established a new subsidiary, named Shanxi Jufeng Seeds Co., Ltd., in Shanxi
province, PRC. This new company began operations in a seeds business in Shanxi, PRC. |
c) | New banking facility agreements |
The Group entered into three new general banking facilities; one facility in the amount of
US$41.16 million on January 5, 2011, a second facility in the amount of US$16 million on
April 12, 2011 and a third facility in the amount of RMB62 million on April 7, 2011. The
maturity dates are two years, two years and one year from drawdown, respectively. The
interest rates on the bank facilities are Libor+1.4%, Libor+2.5% and 5.68%, respectively. |
26. | Condensed Financial Information of the Company |
Under PRC laws and regulations, the Companys PRC subsidiaries and VIEs are restricted in its
ability to transfer certain of its net assets to the Company in the form of dividend payments,
loans, or advances. The amounts restricted include paid up capital, statutory reserve and net
assets of the Companys PRC subsidiary and VIEs, as determined pursuant to PRC generally accepted
accounting principles, totaled approximately RMB896 million (US$135.8 million) as of December 31,
2010. |
Statements of operations |
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB000) | (RMB000) | (RMB000) | (US$000) | |||||||||||||
Revenue |
| | | | ||||||||||||
Cost of revenue |
| | | | ||||||||||||
Gross profit |
| | | | ||||||||||||
Operating expenses |
||||||||||||||||
General and administrative expenses |
(19,744 | ) | (26,700 | ) | (26,293 | ) | (3,983 | ) | ||||||||
Total operating expenses |
(19,744 | ) | (26,700 | ) | (26,293 | ) | (3,983 | ) | ||||||||
Operating loss |
(19,744 | ) | (26,700 | ) | (26,293 | ) | (3,983 | ) | ||||||||
Interest income |
23,735 | 3,379 | 385 | 58 | ||||||||||||
Interest expense |
(14 | ) | (22 | ) | (21 | ) | (3 | ) | ||||||||
Exchange gain (loss) |
(433 | ) | 24 | (70 | ) | (11 | ) | |||||||||
Equity in loss of subsidiaries and
variable interest entities |
(752,842 | ) | (111,956 | ) | (48,345 | ) | (7,325 | ) | ||||||||
Other income |
| | 19,557 | 2,963 | ||||||||||||
Loss before income tax |
(749,298 | ) | (135,275 | ) | (54,787 | ) | (8,301 | ) | ||||||||
Income tax |
(1,704 | ) | | (4,384 | ) | (664 | ) | |||||||||
Net loss |
(751,002 | ) | (135,275 | ) | (59,171 | ) | (8,965 | ) | ||||||||
Net loss attributable to ordinary
shareholders |
(751,002 | ) | (135,275 | ) | (59,171 | ) | (8,965 | ) | ||||||||
39
26. | Condensed Financial Information of the Company (continued) |
Balance sheets |
2009 | 2010 | 2010 | ||||||||||
(RMB000) | (RMB000) | (US$000) | ||||||||||
ASSETS |
||||||||||||
Cash and cash equivalents |
88,640 | 17,346 | 2,628 | |||||||||
Prepayments and other current assets |
3,211 | 9,482 | 1,437 | |||||||||
Investment in subsidiaries and variable interest entities |
1,630,286 | 1,448,075 | 219,405 | |||||||||
Amount due from related parties |
| 390 | 59 | |||||||||
Total assets |
1,722,137 | 1,475,293 | 223,529 | |||||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||||||
Liabilities |
||||||||||||
Accrued expenses and other liabilities |
9,651 | 11,535 | 1,747 | |||||||||
Total liabilities |
9,651 | 11,535 | 1,747 | |||||||||
Shareholders equity |
||||||||||||
Ordinary shares (par value US$0.0000001 per share;
499,900,000,000 shares authorized; 125,160,000 and
110,766,600 shares issued and outstanding at December
31, 2009 and December 31, 2010, respectively) |
| | | |||||||||
Additional paid-in capital |
2,381,377 | 2,285,611 | 346,305 | |||||||||
Accumulated other comprehensive loss |
(78,309 | ) | (95,148 | ) | (14,417 | ) | ||||||
Accumulated deficit |
(590,582 | ) | (726,705 | ) | (110,106 | ) | ||||||
Total shareholders equity |
1,712,486 | 1,463,758 | 221,782 | |||||||||
Total liabilities and shareholders equity |
1,722,137 | 1,475,293 | 223,529 | |||||||||
Statements of Cash flows |
2008 | 2009 | 2010 | 2010 | |||||||||||||
(RMB) | (RMB) | (RMB) | (US$) | |||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Net loss |
(751,002 | ) | (135,275 | ) | (59,171 | ) | (8,965 | ) | ||||||||
Adjustments to reconcile net loss to net
cash provided by used in operating
activities: |
||||||||||||||||
Equity in loss of subsidiaries and variable
interest entity |
752,842 | 111,956 | 48,345 | 7,325 | ||||||||||||
Change in operating assets and liabilities: |
||||||||||||||||
Prepayments and other current assets |
1,422 | (616 | ) | (6,271 | ) | (950 | ) | |||||||||
Tax payable |
1,704 | (1,704 | ) | | | |||||||||||
Amount due from related parties |
| | (390 | ) | (59 | ) | ||||||||||
Accrued expenses and other liabilities |
(833 | ) | 9,651 | 1,883 | 285 | |||||||||||
Net cash provided by (used in) operating
activities |
4,133 | (15,988 | ) | (15,604 | ) | (2,364 | ) | |||||||||
Cash flows from investing activities: |
||||||||||||||||
Investment in subsidiaries and variable
interest entities |
(230,918 | ) | (737,525 | ) | (38,852 | ) | (5,888 | ) | ||||||||
Net cash used in investing activities |
(230,918 | ) | (737,525 | ) | (38,852 | ) | (5,888 | ) | ||||||||
Cash flows from financing activities: |
||||||||||||||||
Repurchase of ordinary shares |
(7,252 | ) | (1,976 | ) | | | ||||||||||
Net cash used in financing activities |
(7,252 | ) | (1,976 | ) | | | ||||||||||
Effect of exchange rate changes on cash
and cash equivalents |
(63,764 | ) | (87 | ) | (16,838 | ) | (2,551 | ) | ||||||||
Net decrease in cash and cash equivalents |
(297,801 | ) | (755,576 | ) | (71,294 | ) | (10,803 | ) | ||||||||
Cash and cash equivalents at the beginning
of year |
1,142,017 | 844,216 | 88,640 | 13,430 | ||||||||||||
Cash and cash equivalents at the end of year |
844,216 | 88,640 | 17,346 | 2,627 | ||||||||||||
40
Basis of presentation |
||
In the Company-only financial statements, the Companys investment in subsidiaries and variable
interest entity is stated at cost plus equity in undistributed earnings of subsidiaries since
inception. The Company-only financial statements should be read in conjunction with the Companys
consolidated financial statements. |
The Company records its investment in its subsidiaries and variable interest entities under the
equity method of accounting as prescribed in ASC 323-10, Investments-Equity Method and Joint
Ventures: Overall (Pre-codification: APB opinion No. 18, The Equity Method of Accounting for
Investments in Common Stock). Such investment is presented on the balance sheet as Investment
in subsidiaries and variable interest entities and share of their profit or loss as Equity in
profit (loss) of subsidiaries and variable interest entities on the statements of operations. |
Certain information and footnote disclosures normally included in financial statements prepared in
accordance with U.S. generally accepted accounting principles have been condensed or omitted. |
41
Pages | ||||
ARTICLE I DEFINITIONS |
1 | |||
SECTION 1.01. Certain Defined Terms |
1 | |||
ARTICLE II PURCHASE AND SALE |
3 | |||
SECTION 2.01. Purchase and Sale |
3 | |||
SECTION 2.02. Purchase Price |
3 | |||
SECTION 2.03. Closing |
3 | |||
SECTION 2.04. Deliveries at the Closing |
3 | |||
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER |
4 | |||
SECTION 3.01. Authority to Execute and Perform this Agreement |
4 | |||
SECTION 3.02. Transferred Shares |
4 | |||
SECTION 3.03. No Conflicts |
4 | |||
SECTION 3.04. Controlling Agreements |
4 | |||
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER |
5 | |||
SECTION 4.01. Authority to Execute and Perform this Agreement |
5 | |||
ARTICLE V UNDERTAKINGS |
5 | |||
SECTION 5.01. Confidentiality |
5 | |||
SECTION 5.02. Consents and Approvals in relation to the Lease Transfer Agreements |
5 | |||
ARTICLE VI CONDITIONS PRECEDENT |
6 | |||
SECTION 6.01. Conditions Precedent to the Obligations of the Seller and the Purchaser |
6 | |||
SECTION 6.02. Conditions Precedent to the Purchasers Obligations |
6 | |||
SECTION 6.03. Conditions Precedent to the Sellers Obligations |
7 | |||
ARTICLE VII INDEMNIFICATION |
7 | |||
SECTION 7.01. Indemnification by the Seller |
7 | |||
SECTION 7.02. Indemnification by the Purchaser |
7 | |||
ARTICLE VIII GENERAL PROVISIONS |
8 | |||
SECTION 8.01. Expenses |
8 | |||
SECTION 8.02. Termination |
8 | |||
SECTION 8.03. Notices |
8 | |||
SECTION 8.04. Severability |
8 | |||
SECTION 8.05. Amendment |
9 | |||
SECTION 8.06. Governing Law, Arbitration |
9 | |||
SECTION 8.07. Assignment and Succession |
9 | |||
SECTION 8.08. Headings |
9 | |||
SECTION 8.09. Language |
9 |
1
2
3
4
5
6
7
If to the Seller: | ||||
Xue Zhixin Address: 25th Floor, Jin Gang Hotel, No.91 Bing Zhou North Road, Taiyuan City, Shanxi Province |
||||
Fax: 0351-4727112 | ||||
If to the Purchaser: | ||||
Agria Corporation Address: 21/F Tower B, PingAn International Finance Center, 1-3 Xinyuan South Road, Chaoyang District, Beijing, China |
||||
Attn: Xie Tao | ||||
Fax: 010-84381003 |
8
9
Seller: |
||||
By: | /s/ Xue Zhixin | |||
Name: | Xue Zhixin | |||
Purchaser: AGRIA CORPORATION |
||||
By: | /s/ Xie Tao | |||
Name: | Xie Tao | |||
Title: | Chief Executive Officer |
10
1. | Power of Attorney |
|
2. | Equity Pledge Agreement |
|
3. | Exclusive Call Option Agreement |
|
4. | Exclusive Technology Development, Technology Support and Technology Service
Agreement |
|
5. | Exclusive Consultancy Service Agreement |
|
6. | Proprietary Technology License Agreement |
|
7. | Letter of Undertaking |
11
Appendix A:
|
Assignment and Assumption Agreement regarding the Exclusive Call Option Agreement | |
Appendix B:
|
Assignment and Assumption Agreement regarding the Exclusive Technology Development, Technology Support and Technology Service Agreement | |
Appendix C:
|
Termination Notice regarding the Exclusive Consultancy Service Agreement | |
Appendix D:
|
Termination Notice regarding the Proprietary Technology License Agreement | |
Appendix E:
|
Termination Notice regarding the Equity Pledge Agreement | |
Appendix F:
|
New Letter of Undertaking | |
Appendix G:
|
Lease Transfer Agreements |
12
1. | Assignment and Assumption |
2. | Consideration |
3. | Closing |
4. | Representations and Warranties |
a. | The Assignor represents and warrants to the Assignee that: |
(i) | it has not assigned, mortgaged, pledged,
encumbered, or otherwise hypothecated any of its right, title or
interest under the Exclusive Call Option Agreement, except as set forth
in this Assignment; |
||
(ii) | the execution, delivery and performance of this
Assignment, including but not limited to the consummation of the
transactions contemplated hereby and thereby do not and will not
violate, conflict with or result in a breach of, or constitute a
default (or create an event which, with notice or lapse of time or
both, would constitute a default in the Exclusive Call Option
Agreement) of the terms, conditions or provisions under the Exclusive
Call Option Agreement; and |
||
(iii) | the Assignor has full power and authority to
enter into this Assignment, perform the obligations of such party
hereunder and consummate the transactions contemplated hereby. All
necessary and appropriate action has been taken by such party with
respect to the execution and delivery of this Assignment. This
Assignment constitutes the valid and binding obligation of such party
enforceable in accordance with the terms hereof, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors
rights and to general equity principles. |
b. | the Assignee represents and warrants to the Assignor that it
has full power and authority to enter into this Assignment, perform the
obligations of such party hereunder and consummate the transactions
contemplated hereby. All necessary and appropriate action has been taken by
such party with respect to the execution and delivery of this Assignment. This
Assignment constitutes the valid and binding obligation of such party
enforceable in accordance with the terms hereof, subject to bankruptcy,
insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors rights and to general equity principles. |
2
5. | Conditions Precedent |
a. | the obligations of the Assignor to complete the Closing, unless
otherwise waived in writing by the Assignor, are subject to the fulfillment of
each of the following conditions on or before the Closing Date: |
(i) | the representations and warranties of the
Assignee shall be true and correct on the Closing Date; |
||
(ii) | the Share Purchase Agreement has been fully
executed; |
||
(iii) | the documents required in Section 6.01(a) to
Section 6.01(f) under the Share Transfer Agreement have been fully
executed; and |
||
(iv) | the conditions required in Section 6.02 under
the Share Transfer Agreement have been satisfied. |
b. | The obligations of the Assignee to complete the Closing, unless
otherwise waived in writing by the Assignee, are subject to the fulfillment of
each of the following conditions on or before the Closing Date: |
(i) | the representations and warranties of the
Assignor shall be true and correct on the Closing Date; |
||
(ii) | the Share Purchase Agreement has been fully
executed; and |
||
(iii) | the conditions required in Section 6.03 under
the Share Transfer Agreement have been satisfied. |
6. | Termination |
7. | Expense |
3
8. | Severability |
9. | Amendment |
10. | Assignment and Succession |
11. | Governing Law, Arbitration |
4
12. | Notices |
If to the Assignor: | ||||
Aero-Biotech Science & Technology Co., Ltd. Address: 21th Floor, Tower B, Pingan International Financial Center, No. 1-3 Xinyuan South Road, Chaoyang District, Beijing Attn: Xie Tao Fax: 010-84381003 Postcode: 100027 |
||||
If to the Assignee: | ||||
Mr. Xue Zhixin Address: 25th Floor, Jin Gang Hotel, No.91 Bing Zhou North Road, Taiyuan City, Shanxi Province Attn: Xue Zhixin Fax: 0351-4727112 Postcode: 030001 |
13. | Headings |
14. | Language |
5
ASSIGNOR | ASSIGNEE | |||||||||
Aero-Biotech Science & Technology Co., Ltd. | Xue Zhixin | |||||||||
By: | /s/ Xie Tao | /s/ Xue Zhixin | ||||||||
Name: | Xie Tao | |||||||||
Title: | Chief Executive Officer | |||||||||
Seal: |
6
(1) | Party A is a citizen of the Peoples Republic of China, who owns non-patent technologies
listed in Annex I (such technologies and related information, manual, handbook, files, etc.
hereinafter referred to as Proprietary Technology); |
(2) | Party B is a limited liability company duly registered and established in Taiyuan City,
Shanxi Province of China under the laws of China and primarily engages in the development and
production of agricultural seeds, tree seeds and species of live stock; |
(3) | Party A agrees to grant to Party B the exclusive right to use the Proprietary Technology
under this Agreement in accordance with the terms and conditions of this Agreement, and Party
B agrees to accept such license in accordance with the same terms and conditions. |
1. | PERMISSION GRANT |
|
1.1 | Proprietary Technology |
(a) | Party A agrees, according to the terms and conditions under this Agreement, to
grant to Party B, and Party B agrees to accept the right to use the Proprietary
Technology in China according to the same terms and conditions. The license under this
Agreement is exclusive, and except with the written consent of Party A, Party B shall
not transfer the Proprietary Technology to any third party, nor shall it jointly share,
use, develop, improve or innovate the Proprietary Technology with any third party. |
(b) | Both parties agree that, should there be any improvement or innovation
technological achievements resulted during the course of using the Proprietary
Technology by Party B, the relevant rights and ownership shall be exclusively vested in
Party A unless it is otherwise provided by Chinese laws and regulations or mutually
agreed by both parties. Party B shall not hold any rights and interests. |
1.2 | Scope |
(a) | The Proprietary Technology granted to Party B herein shall only be used on
Party Bs business in development and production of stock breeding. Unless provided in
this contract to the contrary, without written consent of Party A, Party B shall not
use the Proprietary Technology in other purpose or re-license for the use of any third
party, whether for normal application, training or commercial sharing. |
(b) | The right granted to Party B to use the Proprietary Technology herein shall be
effective only in China. Party B agrees not to use such Proprietary Technology, whether
directly or indirectly, in other geographical areas. |
2. | PAYMENT METHOD |
3. | PARTY AS RIGHTS AND PROTECTION |
3.1 | In the effective term of this Agreement and thereafter, Party B agrees not to challenge or
question the validity of the proprietary right and this Agreement in connection with the
aforesaid Proprietary Technology; and not to perform any acts that Party A believes will
impair Party As rights and license. |
3.2 | Party B agrees to provide the necessary assistance to protect Party As rights on the
Proprietary Technology. Should any third party bring an infringement claim against Party As
Proprietary Technology, at Party As discretion, Party A may respond to such compensation
litigation in its own name, in Party Bs name or in both parties name. In the event any third
party commits any infringement behavior in connection with such Proprietary Technology, Party
B shall notify Party A such immediately within its scope of knowledge; only Party A is
entitled to decide whether to take action against such infringement behavior. |
3.3 | Party B agrees to use the Proprietary Technology only in the manner as provided in this
Agreement and shall not use the Proprietary Technology in any manner which Party A deems as
deceptive, misleading or in other manner that may impair the Proprietary Technology or Party
As reputation. |
2
4. | CONFIDENTIALITY PROVISIONS |
4.1 | Party B shall keep confidential all the material and information (hereinafter referred to as
Confidential Information) understood or accessed by Party B as a result of accepting
the Proprietary Technology license; and upon the termination of this Agreement, Party B
shall, upon Party As request, return to Party A or destroy any such documents and materials
that contain Confidential Information, and shall delete any Confidential Information from
any relevant memory device, and shall discontinue using such Confidential Information.
Without the written consent of Party A, Party B shall not disclose to any third party, give
or transfer such Confidential Information. |
4.2 | Both parties agree that this Article 4 shall remain valid regardless of whether this
Agreement shall become invalid, altered, discharged, terminated or unenforceable. |
5. | REPRESENTATION AND WARRANTY |
|
5.1 | Party A represents and warrants as follows: |
(a) | Party A has the right to execute and perform this Agreement and to adopt all
necessary and appropriate corporate actions to execute and deliver this Agreement not
to in violation of any restrictions imposed by laws and agreement binding or having an
effect upon it. |
(b) | This Agreement, once executed, shall constitute legitimate, valid, binding and
enforceable obligations on Party A under the conditions of this Agreement. |
||
(c) | Party A shall hold full and complete rights towards the Proprietary Technology. |
5.2 | Party B represents and warrants as follows: |
(a) | Party B is a validly existing limited liability company legally registered in
accordance with the Chinese laws. |
(b) | Party B signs and perform this Agreement within the power and business scope of
the company; adopted all necessary corporate actions, duly authorized, and obtained the
consent and approvals (as required) of third party or government; and not to in
violation of any restrictions imposed by laws and company policies and agreement
binding or having an effect upon it. |
(c) | This Agreement, once executed, shall constitute legitimate, valid, binding and
enforceable obligations on Party B under the conditions of this Agreement. |
6. | EFFECTIVENESS AND TERM |
6.1 | This Agreement shall be effective when it is executed on the date written on the first page
of this Agreement. Unless it is early terminated according to this Agreement, this Agreement
shall remain effective during the operation term of Party B. |
6.2 | On written consent by both parties, this Agreement is renewable upon expiry and the renewal
term shall be determined by both parties through consultation. |
3
7. | DEFAULT RESPONSIBILITY AND TERMINATION |
|
7.1 | Default Responsibility |
7.2 | Discharge and Termination |
|
During the effective term of this Agreement, Party A may, at any time, by giving a thirty
(30) day prior written notice to Party B, terminate this Agreement; unless as otherwise
expressly provided herein, without a reasonable written consent of Party A, Party B shall
not terminate or discharge this Agreement unilaterally. |
||
7.3 | Results of Termination or Expiration |
8. | FORCE MAJEURE |
8.1 | Force Majeure refers any event that is beyond the reasonable control of a party,
and it is unavoidable even under the reasonable care of the affected party, such events shall
include but not limited to: acts of government, forces of nature, fire, explosion, typhoon,
floods, earthquakes, tidal, lightning or war. However, credit, capital or financing shortage
shall not be considered as matters beyond a partys reasonable control. The party, affected by
Force Majeure, seeks exemption from performing its responsibilities under this Agreement or
under any provision of this Agreement, shall notify the other party as soon as possible
regarding such matter of exemption |
8.2 | When the performance of this Agreement is delayed or prevented due to the aforementioned
definition of Force Majeure, the affected party shall not assume any responsibility under
this Agreement provided that the affected party has endeavored its reasonable effort to
perform the agreement and to the extent of the part of the performance being delayed or
prevented. Once the cause of such liability exemption is redressed or remedied, both parties
agree to resume the performance of this Agreement with their best effort. If the influence of
force majeure has rendered the performance of this Agreement becomes impossible, both parties
agree, at the request of Party A, to use their greatest efforts to adopt other resolutions to
realize the purposes of this Agreement. |
4
9. | DISPUTE RESOLUTION |
10. | NOTICE |
5
11. | RETRANSFER, SUBLICENSE |
|
Without the prior written consent of Party A, Party B shall not transfer, pledge or
sublicense the rights and obligations of and under this Agreement. |
||
12. | GOVERNING LAW |
|
The validity, performance and interpretation of this Agreement shall be governed by laws of
China. |
||
13. | AMENDMENT AND SUPPLEMENT |
|
Amendments and supplements to this Agreement shall be made in the form of a written
instrument. The relevant amendment agreement and supplemental agreement to this Agreement,
duly signed by both parties, shall be an integral part of this Agreement and shall have the
same legal effect as this Agreement. |
||
14. | SEVERABILITY |
|
If any provision of this Agreement is held invalid or unenforceable due to the inconsistency
with the relevant laws, then such provision shall be deemed invalid only within the scope of
the related jurisdiction and that it shall not affect the legality of the other provisions
under this Agreement. |
||
15. | ANNEX |
|
Any annex of this Agreement is an integral part of this Agreement, and it shall have the
same legal effect. |
||
IN WITNESS WHEREOF, both parties have caused their legal representative or authorized
representative to execute this Agreement on the date first above written. |
||
16. | DUPLICATES |
|
This Agreement is signed in quadruplicate, each party holds two originals and each original
shall have the same legal force and effect. |
6
PARTY A: Xue Zhixin | ||||||
Signature: | /s/ Xue Zhixin | |||||
PARTY B : Primalights III Agriculture Development Co., Ltd. | ||||||
Signature: | /s/ Xue Zhixin | |||||
Name: | Xue Zhixin | |||||
Title: | Legal Representative | |||||
Seal: |
7
8
1. | Assignment and Assumption |
2. | Closing |
3. | Representations and Warranties |
a. | The Assignor represents and warrants to the Assignee that: |
(i) | it has not assigned, mortgaged, pledged,
encumbered, or otherwise hypothecated any of its right, title or
interest under the Technology Development Agreement, except as set
forth in this Assignment; |
(ii) | the execution, delivery and performance of this
Assignment, including but not limited to the consummation of the
transactions contemplated hereby and thereby do not and will not
violate, conflict with or result in a breach of, or constitute a
default (or create an event which, with notice or lapse of time or
both, would constitute a default in the Technology Development
Agreement) of the terms, conditions or provisions under the Technology
Development Agreement; |
(iii) | the Assignor has full power and authority to
enter into this Assignment, perform the obligations of such party
hereunder and consummate the transactions contemplated hereby. All
necessary and appropriate action has been taken by such party with
respect to the execution and delivery of this Assignment. This
Assignment constitutes the valid and binding obligation of such party
enforceable in accordance with the terms hereof, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors
rights and to general equity principles. |
b. | The Assignee represents and warrants to the Assignor that it
has full power and authority to enter into this Assignment, perform the
obligations of such party hereunder and consummate the transactions
contemplated hereby. All necessary and appropriate action has been taken by
such party with respect to the execution and delivery of this Assignment. This
Assignment constitutes the valid and binding obligation of such party
enforceable in accordance with the terms hereof, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors rights and to general
equity principles. |
2
4. | Conditions Precedent |
a. | the obligations of the Assignor to complete the Closing, unless
otherwise waived in writing by the Assignor, are subject to the fulfillment of
each of the following conditions on or before the Closing Date: |
(i) | the representations and warranties of the
Assignee shall be true and correct on the Closing Date; |
(ii) | the Share Purchase Agreement has been fully
executed; |
(iii) | the documents required in Section 6.01(a) to
Section 6.01(f) under the Share Transfer Agreement have been fully
executed; and |
(iv) | the conditions required in Section 6.02 under
the Share Transfer Agreement have been satisfied. |
b. | The obligations of the Assignee to complete the Closing, unless
otherwise waived in writing by the Assignee, are subject to the fulfillment of
each of the following conditions on or before the Closing Date: |
(i) | the representations and warranties of the
Assignor shall be true and correct on the Closing Date; |
(ii) | the Share Purchase Agreement has been fully
executed; and |
(iii) | the conditions required in Section 6.03 under
the Share Transfer Agreement have been satisfied. |
5. | Termination |
||
This Assignment shall be terminated at any time prior to the Closing by a mutual
written consent of the Assignor and the Assignee. |
|||
6. | Expense |
||
All costs and expenses, including but not limited to, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Assignment and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses. |
|||
7. | Severability |
||
If any term or other provision of this Assignment is invalid, illegal or incapable
of being enforced by any law or public policy, all other terms and provisions of
this Assignment 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 materially adverse to either party hereto. Upon such determination
that any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Assignment so as to
effect the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible. |
3
8. | Amendment |
||
This Assignment may not be amended or modified except by an instrument in writing
signed by, or on behalf of, the Assignor and the Assignee. |
|||
9. | Assignment and Succession |
||
This Assignment may not be assigned by operation of law or otherwise without the
express written consent of the other party (which consent may be granted or withheld
in the sole discretion of such party). This Assignment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns. |
|||
10. | Governing Law, Arbitration |
||
This Agreement shall be governed by, and construed in accordance with, the Laws of
the Peoples Republic of China. In the event that a dispute arises in connection
with the interpretation or implementation of this Agreement, the parties shall
attempt in the first instance to resolve such dispute through friendly
consultations. If the dispute is not resolved through consultations within thirty
(30) days after any party has served a written notice on the other parties
requesting the commencement of consultations, then any party may submit the dispute
for arbitration to the China International Economic and Trade Arbitration Commission
in accordance with its rules in force at the time. The arbitration shall take place
in Beijing and be conducted in Chinese. The arbitration award shall be final,
binding and non-appealable on the parties. |
|||
11. | Notices |
||
All notices, requests, claims, demands and other communications hereunder will be in
writing and will be given or made and will be deemed to have been duly given or made
upon receipt by delivery in person, by courier service, by confirmed telecopy (with
a copy sent by another means specified herein), or by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses or at such other address for a party as will be specified by like notice. |
If to the Assignor: | ||||
Aero-Biotech Science & Technology Co., Ltd. Address: 21th Floor, Tower B, Pingan International Financial Center, No. 1-3 Xinyuan South Road, Chaoyang District, Beijing Attn: Xie Tao Fax: 010-84381003 Postcode: 100027 |
4
If to the Assignee: | ||||
Mr. Xue Zhixin Address: 25th Floor, Jin Gang Hotel, No.91 Bing Zhou North Road, Taiyuan City, Shanxi Province Fax: 0351-4727112 Postcode: 030001 |
12. | Headings |
13. | Language |
5
ASSIGNOR | ASSIGNEE | |||||||||
Aero-Biotech Science & Technology Co., Ltd. | Xue Zhixin | |||||||||
By: | /s/ Xue Tao | /s/ Xue Zhixin | ||||||||
Name: | Xie Tao | |||||||||
Title: | Chief Executive Officer | |||||||||
Seal: |
6
To:
|
Primalights III Agriculture Development Co., Ltd. | |
Address: Middle Area of Highway 73, Zhuang Er Shang Village, Huang Ling Rural Area, Xiaodian District, Taiyuan City |
||
Fax: 0351- 7123671 | ||
Tel: 0351- 7870123 |
Very truly yours, | ||||||
Aero-Biotech Science & Technology Co. Ltd. | ||||||
Signature: | /s/ Xie Tao | |||||
Name: | Xie Tao | |||||
Title: | Chief Executive Officer |
1. | Party A is citizen of the Peoples Republic of China. |
|
2. | Party B is a limited liability company established and registered in Taiyuan City, Shanxi
Province of China under Chinese laws. Its scope of business includes automation control
greenhouse construction, yield farmland development; demonstration plots set up, corn seed
production; crop seeds wholesale and retail, seedling seed production, wholesale and retail,
livestock, processing and marketing of agricultural and sideline products. |
3. | Party A agrees to provide under this Agreement consulting services to Party B and Party B
agrees to accept such consulting services from Party A. |
4. | EXCLUSIVE CONSULTANCY AND SERVICES; MONOPOLIZED AND EXCLUSIVE INTERESTS |
4.1 | During the term of this Agreement, Party A agrees, in accordance with the terms and
conditions of this Agreement, to provide to Party B the exclusive consultancy services in the
aspect of management, marketing promotion and sales, including, but not limited to: |
(a) | assist Party B to formulate the management model and operational plan of the
company; |
||
(b) | assist Party B to formulate the marketing development plan; |
||
(c) | provide marketing and client resources information to Party B; |
||
(d) | conduct specific marketing research and survey; |
||
(e) | assist Party B to establish a sales and marketing network. |
4.2 | Party B agreed to accept the consulting services rendered by Party A. Party B further agrees
that unless with a prior written consent of Party A, during the term of this Agreement, Party
B shall not accept professional consulting and services provided by any third party. |
5. | CALCULATION, PAYMENT AND SECURITY OF CONSULTING SERVICE |
5.1 | Both parties agree to calculate and pay the consulting service fee under this Agreement
according to Annex 1. |
5.2 | Both parties shall be responsible to pay their respective taxes for executing and performing
this Agreement as legally required. |
(a) | Party A executes and performs this Agreement within his power, with the
necessary and appropriate actions to sign and deliver, and that this Agreement is not
in violation of the restrictions or limitation under the laws and agreements binding or
influential to him; |
||
(b) | Once this Agreement is signed, it constitutes legal, valid, binding and
enforceable obligations to Party A under the provisions of this Agreement. |
6.2 | Party B hereby represents and warrants as follows: |
(a) | Party B is a limited liability company legitimately registered, established and
validly existing in accordance with Chinese laws, and that its main business involves
the development and production of agroforestry species; |
||
(b) | Party B performs and executes this Agreement within the power and business
scope of the company, with the necessary and appropriate corporate action and
authorization, and obtained the necessary approval and consent of the government and
third-party, and that it is not in violation of the restriction and limitations under
the laws and agreements binding or influential to it; |
||
(c) | Once this Agreement is signed, it constitutes legal, valid, binding and
enforceable obligations to Party B under the provisions of this Agreement. |
7. | CONFIDENTIALITY |
2
8. | EFFECTIVENESS AND TERM |
|
8.1 | This Agreement shall be effective on the date it is signed. |
8.2 | This Agreement shall remain effective within the operating term of Party B, unless it is
early terminated by the provisions of another relevant contract entered separately by both
parties or by the provisions of this Agreement. |
|
9. | TERMINATION |
9.1 | EARLY TERMINATION. During the effective term of this Agreement, unless Party A commits gross
negligence, fraud, other violations of law or bankruptcy, Party B shall not early terminate
this Agreement. Notwithstanding the aforesaid covenant, Party A is entitled to terminate this
Agreement by giving a written notice thirty (30) days in advance to Party B at any time.
During the term of this Agreement, if Party B violates this Agreement, Party A can terminate
this Agreement by giving a written notice to Party B. |
9.2 | PROVISIONS AFTER TERMINATION. After the termination of this Agreement, the rights and
obligations of both parties under Articles 4, 7 and 8 herein shall remain in effect. |
|
10. | GOVERNING LAW |
|
The validity, performance, interpretation and enforceability of this Agreement shall be
governed by Chinese laws. |
||
11. | DISPUTE RESOLUTION |
|
When disputes arose between the parties in connection with the interpretation performance of
the provisions under this Agreement, both parties shall resolve the dispute through friendly
consultation. If resolution cannot be reached within thirty (30) days after the request to
resolve the disputes is made by a party, either party may submit the dispute to the China
International Economic and Trade Arbitration Commission to resolve the disputes, in
accordance with its then effective arbitration rules. The venue of arbitration shall be in
Beijing; the arbitration language shall be Chinese. The arbitral award shall be final and
binding upon both sides. |
||
12. | FORCE MAJEURE |
12.1 | Force majeure refers to any event that is beyond the reasonable control of a party, it is
unavoidable even the affected party has given reasonable attention to it, including but not
limited to, the acts of government, acts of nature, fire, explosion, typhoon, flood,
earthquake, tidal, lightning or war. However, credit, capital or financing shortage shall not
be considered as matters beyond the partys reasonable control. The party, affected by the
force majeure and seeking to remove its responsibilities of this Agreement, shall promptly
notify the other party regarding such responsibilities exemption matter and let to the other
party know the steps to be taken to fulfill it. |
12.2 | When the performance of this Agreement is delayed or prevented due to force majeure, the
affected party shall not assume any responsibility under this Agreement to the extent it is
within the scope of the delay or prevention. The affected party shall
take appropriate measures to reduce or eliminate the impact of force majeure and take
effort to resume the performance of the obligation delayed or prevented by the event of
force majeure . Once the event of force majeure is removed, both parties agree to resume
the performance of this Agreement with their greatest efforts. |
3
13. | NOTICE |
4
14. | ENTIRE AGREEMENT |
15. | SEVERABILITY |
16. | AMENDMENTS AND SUPPLEMENTS |
17. | COUNTERPART |
5
PARTY A: Mr. Xue Zhixin | ||||||
Signature: | /s/ Xue Zhixin | |||||
PARTY B: Primalights III Agriculture Development Co., Ltd. | ||||||
Signature: | /s/ Xue Zhixin | |||||
Name: | Xue Zhixin | |||||
Title: | Legal Representative |
6
1. | Formula for calculation |
|
Party B shall pay RMB million consulting service fee every year to Party A. |
||
2. | Payment method |
(i) | Every fiscal year Party A will issue a settlement statement to Party B,
according to the content of the services provided to Party B, and submit to Party B in
writing for verification and confirmation. |
||
(ii) | Party B shall pay the consulting service fee to Party As designated account
within the due date as indicated in the settlement statement provided by Party A. Party
B should facsimile or mail the copy of remittance voucher to Party A. |
3. | Adjustment mechanism |
|
If Party A deems that the pricing mechanism stipulated in this agreement is inapplicable for
some reason that the pricing mechanism needs to be adjusted, Party A should negotiate with
Party B actively and in good faith to determine a new standard or mechanism of charges,
within 7 working days after Party As written request for such adjustment. |
7
To:
|
Primalights III Agriculture Development Co., Ltd. | |
Address: Primalights III Agriculture Development Co., Ltd. Middle Area of Highway 73, Zhuang Er Shang Village, |
||
Huang Ling Rural Area, Xiaodian District, Taiyuan City | ||
Tel: 0351- 7870123 | ||
Fax: 0351- 7123671 |
Very truly yours, | ||||||
Aero-Biotech Science & Technology Co. Ltd. | ||||||
Signature: | /s/ Xie Tao | |||||
Name: | Xie Tao | |||||
Title: | Chief Executive Officer |
To:
|
Primalights III Agriculture Development Co., Ltd. Address: Middle Area of Highway 73, Zhuang Er Shang Village, Huang Ling Rural Area, Xiaodian District, Taiyuan City Fax: 0351- 7123671 Tel: 0351- 7870123 |
|
Juan Li PRC Identification Card No. : 420983197609010023 Units 1 & 8, 17th Floor, Duty-free Business Building, No.6 Fu Hua First Road, Futian District, Shenzhen City Fax: 0755-82766965 Tel: 0755-82766980 |
||
Zhaohua Qian PRC Identification Card No. : 130224670510033 Room 716, Huan Tai Building, South Street, Zhong Guan Cun, Haidian District, Beijing Fax: 010-62109298 Tel: 010-62109299 |
||
Zhixin Xue PRC Identification Card No. : 140102196210230813 Address: 25th Floor, Jin Gang Hotel, No.91 Bing Zhou North Road, Taiyuan City, Shanxi Province Fax: 0351-4727112 Tel: 0351-4727118 |
||
Mingshe Zhang PRC Identification Card No. : 140104710212037 25th Floor, Jin Gang Hotel, No.91 Bing Zhou North Road, Taiyuan City, Shanxi Province Fax: 0351-4727111 Tel: 0351-4727111 |
Aero-Biotech Science & Technology Co., Ltd. | ||||||
By: | /s/ Xie Tao | |||||
Name: | Xie Tao | |||||
Title: | Chief Executive Officer |
- 2 -
Aero-Biotech Science & Technology Co., Ltd. | ||||||
By: | /s/ Xie Tao | |||||
Name: | Xie Tao | |||||
Title: | Chief Executive Officer |
Shareholders Agreement | ||
Relating to Agria Asia Investments Limited | ||
Agria Group Limited (Agria Group) | ||
New Hope International (Hong Kong) Limited (New Hope) | ||
Agria Corporation |
Details |
4 | |||
Agreed terms |
5 | |||
1. Defined terms and interpretation |
5 | |||
1.1 Defined terms |
5 | |||
1.2 Interpretation |
6 | |||
1.3 Headings |
6 | |||
2. Commencement |
7 | |||
2.1 Commencement |
7 | |||
3. Rights of First Offer and Tag-along Right of New Hope |
7 | |||
3.1 Right of First Offer |
7 | |||
3.2 Tag-Along Right |
7 | |||
3.3 Permitted Transfers |
8 | |||
4. Put Option of New Hope |
8 | |||
4.1 Put Option |
8 | |||
4.2 Repurchase Price |
9 | |||
5. Covenant |
9 | |||
5.1 Security Agreements |
9 | |||
5.2 Further Action |
10 | |||
5.3 Information |
10 | |||
6. Warranties |
10 | |||
6.1 Capacity and status |
10 | |||
6.2 Information accuracy |
10 | |||
6.3 Legal advice |
11 | |||
6.4 Confidentiality obligations |
11 | |||
6.5 Announcements |
11 | |||
6.6 Exceptions |
11 | |||
6.7 Survival |
11 | |||
7. Termination |
12 | |||
7.1 Automatic termination |
12 | |||
7.2 Accrued rights |
12 | |||
8. Disputes |
12 | |||
9. Notices and other communications |
13 | |||
9.1 Service of notices |
13 | |||
9.2 Effective on receipt |
13 | |||
10. Miscellaneous |
14 | |||
10.1 Alterations |
14 | |||
10.2 Approvals and consents |
14 | |||
10.3 Costs |
14 | |||
10.4 Assignment |
14 |
page 2
10.5 Survival |
14 | |||
10.6 Counterparts and electronic copies |
14 | |||
10.7 No merger |
14 | |||
10.8 Entire agreement |
14 | |||
10.9 Further action |
14 | |||
10.10 Severability |
14 | |||
10.11 Waiver |
14 | |||
10.12 Relationship |
15 | |||
10.13 Governing law and jurisdiction |
15 | |||
10.14 Effectiveness |
15 | |||
Signing page |
16 | |||
Exhibit I First Pledge Agreement |
17 |
page 3
Name
|
Agria Group Limited | |
Short name
|
Agria Group | |
Notice Details
|
21/F Tower B, PingAn International Finance Center, 1-3
Xinyuan South Road, Chaoyang District, Beijing, China |
|
Fax
|
010-84381003 | |
Attention
|
John Layburn | |
Name
|
Agria Corporation | |
Short name
|
Agria Corporation | |
Notice Details
|
21/F Tower B, PingAn International Finance Center, 1-3
Xinyuan South Road, Chaoyang District, Beijing, China |
|
Fax
|
010-84381003 | |
Attention
|
John Layburn | |
Name
|
New Hope International (Hong Kong) Limited | |
Short name
|
New Hope | |
Notice Details
|
Suite 2508, West Tower, LG Twin Tower, Jianguomenwai Avenue, Chaoyang District, Beijing, China | |
Fax
|
010-65676087 | |
Attention
|
Tianli Zhang |
A | Agria Group, a company incorporated under the laws of British Virgin Islands, is a wholly-owned subsidiary of Agria Corporation, a NYSE listed company incorporated under the laws of Cayman Islands. | |
B | New Hope is a company with limited liability incorporated under the laws of the Hong Kong Special Administrative Region of the PRC. | |
C | Agria Asia Investments Limited (Company), is a company incorporated under the laws of British Virgin Islands whose shareholders became Agria Group and New Hope pursuant to certain subscription agreements entered into between Agria Group, New Hope and the Company. | |
D | The Company is the sole shareholder of Agria (Singapore) Pte. Ltd. (Subsidiary) which holds 50.01% of the shares in PGG Wrightson Limited, a New Zealand public company with the largest rural services business in New Zealand (PGW). | |
E | New Hope intends to be a medium to long term holder of shares in the Company, unless changed circumstances cause New Hope to change its objectives, in which case the parties hereto will use their respective reasonably best efforts to agree upon a partial or full exit for New Hope. Agria and New Hope have entered into this agreement in connection with certain matters relating to their shareholdings in the Company unless there is any other agreement reached between Agria Group and New Hope. |
page 4
1. | Defined terms and interpretation | |
1.1 | Defined terms | |
In this agreement: | ||
Affiliate means, with respect to any person, any other person directly or indirectly Controlling, Controlled by, or under common Control with such person. | ||
Business Day means a day that is not a Saturday or Sunday, or a public holiday in any of Beijing, China, the City of New York, New York, USA and Auckland and Christchurch, New Zealand. | ||
Change in Control means any change in the largest beneficial owner (as such term is defined in Section 13 of the U.S. Securities Exchange Act of 1934) of the shares of Agria Corporation as of the date of this Agreement. | ||
Completion Date means 29 April 2011. | ||
Conditions means any required material third-party or governmental approvals, compliance with applicable laws and the absence of any injunction or similar legal order preventing such transaction. | ||
Confidential Information means any of the following which is not in the public domain: |
(a) | information concerning the contents of the Transaction Documents or any transaction undertaken under the Transaction Documents; |
(b) | all data bases, source codes, methodologies, manuals, artwork, advertising manuals, trade secrets and all financial, accounting, marketing and technical information, customer and supplier lists, know-how, technology, operating procedures and other information, used by or relating to the Company or the Subsidiary and its transactions and affairs; |
(c) | all notes and reports incorporating or derived from information referred to in paragraph (a) or (b); and |
(d) | all copies of the information, notes and reports referred to in paragraphs (a) to (c). |
page 5
1.2 | Interpretation | |
In this agreement, unless the context otherwise requires: |
(a) | the singular includes the plural and vice versa and a gender includes other genders; |
(b) | another grammatical form of a defined word or expression has a corresponding meaning; |
(c) | a reference to a clause, paragraph, schedule or annexure is to a clause in or paragraph of or schedule or annexure to this agreement and a reference to this agreement includes any schedule or annexure; |
(d) | a reference to a document or instrument, includes the document or instrument as novated, altered, supplemented or replaced from time to time; | ||
(e) | a reference to time is to New Zealand time; |
(f) | a reference to a party to this agreement, and a reference to a party to a document includes the partys executors, administrators, successors and permitted assigns and substitutes; |
(g) | a reference to a person includes a natural person, partnership, body corporate, association, governmental or local authority or agency or other entity; |
(h) | a reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of any of them; |
(i) | the meaning of general words is not limited by specific examples introduced by including, for example or similar expressions; |
(j) | any agreement, representation, warranty or indemnity in favour of two or more parties (including where two or more persons are included in the same defined term) is for the benefit of them jointly and severally; |
(k) | a rule of construction does not apply to the disadvantage of a party because the party was responsible for the preparation of this agreement or any part of it; |
(l) | if a day on or by which an obligation must be performed or an event must occur is not a Business Day, the obligation must be performed or the event must occur on or by the next Business Day; and |
(m) | if a calculation relating to the issue or Transfer of Shares under this agreement results in a number that is, or includes, a fraction, the fraction is rounded down to the nearest whole number. |
1.3 | Headings |
page 6
2. | Commencement | |
2.1 | Commencement | |
This agreement shall commence on the date of this Agreement. | ||
3. | Rights of First Offer and Tag-along Right of New Hope | |
3.1 | Right of First Offer | |
3.1.1 | If Agria Corporation proposes to Transfer all or any part of its shares in Agria Group, other than to a Permitted Transferee (as defined below), Agria Corporation shall first give written notice (the ROFO Notice) to New Hope stating its bona fide intention to Transfer such shares (Relevant Shares), including a description of any material terms, including the amount of the Relevant Shares and the price per share (the ROFO Price), of such intended Transfer. The ROFO Notice shall constitute an irrevocable and binding written offer (the Offer) to sell all, but not part, of the Relevant Shares at the ROFO Price and on the offer terms specified in the Offer. | |
3.1.2 | New Hope may accept the Offer by delivering an irrevocable written acceptance (an Acceptance) to Agria Corporation within 15 days after the receipt of the ROFO Notice. Following any Acceptance, the closing of the purchase of the Relevant Shares and any Shares being sold pursuant to the exercise of a Tag-Along Right in accordance with Section 3.2 shall take place on the 90th day (unless such day is not a Business Day, in which case it will occur on the Business Day immediately after the 90th day) after the date of such Acceptance unless the parties agree on a different time, subject to the satisfaction of any Conditions, in which case, such closing shall be delayed pending satisfaction of such Conditions; provided, that if any Conditions remain unsatisfied as of the 120th day after the date of Acceptance (the Expiration Date), New Hope shall be deemed to have not delivered such Acceptance and Section 3.1.3 shall apply. | |
3.1.3 | If New Hope does not deliver an Acceptance within 15 days after the receipt of the ROFO Notice, and otherwise in accordance with Section 3.1.2, Agria Corporation shall have the right, subject to Section 3.2, to sell the Relevant Shares to a third party at a price no less than the ROFO Price and at terms and conditions no less favourable to Agria Corporation than those terms and conditions stated in the ROFO Notice for a period of 270 days from the later of (x) the 15th day following the Offer Date and (y) the Expiration Date (the Sale Period). If Agria Corporation does not Transfer the applicable Relevant Shares before the end of the Sale Period, Agria Corporation may not sell any Relevant Shares without complying with this Section 3.1. | |
3.1.4 | For the avoidance of doubt, Agria Corporations rights and obligations under this agreement shall only be with respect to this Section 3.1. | |
3.2 | Tag-Along Right | |
3.2.1 | Subject to compliance with Section 3.1, if Agria Group proposes to Transfer the shares in the Company to a person (the Purchaser), other than (i) in accordance with Section 3.1, or (ii) to a Permitted Transferee as defined below (a Tag-Along Sale), Agria Group shall give written notice (a Tag-Along Notice) to New Hope at least 30 days prior to the consummation of such proposed Tag-Along Sale setting forth: |
(a) | the total number of Shares proposed to be Transferred to the Purchaser (the Tag-Along Offered Shares) and the sale price per share; | ||
(b) | the identity of the Purchaser; | ||
(c) | any other material terms and conditions of the proposed Transfer; and | ||
(d) | the expected date of the proposed Transfer. |
page 7
3.2.2 | Upon delivery of a Tag-Along Notice, New Hope shall have the right, but not the obligation, to sell up to its Pro Rata Portion of the Tag-Along Offered Shares at the same price per share, for the same form of consideration and pursuant to the same terms and conditions as set forth in the Tag-Along Notice. If New Hope wishes to participate in the Tag-Along Sale, it shall provide irrevocable written notice to Agria Group no later than 20 days after the date of the Tag-Along Notice. Such notice shall (i) set forth the number of Shares that New Hope elects to include in the Tag-Along Sale, which number shall not exceed its Pro Rata Portion of the Tag-Along Offered Shares, and (ii) constitute New Hopes binding agreement to sell such Shares in the Tag-Along Sale on the terms and conditions applicable to the Tag-Along Sale. Agria Group shall not consummate the Tag-Along Sale unless the Purchaser purchases all of the Shares requested to be included in the Tag-Along Sale by New Hope on the same terms and conditions applicable to Agria Group; provided, that if the number of Shares which Agria Group and New Hope elect to sell in the Tag-Along Sale is more than the Tag-Along Offered Shares, to the extent that the Purchaser does not elect to purchase such excess shares, the number of shares to be sold by Agria Group and New Hope shall be reduced on a pro rata basis according to the proportion which the number of Shares that each of Agria Group and New Hope elects to have included in the Tag-Along Sale pursuant to this Section 3.2 bears to the total number of Shares elected by Agria Group and New Hope to have included in the Tag-Along Sale pursuant to this Section 3.2. |
3.2.3 | Agria Group shall have the right for a period of 120 days (which period may be extended to 180 days to satisfy any Conditions) after the expiration of the 20-day period referred to in Section 3.2.2 to Transfer the Tag-Along Offered Shares subject to the Tag-Along Notice (not otherwise sold by New Hope) to the Purchaser at a price not greater than the price contained in, and otherwise on terms and conditions not materially more favourable to Agria Group than those set forth in the Tag-Along Notice. After the end of the 120-day period referred to in this Section 3.2.3, Agria Group will not effect Transfer of any shares that are the subject of the Tag-Along Notice without commencing de novo the procedures set forth in this Section 3.2. |
3.2.4 | Pro Rata Portion means with respect to New Hope, in the case that Agria Group proposes to Transfer all or any portion of its Shares, such portion of Shares held by New Hope that represents the same percentage of the total number of Shares held by it as the total number of Shares proposed to be sold by Agria Group represents to the total number of Shares held by Agria Group. | |
3.3 | Permitted Transfers | |
Sections 3.1 and 3.2 do not apply to a Transfer to a company of which the ROFO Seller is the sole beneficial owner of the shares or to a wholly owned subsidiary of that company (Permitted Transferee). |
4. | Put Option of New Hope | |
4.1 | Put Option | |
4.1.1 | New Hope shall have the right to sell its Shares in the Company to Agria Group (the Put Option) as follows: |
(a) | within 30 days after 12 months following the Completion Date, New Hope shall have the right to serve a prior written notice to Agria Group to sell up to 30% of the Shares in the Company initially subscribed by it to Agria Group; |
(b) | within 30 days after 24 months following the Completion Date, New Hope shall have the right to serve a prior written notice to Agria Group to sell up to 60% of the Shares in the Company less any Shares sold under Section 4.1.1 (a) that were initially subscribed by it to Agria Group; and |
(c) | within 30 days after 36 months following the Completion Date, New Hope shall have the right to serve a prior written notice to Agria Group to sell up to 100% of the Shares in the Company less the Shares sold under Section 4.1.1 (a) and Section 4.1.1 (b) that were initially subscribed by it to Agria Group. |
page 8
4.1.2 | Within 45 days after the occurrence of any or all of the following events, which information shall be promptly communicated to New Hope by Agria Group within 5 days after such occurrence, New Hope shall have the right to serve a written notice to Agria Group to sell all of the Shares in the Company held by it: |
(a) | Agria Corporation has undergone a Change in Control; or |
(b) | Agria Corporation unilaterally terminates the service agreement (to be entered into and a copy forthwith after execution to be delivered to New Hope) between Mr. Xie Tao and Agria Corporation within three years following the Completion Date without cause. |
4.2 | Repurchase Price | |
The repurchase price (Repurchase Price) payable by Agria Group to New Hope upon exercise of the Put Option by New Hope shall be a price to be agreed upon in writing by Agria Group and New Hope. | ||
5. | Covenant | |
5.1 | Security Agreements | |
5.1.1 | Agria Group shall: |
(a) | execute and deliver the First Pledge Agreement upon the signing of this Agreement; and |
(b) | cause Mr. Guanglin Lai to execute and deliver the Personal Guaranty in a form to be agreed between New Hope and Agria Group upon the signing of this Agreement |
5.1.2 | In the event that the Subsidiary executes and delivers the Second Pledge Agreement to New Hope, the parties agree that the First Pledge Agreement and the Personal Guaranty shall be terminated and the relevant parties thereunder shall be released and discharged from any and all obligations and liabilities with respect to the First Pledge Agreement and the Personal Guaranty. |
5.1.3 | The Security Agreements will terminate if the Put Options have been exercised by New Hope to the fullest extent and Agria Group has paid to New Hope all of the considerations in connection with the Put Options as determined by Section 4.2. |
5.1.4 | The Security Agreement will terminate if New Hope does not exercise the Put Options within 30 days after 36 months following the Completion. |
5.1.5 | The Security Agreement will also terminate if New Hope does not exercise the Put Options within 45 days after the occurrence of all of the events set forth in Section 4.1.2 (a) (b), which information shall be promptly communicated to New Hope by Agria Group within 5 days after such occurrence. |
page 9
5.2 | Further Action |
5.3 | Information |
6. | Warranties |
6.1 | Capacity and status |
(a) | it is validly existing under the laws of its place of incorporation; |
(b) | it has the power to enter into and perform its obligations under this agreement and to carry out the transactions contemplated by this agreement; |
(c) | it has taken all necessary action to authorise its entry into and performance of this agreement and to carry out the transactions contemplated by this agreement; and |
(d) | its obligations under this agreement are valid and binding and enforceable against it in accordance with their terms. |
6.2 | Information accuracy |
page 10
6.3 | Legal advice |
6.4 | Confidentiality obligations |
(a) | use the Confidential Information only to make decisions regarding their investment in the Group, and |
(b) | keep that Confidential Information confidential and not disclose it or allow it to be disclosed to any third party except, and in all cases subject to any obligations under any applicable laws or regulations: |
(i) | with the prior written approval of the other party; or |
(ii) | to officers, employees and consultants or advisers of the parties (or their Related Companies) who have a need to know (and only to the extent that each has a need to know) and are aware that the Confidential Information must be kept confidential, |
6.5 | Announcements |
6.6 | Exceptions |
(a) | is disclosed to a party, but at the time of disclosure is rightfully known to or in the possession or control of the party and not subject to an obligation of confidentiality on the party; |
(b) | is public knowledge (except because of a breach of this agreement or any other obligation of confidence); |
(c) | is required to be disclosed by law or order of any court, tribunal, authority or regulatory body or in connection with the enforcement of this agreement or by the rules of a stock exchange, in which case the disclosing party shall discuss with the other party within a reasonable period before the disclosure and make reasonable efforts to seek confidential treatment as reasonably requested by the other party to the extent practicable. |
6.7 | Survival |
page 11
7. | Termination | |
7.1 | Automatic termination |
(a) | if all parties agree; |
(b) | for any party, when it stops holding, directly or indirectly, any Shares, at which time the Shareholder has no further rights or obligations under this agreement; | ||
(c) | when the Company is liquidated; or | ||
(d) | on the day on which an agreement to sell all the Shares is completed. |
7.2 | Accrued rights |
8. | Disputes |
(a) | The parties agree to negotiate in good faith to resolve any dispute among them regarding this Agreement. If the negotiations do not resolve the dispute to the reasonable satisfaction of all Parties to the dispute within thirty (30) days of notification of the dispute in writing by one party delivered to the other Party, the dispute shall be referred to arbitration under Section 8(b). |
(b) | The arbitration shall be conducted in Hong Kong under the auspices of the Hong Kong International Arbitration Centre (the HKIAC). There shall be three arbitrators. The complainant and the respondent to such dispute shall each select one arbitrator within thirty (30) days after giving or receiving the demand for arbitration. Such arbitrators shall be freely selected, and the parties hereto shall not be limited in their selection to any prescribed list. The Chairman of the HKIAC shall select the third arbitrator. If either Party to the arbitration does not appoint an arbitrator who has consented to participate within the said thirty (30) day period, the relevant appointment shall be made by the Chairman of the HKIAC. |
(c) | The arbitration proceedings shall be conducted in English. The arbitration tribunal shall apply the Arbitration Rules of the HKIAC in effect at the time of the arbitration. However, if such rules are in conflict with the provisions of this Section 8, including the provisions concerning the appointment of arbitrators, the provisions of this Section 8 shall prevail. |
(d) | Each party shall cooperate with any party to the dispute in making full disclosure of and providing complete access to all information and documents requested by such party in connection with such arbitration proceedings, subject only to any confidentiality obligations binding on the party receiving the request. |
(e) | The award of the arbitration tribunal shall be final and binding upon and the exclusive remedy of the disputing parties, and any party to the dispute may apply to a court of competent jurisdiction for enforcement of such award. |
(f) | Any party to the dispute shall be entitled to seek preliminary injunctive relief, if possible, from any court of competent jurisdiction pending the constitution of the arbitral tribunal. |
page 12
9. | Notices and other communications | |
9.1 | Service of notices |
(a) | in writing, in English and signed by a person duly authorised by the sender; and |
(b) | hand delivered or sent by prepaid post or facsimile or e mail to the recipients address for Notices, as varied by any Notice given by the recipient to the sender. |
9.2 | Effective on receipt |
(a) | if hand delivered, on delivery; |
(b) | if sent by prepaid post, on the second Business Day after the date of posting to an address within the country in which the notice was sent (or on the seventh Business Day after the date of posting if posted to a place outside the country from which the notice was sent); |
(c) | if sent by facsimile, on the date and time shown on the transmission report by the machine from which the facsimile was sent which indicates that the facsimile was sent in its entirety and in legible form to the facsimile number of the addressee notified for the purposes of this clause; or |
(d) | if sent by email, on the date and time at which it enters the addressees information system (as shown in a confirmation of delivery report from the senders information system, which indicates that email was sent to the email address of the addressee notified for the purposes of this clause), |
page 13
10. | Miscellaneous | |
10.1 | Alterations |
10.2 | Approvals and consents |
10.3 | Costs | |
All costs and expenses (including, without limitation, fees and disbursements of counsel, financial advisers and accountants) incurred in connection with this agreement and the transactions contemplated hereby shall be paid by each party. | ||
10.4 | Assignment |
(a) | Subject to clause 10.4(b), a party may only assign this agreement or a right under this agreement with the prior written consent of each other party. | ||
(b) | A party hereto may assign its rights under this agreement to a person to whom it sells all of its Shares in accordance with, and subject to, this agreement. |
10.5 | Survival | |
Any indemnity or obligation of confidentiality under this agreement is independent from the other obligations of the parties and survives termination of this agreement. Any other term which by its nature is intended to survive termination of this agreement survives termination of this agreement. | ||
10.6 | Counterparts and electronic copies | |
This agreement may be executed in counterparts. All executed counterparts constitute one document. This agreement may be executed on the basis of an exchange of facsimile, scanned or other electronic copies and execution of this agreement by such means is to be a valid and sufficient execution. | ||
10.7 | No merger | |
The rights and obligations of the parties under this agreement do not merge on completion of any transaction contemplated by this agreement. | ||
10.8 | Entire agreement | |
This agreement, together with the other Transaction Documents, constitutes the entire agreement between the parties in connection with its subject matter and supersedes all previous agreements or understandings between the parties in connection with its subject matter. | ||
10.9 | Further action | |
Each party must do, at its own expense, everything reasonably necessary (including executing documents) to give full effect to this agreement and any transaction contemplated by it. | ||
10.10 | Severability | |
A term or part of a term of this agreement that is illegal or unenforceable may be severed from this agreement and the remaining terms or parts of the term of this agreement continue in force. | ||
10.11 | Waiver | |
A party does not waive a right, power or remedy if it fails to exercise or delays in exercising the right, power or remedy. A single or partial exercise by a party of a right, power or remedy does not prevent another or further exercise of that or another right, power or remedy. A waiver of a right, power or remedy must be in writing and signed by the party giving the waiver. |
page 14
10.12 | Relationship | |
Except where this agreement expressly states otherwise, this agreement does not create a relationship of employment, trust, agency or partnership between the parties. | ||
10.13 | Governing law and jurisdiction | |
This agreement is governed by the laws of the Hong Kong Special Administrative Region of the Peoples Republic of China (Hong Kong) and each party irrevocably and unconditionally submits to the exclusive jurisdiction of the courts of Hong Kong. | ||
10.14 | Effectiveness | |
The effectiveness of this Agreement is subject to the transaction contemplated in the Transaction Documents being approved by relevant authorities in China. To the extent that any provision or term of this agreement requires approval under any law of New Zealand or the NZX Listing Rules, such provision or term will not take effect until or unless such approval is obtained or waived and the terms of any such approval complied with. |
page 15
SIGNED by AGRIA GROUP LIMITED by its duly authorised signatory: |
/s/ Lai Guanglin
|
|||
Lai Guanglin | ||||
Name of authorised signatory | ||||
SIGNED by AGRIA CORPORATION by its duly
|
/s/ Xie Tao | |||
authorised signatory, only with respect
to Section 3.1 hereof:
|
Signature of authorised signatory | |||
Xie Tao | ||||
Name of authorised signatory | ||||
SIGNED by NEW HOPE INTERNATIONAL
|
/s/ [Illegible] | |||
(HONG KONG) LIMITED by its duly authorised signatory: |
Signature of authorised signatory | |||
Name of authorised signatory |
page 16
page 17
page 18
(1) | Agria Group Limited, a company incorporated under the laws of the British Virgin Islands (the Chargor); and |
(2) | New Hope International (Hong Kong) Limited, a company incorporated under the laws of Hong Kong (Chargee); |
(3) | Whereas: |
(A) | The Chargor, the Chargee and Agria Asia Investments Limited entered into a subscription agreement (Subscription Agreement) dated 14 April 2011 and a related shareholder agreement (Shareholder Agreement) dated 28 June 2011 in respect of the subscription of the shares in Agria Asia Investment Limited on 29 April 2011. It is a condition under the Shareholder Agreement that the Chargor shall enter into this share charge in relation to the issued share capital of the Charged Company (as defined below). |
(B) | The Chargee shall hold the benefit of this Charge for itself and on trust for the holders of the Notes. |
1 | Definitions and Interpretation |
1.1 | In this Charge (except where the context otherwise requires) words and expressions shall have the same meanings assigned to them as defined in the Subscription Agreement and the Shareholder Agreement and the following words and expressions shall have the following meanings: |
BCA
|
means the BVI Business Companies Act, 2004 (as amended); | |
Business Day
|
means, in the case of delivery of a notice, any day which is not a Saturday or Sunday or public holiday in the place at which the notice is left or sent, and in any other case, any day which is not a Saturday or Sunday or a public holiday in the British Virgin Islands; | |
Charge
|
means this share charge to be entered into between the Chargor and the Chargee; |
Charged Shares
|
means the Initial Shares and all and any other shares, warrants and other securities of any kind (including loan capital) of the Charged Company now or at any time in the future legally and/or beneficially owned by the Chargor or in which the Chargor has any interest and all rights, benefits and advantages now or at any time in the future deriving from or incidental to any of the Charged Shares, including, without limitation: |
(a) | all dividends, interest and other income paid or payable in relation to any Charged Shares; and | ||
(b) | all shares, securities, rights, monies or other property accruing, offered or issued at any time by way of redemption, conversion, exchange, substitution, preference, option or otherwise in respect of any Charged Shares (including but not limited to proceeds of sale); |
Charged Shares shall exclude any shares of the Charged Company that may be sold to Ngai Tahu Holdings Corporation Limited (Ngai Tahu) by the Chargor pursuant to a conditional share purchase agreement between Ngai Tahu and the Chargor dated 15 April 2011. | ||
Charged Company
|
means the company set forth in Column C of Schedule 1 in this Charge; | |
Company
|
means Agria Asia Investment Limited, a company incorporated in the British Virgin Islands of PO Box 957, Road Town, Tortola, British Virgin Islands; | |
Enforcement Notice
|
means an enforcement notice served by the Chargee on the Chargor; | |
Initial Shares
|
means the shares listed in Schedule 1, which are registered at the date of this Charge in the name of the Chargor; | |
Insolvency Act
|
means the BVI Insolvency Act, 2003 (as amended); | |
Receiver
|
means as defined in Clause 8; | |
Register of Members
|
means the register of members held at the Charged Companys registered office, containing the names and addressed of the persons who hold shares in the Charged Company, the number of each class and series of shares held by each member, the date on which the name of each member was entered in the register of members, and the date on which any eligible person ceased to be a member of the Charged Company; |
2
Registry
|
means the Registry of Corporate Affairs in the British Virgin Islands; | |
Secured Obligations
|
means all and any amounts of any kind, now or in the future, actual or contingent, due or payable (or expressed to be due or payable) by the Chargor to the Chargee in any currency, actually or contingently, solely and/or jointly and/or severally with another or others as principal or surety on any account whatsoever under or in connection with the Put Option defined and contemplated in the Shareholder Agreement; | |
Security Interest
|
means any mortgage, charge, pledge, lien, encumbrance, right of set off or any security interest, howsoever created or arising; and | |
Shareholder
Agreement
|
means a shareholder agreement entered into by and between Chargor, Chargee and the Agria Corporation dated 28 June 2011, containing, among other matters, the Put Option as defined in the Shareholder Agreement. | |
Subscription
Agreement
|
means a subscription agreement entered into bv and between Chargor, Chargee, the Company in connection with the subscription of shares in the Company on 29 April 2011 (as may be amended from time to time); | |
Termination Event
|
means any breach of, or a termination event, or default or event of default under the Shareholder Agreement by the Company or this Charge by the Chargor that is either incapable of remedy or if capable of remedy has been continuing for 7 Business Days following notification by the Chargee. |
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1.2 | In this Charge: |
(a) | any reference to a Recital, Clause or Schedule is to the relevant Recital, Clause or Schedule of or to this Charge and any reference to a Sub-Clause or paragraph is to the relevant Sub-Clause or paragraph of the Clause or Schedule in which it appears; | ||
(b) | the clause headings are included for convenience only and shall not affect the interpretation of this Charge; | ||
(c) | use of the singular includes the plural and vice versa; | ||
(d) | use of any gender includes the other genders; | ||
(e) | any phrase introduced by the terms including, include, in particular or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding those terms; and | ||
(f) | references to any document or agreement are to be construed as references to such document or agreement as is in force for the time being and as amended, varied supplemented, substituted or novated from time to time. |
1.3 | The Recitals and Schedules form part of this Charge and shall have effect as if set out in full in the body of this Charge and any reference to this Charge includes the Recitals and Schedules. |
1.4 | The obligations of each person (if more than one person) constituting the Chargor under this Charge are joint and several. |
1.5 | In the event of any conflict between the provisions of this Charge and the Shareholder Agreement, the provisions of the Shareholder Agreement shall prevail. |
2 | Covenant to Pay |
3 | Charge |
3.1 | The Chargor, with full title guarantee, hereby charges by way of first fixed charge as a continuing security for the payment and discharge of the Secured Obligations, all its right, title, interest and benefit present and future in, to and under the Charged Shares subject to the provisions for release of this Charge set out below. |
3.2 | Unless and until a Termination Event has occurred: |
(a) | the Chargor shall be entitled to exercise all voting rights attaching to the Charged Shares or any thereof for all purposes not inconsistent with the purposes of this Charge, any of the Secured Obligations or of the Shareholder Agreement; and |
(b) | the Chargor shall be entitled to receive and retain any and all dividends and other distributions paid in respect of the Charged Shares or any thereof. |
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3.3 | Subject to Clauses 3.4 and 3.5, on the irrevocable and unconditional payment or discharge by or on behalf of the Chargor of the Secured Obligations in full, the Chargee shall, at the request and cost of the Chargor, release this Charge. |
3.4 | Any receipt, release or discharge of any security created by this Charge or of any liability arising under this Charge may only be given by the Chargee in accordance with the provisions on this Charge and shall not release or discharge the Chargor from any liability to the Chargee for the same or any other monies which may exist independently of this Charge. Where such receipt, release or discharge relates to only part of the Secured Obligations such receipt, release or discharge shall not prejudice or affect any other part thereof nor any of the rights and remedies of the Chargee hereunder or under any other agreement nor any of the obligations of the Chargor under this Charge or any other agreement. |
3.5 | Any release, discharge or settlement between the Chargor and the Chargee shall be conditional upon no security, disposition or payment to the Chargee or any other person being void, set aside or ordered to be refunded pursuant to any enactment or law relating to liquidation, administration or insolvency or for any other reason whatsoever and if such condition is not fulfilled the Chargee shall be entitled to enforce this Charge as if such release, discharge or settlement had not occurred and any such payment had not been made. |
3.6 | The restriction on the consolidation of mortgages and on power of sale imposed by sections 35 and 40 respectively of the Conveyancing and Law of Property Act 1961 (as amended) (the CPA Act) shall not apply to the security constituted by this Charge. |
4 | Covenants by the Chargor |
4.1 | it shall deliver to the Chargee the following (on the date hereof) in form and substance acceptable to the Chargee as security in accordance with the terms of this Charge: |
(a) | the original share certificates in respect of the Initial Shares; |
(b) | blank, signed and undated transfers in respect of the Initial Shares in the form set out in Schedule 2; |
4.2 | it shall deliver to the Chargee the following (within 10 Business Days from the date hereof), a certified true copy of the Chargors register of charges, duly stamped and filed at the Registry, showing details of this Charge; |
4.3 | it shall promptly pay (and shall indemnify the Chargee on demand against) all calls, instalments and other payments which may be made or become due in respect of the Charged Shares and so that, in the event of default by the Chargor, the Chargee may do so on behalf of the Chargor; |
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4.4 | it shall not, except with the prior written consent of the Chargee: |
(a) | create or permit to exist over all or part of the Charged Shares (or any interest therein) any Security Interest (other than created or expressly permitted to be created under this Charge) whether ranking prior to, pari passu with or behind the security contained in this Charge; or |
(b) | sell, transfer or otherwise dispose of the Charged Shares or any interest therein or attempt or agree to so dispose (other than in accordance with this Charge); or |
(c) | permit any person other than the Chargor or the Chargee or the Chargees nominee or nominees to be registered as, or become the holder of, the Charged Shares; or |
(d) | vote in favour of a resolution to amend, modify or change the memorandum and articles of association of the Charged Company or to continue the Charged Company in a jurisdiction outside the British Virgin Islands; or |
(e) | to the extent that the same is within the control of the Chargor, allow or consent to any further shares in the Charged Company being issued to any person other than the Chargor (and for the avoidance of doubt any such shares issued to the Chargor will form part of the Charged Shares in accordance with this Charge); |
4.5 | it shall promptly forward to the Chargee all material notices, reports, accounts and other documents relating to the Charged Shares which it may receive from time to time (including all notices of meetings of the shareholders of the Charged Company); |
4.6 | at any time after the occurrence of a Termination Event it shall exercise all voting and other rights and powers which may at any time be exercisable by the holder of the Charged Shares as the Chargee may in its absolute discretion direct; |
4.7 | it shall not take or accept any Security Interest from the Charged Company or, in relation to the Secured Obligations, from any third party, without the Chargees prior written consent; |
4.8 | unless directed in writing to do so by the Chargee it shall not prove in a liquidation or winding up of the Charged Company until all the Secured Obligations are paid in full and if directed to prove by the Chargee (or if the Chargor otherwise receives any payment or other benefit in breach of this Clause or Clause 4.9) the Chargor shall hold all monies received by it on trust for the Chargee to satisfy the Secured Obligations; and |
4.9 | until all of the Secured Obligations have been paid in full, it shall not claim payment whether directly or by set-off, lien, counterclaim or otherwise of any amount which may be or has become due to the Chargor by the Charged Company other than as contemplated and/or expressly permitted by the Shareholder Agreement. |
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5 | Representations and Warranties by the Chargor |
5.1 | the Chargor is the absolute sole legal and beneficial owner of all of the Initial Shares free of all Security Interests, trusts, equities and third party claims whatsoever (save those under this Charge) and that all of the Initial Shares are fully paid up; |
5.2 | the Initial Shares represent 80.81% of the shares issued by the Charged Company; |
5.3 | the Initial Shares are freely transferable on the books of the Charged Company and no consents or approvals are required in order to register a transfer of the Initial Shares; |
5.4 | no litigation against the Chargor or the Charged Company is current or, to their knowledge pending or threatened; |
5.5 | it is duly incorporated and in good standing under the laws of the jurisdiction in which it is incorporated and has and will at all times have the necessary power to enter into and perform its obligations under this Charge and has duly authorised the execution and delivery of this Charge and the performance of its obligations hereunder; |
5.6 | this Charge constitutes its legal, valid, binding and enforceable obligation and is a first priority security interest over the Charged Shares effective in accordance with its terms; |
5.7 | the execution, delivery, observance and performance by the Chargor of this Charge will not require the Chargor to obtain any licences, consents or approvals and will not result in any violation of any law, statute, ordinance, rule or regulation applicable to it; |
5.8 | it is not necessary to file details of this Charge anywhere in the world, save as set out in sections 162 and 163 of the BCA; |
5.9 | it has obtained all the necessary authorisations and consents to enable it to enter into this Charge and the necessary authorisations and consents will remain in full force and effect at all times during the subsistence of the security constituted by this Charge; |
5.10 | the execution, delivery, observance and performance by the Chargor of the Charge will not constitute an event of default or trigger any enforcement under any Security Interest in the Chargors assets nor will it result in the creation of any Security Interest over or in respect of the present or future assets of the Charged Company; |
5.11 | the execution, enforcement or payments made under this Charge will not be subject to any taxes, fees or charges (including stamp duty) in the British Virgin Islands; and |
5.12 | it will procure that details of the Charged Shares shall be entered into the register of members of the relevant Charged Company. |
6 | Power of Attorney |
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7 | Enforcement |
7.1 | The percentage of the Companys shares that may be enforceable under this charge shall be equal to the Repurchase Price (as defined in the Shareholders Agreement) as a percentage of the fair value of the Companys equity. |
7.2 | After this Charge has become enforceable, in accordance with Clause 7.3, the Chargee may in its absolute discretion enforce all or any part of this Charge in any manner it sees fit. For the avoidance of doubt, the Chargees rights of enforcement shall include (without limitation) the right: |
(a) | to perfect or improve its title to and security over the Charged Shares in such manner as the Chargee may in its absolute discretion determine; |
(b) | with notice to, or upon consent or concurrence by, the Chargor to sell the Charged Shares or any part thereof by such method, at such place and upon such terms as the Chargee may in its absolute discretion determine, with power to postpone any such sale and in any such case the Chargee may exercise any and all rights attaching to the Charged Shares as the Chargee in its absolute discretion may determine and without being answerable for any loss occasioned by such sale or resulting from postponement thereof or the exercise of such rights; |
(c) | to receive and retain all dividends and other distributions made on or in respect of the Charged Shares or any thereof and any such dividends and other distributions received by the Chargor after such time shall be held in trust by the Chargor for the Chargee and be paid or transferred to the Chargee on demand to be applied towards the discharge of the Secured Obligations; |
(d) | to exercise (or enable its nominees to exercise) any and all powers, discretion, voting or other rights or entitlements conferred on a holder of the Charged Shares in such manner as the Chargee may in its absolute discretion determine; |
(e) | to exercise any and all other rights, powers and discretions of the Chargor in respect of the Charged Shares in such manner as the Chargee may in its absolute discretion determine; |
(f) | to procure that the Chargee or its nominee or nominees is registered in the Register of Members of the Charged Company as holder of the legal title in and to the Charged Shares; |
(g) | otherwise to enforce any of the rights of the Chargee under or in connection with this Charge in such manner as the Chargee may in its absolute discretion determine; and |
(h) | to date and deliver the documents delivered to it pursuant to this Charge as it considers appropriate and to take all steps to register the Charged Shares in the name of the Chargee or its nominee or nominees and to assume control as the registered owner of the Charged Shares. |
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7.3 | Subject to Clause 7.4 below, the Chargees rights of enforcement in relation to this Charge (other than those listed in section 66(5) of the BCA) shall become immediately enforceable upon the occurrence of a Termination Event. |
7.4 | For the purposes of section 66(7) of the BCA, notwithstanding any other provision of this Charge, the Chargee may enforce all rights of enforcement set out in section 66(5) of the BCA immediately upon the occurrence of a Termination Event that has been continuing for one day and which remains unrectified for a period of not less than one Business Day following notice given by the Chargee to the Chargor instructing the Chargor to immediately rectify such Termination Event (an Unrectified Termination Event). |
7.5 | Neither the Chargee nor any Receiver (as defined in Clause 8 below) will be liable, by reason of entering into possession of a Charged Share, to account as mortgagee in possession or for any loss on realisation or for any default or omission for which a mortgagee in possession might be liable. |
8 | Receiver |
8.1 | Without prejudice to the provisions of Clause 7 above, upon the service of an Enforcement Notice the Chargee shall immediately become entitled to appoint one or more person or persons eligible to be appointed as a receiver under the Insolvency Act as the Chargee thinks fit to be a receiver (the Receiver) in relation to the Charged Shares. Where the Chargee appoints two or more persons as Receiver, the Receivers may act jointly or independently. |
8.2 | The Receiver may take such action in relation to the enforcement of this Charge including, without limitation, to sell, charge or otherwise dispose of the Charged Shares, to exercise any powers, discretion, voting or other rights or entitlements in relation to the Charged Shares and generally to carry out any other action which he may in his sole discretion deem necessary in relation to the enforcement of this Charge. |
8.3 | To the fullest extent permissible under law, the Chargee may exercise any right or power that the Receiver may exercise in relation to the enforcement of this Charge. |
8.4 | The Receiver shall have, in addition to the other powers set out in this Clause, the following powers: |
(a) | power to take possession of, collect and get in the Charged Shares and, for that purpose, to take such proceedings as may seem to him to be expedient; |
(b) | power to raise or borrow money and grant security over the Charged Shares; |
(c) | power to appoint an attorney or accountant or other professionally qualified person to assist him in the performance of his functions; |
(d) | power to bring or defend any action or other legal proceedings in the name of and on behalf of the Chargor in respect of the Charged Shares; |
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(e) | power to do all acts and execute in the name and on behalf of the Chargor any document or deed in respect of the Charged Shares; |
(f) | power to make any payment which is necessary or incidental to the performance of his functions; |
(g) | power to make any arrangement or compromise on behalf of the Chargor in respect of the Charged Shares; |
(h) | power to rank and claim in the insolvency or liquidation of the Charged Company and to receive dividends and to accede to agreements for the creditors of the Charged Company; |
(i) | power to present or defend a petition for the winding up of the Charged Company; and |
(j) | power to do all other things incidental to the exercise of the foregoing powers. |
8.5 | The Receiver shall be the agent of the Chargor and the Chargor alone shall be responsible for his acts and defaults and liable on any contracts made, entered into or adopted by the Receiver. The Chargee shall not be liable for the Receivers acts, omissions, negligence or default, nor be liable on contracts entered into or adopted by the Receiver. |
9 | Application of Monies |
9.1 | The Chargee (and any Receiver) shall apply the monies received by it as a result of the enforcement of the security: |
(a) | first, in payment or satisfaction of the expenses related to enforcement of this security (including without limitation the fees and expenses of the Receiver); |
(b) | secondly, in meeting claims of the Chargee in respect of the Secured Obligations; and | ||
(c) | thirdly, in payment of the balance (if any) to the Chargor. |
9.2 | The Chargee shall not be liable for any loss or damage: |
(a) | occasioned by any sale or disposal of the Charged Shares or an interest in the Charged Shares; or |
(b) | arising out of the exercise, or failure to exercise, any of its powers under this Charge; or |
(c) | occasioned by any neglect or default to pay any instalment or accept any offer or notify the Chargor of any such neglect or default; or |
(d) | occasioned by any other loss of whatever nature in connection with the Charged Shares. |
10 | Protection of Purchasers |
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11 | Continuing Security and Non-Merger |
12 | Currency |
12.1 | For the purpose of, or pending the discharge of, any of the Secured Obligations the Chargee may, in its sole discretion, convert any moneys received or recovered in any currency under this Charge (including the proceeds of any previous conversion under this Clause) from their existing currency of denomination into any other currency at such rate or rates of exchange and at such time as the Chargee thinks fit. |
12.2 | No payment to the Chargee (whether under any judgment or court order or otherwise) shall discharge the Secured Obligations in respect of which it was made unless and until the Chargee shall have received payment in full in the currency in which such Secured Obligations were incurred and, to the extent that the amount of any such payment shall on actual conversion into such currency fall short of such Secured Obligations expressed in that currency, the Chargee shall have a further separate cause of action against the Chargor and shall be entitled to enforce this Charge to recover the amount of the shortfall. |
13 | Costs |
14 | Variation and Amendment |
15 | Assignment |
15.1 | The Chargor may not assign or transfer all or any part of its rights, benefits or obligations under this Charge to any other person without the prior written consent of the Chargee. |
15.2 | The Chargee may not assign or otherwise transfer the whole or any part of the rights, benefits and obligations under the Charge to any other person without the prior written consent of the Chargor. |
16 | Entire Agreement |
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17 | Further Assurance |
17.1 | The Chargor shall promptly execute all documents and do all things that the Chargee may specify for the purpose of: |
(a) | securing and perfecting its security over or title to all or any of the Charged Shares; or |
(b) | enabling the Chargee to vest all or part of the Charged Shares in its name or in the names of its nominee(s), agent or any purchaser. |
18 | Notices |
18.1 | Without prejudice to any other method of service of notices and communications provided by law, a demand or notice under this Charge shall be in writing signed by an officer or agent of the Chargee or the Chargor, as the case may be, and may be served on the Chargor or the Chargee, as the case may be, by hand, by post, or by facsimile transmission. Any such notice or communication shall be sent to the address or number of the relevant party as set out below: |
18.2 | Any such notice or communication given by the Chargee shall be deemed to have been received: |
(a) | if sent by facsimile transmission, at the time of transmission, or the following Business Day if transmitted after normal business hours; |
(b) | if delivered personally (including being sent by courier), at the time of delivery, or the following Business Day if delivered after normal business hours; and |
(c) | if posted, on the fifth Business Day following the day on which it was properly despatched by courier. |
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18.3 | Any notice given by the Chargor shall be deemed to have been given only on actual receipt by the Chargee. |
18.4 | In proving such service it shall be sufficient to prove that the envelope containing such notice was addressed to the address of the relevant party set out in Clause 18.1 (or as otherwise notified by that party hereunder) and delivered either to that address or into the custody of the postal authorities as a pre-paid recorded delivery, registered post or airmail letter, or that the notice was transmitted by fax to the fax number of the relevant party set out in Clause 18.1 (or as otherwise notified by that party hereunder). |
18.5 | For the avoidance of doubt, notice given under this Charge shall not be validly served if sent by e-mail. |
19 | Miscellaneous |
19.1 | All sums payable by the Chargor under this Charge shall be paid without any set-off, counterclaim, withholding or deduction whatsoever unless required by law in which event the Chargor will simultaneously with making the relevant payment under this Charge pay to the Chargee such additional amount as will result in the receipt by the Chargee of the full amount which would otherwise have been receivable and will supply the Chargee promptly with evidence satisfactory to the Chargee that the Chargor has accounted to the relevant authority for the sum withheld or deducted. |
19.2 | No delay or omission on the part of the Chargee in exercising any right or remedy under this Charge shall impair that right or remedy or operate as or be taken to be a waiver of it nor shall any single, partial or defective exercise of any such right or remedy preclude any other or further exercise under this Charge of that or any other right or remedy. |
19.3 | The Chargees rights powers and remedies under this Charge are cumulative and are not, nor are they to be construed as, exclusive of any rights, powers or remedies provided by law or otherwise and may be exercised from time to time and as often as the Chargee deems expedient. |
19.4 | Any waiver by the Chargee of any terms of this Charge or any consent or approval given by the Chargee under it shall be effective only if given in writing and then only for the purpose and upon the terms and conditions (if any) on which it is given. |
19.5 | If at any time any one or more of the provisions of this Charge is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction neither the legality, validity or enforceability of the remaining provisions of this Charge nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall be in any way affected or impaired as a result. |
19.6 | Any statement, certificate or determination of the Chargee as to the Secured Obligations or (without limitation) any other matter provided for in this Charge shall, in the absence of manifest error, be conclusive and binding on the Chargor. |
19.7 | The Chargor shall at all times maintain an agent for service of process in the British Virgin Islands. Such agent shall be ____ of _____ and any writ, judgment or other notice of legal process shall be sufficiently served on the Chargor if delivered to such agent at its address set out above. The Chargor undertakes not to revoke the authority of the above agent and if, for any reason, such agent no longer serves as agent of the Chargor to receive service of process the Chargor shall promptly appoint another such agent and advise the Chargee of the new agents name and address for service. |
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20 | Law and Jurisdiction |
20.1 | This Charge is governed by, and shall be construed in accordance with, the laws of the British Virgin Islands. |
20.2 | The Chargor irrevocably agree for the exclusive benefit of the Chargee that the courts of the British Virgin Islands shall have jurisdiction to hear and determine any suit, action or proceeding and to settle any dispute which may arise out of or in connection with this Charge and for such purposes irrevocably submits to the jurisdiction of such courts. |
21 | Counterparts |
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Title: Director |
||||
In the presence of: |
||||
Title: |
||||
EXECUTED AS A DEED for and on behalf of New Hope International (Hong Kong) Limited as Chargee | ||||
Title: Director |
||||
In the presence of: |
||||
Title: |
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Column A | Column B | Column C | Column D | Column E | ||||||
Place of | ||||||||||
incorporation | Place of | |||||||||
of Charged | Charged | incorporation | No. of | |||||||
Chargor | Company | Company | of Chargor | shares | ||||||
Agria Group Limited |
British Virgin Islands | Agria Asia Investment Limited | British Virgin Islands | 84,078,522 |
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(1) | Agria Group Limited, a company incorporated under the laws of the British Virgin Islands (the
Chargor); and |
(2) | New Hope International (Hong Kong) Limited, a company incorporated under the laws of Hong
Kong (Chargee); |
(A) | The Chargor, the Chargee and Agria Asia Investments Limited entered into a subscription
agreement (Subscription Agreement) dated 14 April 2011 and a related shareholder agreement
(Shareholder Agreement) dated 28 June 2011 in respect of the subscription of the shares in
Agria Asia Investment Limited on 29 April 2011. It is a condition under the Shareholder
Agreement that the Chargor shall enter into this share charge in relation to the issued share
capital of the Charged Company (as defined below). |
(B) | The Chargee shall hold the benefit of this Charge for itself and on trust for the holders of
the Notes. |
1 | Definitions and Interpretation |
1.1 | In this Charge (except where the context otherwise requires) words and expressions shall have
the same meanings assigned to them as defined in the Subscription Agreement and the
Shareholder Agreement and the following words and expressions shall have the following
meanings: |
BCA
|
means the BVI Business Companies Act, 2004 (as amended); | |
Business Day
|
means, in the case of delivery of a notice, any day which is not a Saturday or Sunday or public holiday in the place at which the notice is left or sent, and in any other case, any day which is not a Saturday or Sunday or a public holiday in the British Virgin Islands; | |
Charge
|
means this share charge to be entered into between the Chargor and the Chargee; |
Charged Shares
|
means the Initial Shares and all and any other
shares, warrants and other securities of any kind
(including loan capital) of the Charged Company
now or at any time in the future legally and/or
beneficially owned by the Chargor or in which the
Chargor has any interest and all rights, benefits
and advantages now or at any time in the future
deriving from or incidental to any of the Charged
Shares, including, without limitation: (a) all dividends, interest and other income paid
or payable in relation to any Charged Shares; and (b) all shares, securities, rights, monies or
other property accruing, offered or issued at any
time by way of redemption, conversion, exchange,
substitution, preference, option or otherwise in
respect of any Charged Shares (including but not
limited to proceeds of sale); Charged Shares shall exclude any shares of the Charged Company that may be sold to Ngai Tahu Holdings Corporation Limited (Ngai Tahu) by the Chargor pursuant to a conditional share purchase agreement between Ngai Tahu and the Chargor dated 15 April 2011. |
|
Charged Company
|
means the company set forth in Column C of Schedule 1 in this Charge; | |
Company
|
means Agria Asia Investment Limited, a company incorporated in the British Virgin Islands of PO Box 957, Road Town, Tortola, British Virgin Islands; | |
Enforcement Notice
|
means an enforcement notice served by the Chargee on the Chargor; | |
Initial Shares
|
means the shares listed in Schedule 1, which are registered at the date of this Charge in the name of the Chargor; | |
Insolvency Act
|
means the BVI Insolvency Act, 2003 (as amended); | |
Receiver
|
means as defined in Clause 8; | |
Register of Members
|
means the register of members held at the Charged Companys registered office, containing the names and addressed of the persons who hold shares in the Charged Company, the number of each class and series of shares held by each member, the date on which the name of each member was entered in the register of members, and the date on which any eligible person ceased to be a member of the Charged Company; | |
Registry
|
means the Registry of Corporate Affairs in the British Virgin Islands; |
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Secured Obligations
|
means all and any amounts of any kind, now or in the future, actual or contingent, due or payable (or expressed to be due or payable) by the Chargor to the Chargee in any currency, actually or contingently, solely and/or jointly and/or severally with another or others as principal or surety on any account whatsoever under or in connection with the Put Option defined and contemplated in the Shareholder Agreement; | |
Security Interest
|
means any mortgage, charge, pledge, lien, encumbrance, right of set off or any security interest, howsoever created or arising; and | |
Shareholder Agreement
|
means a shareholder agreement entered into by and between Chargor, Chargee and the Agria Corporation dated 28 June 2011, containing, among other matters, the Put Option as defined in the Shareholder Agreement. | |
Subscription Agreement
|
means a subscription agreement entered into bv and between Chargor, Chargee, the Company in connection with the subscription of shares in the Company on 29 April 2011 (as may be amended from time to time); | |
Termination Event
|
means any breach of, or a termination event, or default or event of default under the Shareholder Agreement by the Company or this Charge by the Chargor that is either incapable of remedy or if capable of remedy has been continuing for 7 Business Days following notification by the Chargee. |
1.2 | In this Charge: |
(a) | any reference to a Recital, Clause or Schedule is to the relevant Recital,
Clause or Schedule of or to this Charge and any reference to a Sub-Clause or paragraph
is to the relevant Sub-Clause or paragraph of the Clause or Schedule in which it
appears; |
(b) | the clause headings are included for convenience only and shall not affect the
interpretation of this Charge; |
||
(c) | use of the singular includes the plural and vice versa; |
(d) | use of any gender includes the other genders; |
(e) | any phrase introduced by the terms including, include, in particular or
any similar expression shall be construed as illustrative and shall not limit the sense
of the words preceding those terms; and |
(f) | references to any document or agreement are to be construed as references to
such document or agreement as is in force for the time being and as amended, varied
supplemented, substituted or novated from time to time. |
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1.3 | The Recitals and Schedules form part of this Charge and shall have effect as if set out in
full in the body of this Charge and any reference to this Charge includes the Recitals and
Schedules. |
1.4 | The obligations of each person (if more than one person) constituting the Chargor under this
Charge are joint and several. |
1.5 | In the event of any conflict between the provisions of this Charge and the Shareholder
Agreement, the provisions of the Shareholder Agreement shall prevail. |
2 | Covenant to Pay |
3 | Charge |
3.1 | The Chargor, with full title guarantee, hereby charges by way of first fixed charge as a
continuing security for the payment and discharge of the Secured Obligations, all its right,
title, interest and benefit present and future in, to and under the Charged Shares subject to
the provisions for release of this Charge set out below. |
|
3.2 | Unless and until a Termination Event has occurred: |
(a) | the Chargor shall be entitled to exercise all voting rights attaching to the
Charged Shares or any thereof for all purposes not inconsistent with the purposes of
this Charge, any of the Secured Obligations or of the Shareholder Agreement; and |
(b) | the Chargor shall be entitled to receive and retain any and all dividends and
other distributions paid in respect of the Charged Shares or any thereof. |
3.3 | Subject to Clauses 3.4 and 3.5, on the irrevocable and unconditional payment or discharge by
or on behalf of the Chargor of the Secured Obligations in full, the Chargee shall, at the
request and cost of the Chargor, release this Charge. |
3.4 | Any receipt, release or discharge of any security created by this Charge or of any liability
arising under this Charge may only be given by the Chargee in accordance with the provisions
on this Charge and shall not release or discharge the Chargor from any liability to the
Chargee for the same or any other monies which may exist independently of this Charge. Where
such receipt, release or discharge relates to only part of the Secured Obligations such
receipt, release or discharge shall not prejudice or affect any other part thereof nor any of
the rights and remedies of the Chargee hereunder or under any other agreement nor any of the
obligations of the Chargor under this Charge or any other agreement. |
4
3.5 | Any release, discharge or settlement between the Chargor and the Chargee shall be conditional
upon no security, disposition or payment to the Chargee or any other person being void, set
aside or ordered to be refunded pursuant to any enactment or law relating to liquidation,
administration or insolvency or for any other reason whatsoever and if such condition is not
fulfilled the Chargee shall be entitled to enforce this Charge as if such release, discharge
or settlement had not occurred and any such payment had not been made. |
3.6 | The restriction on the consolidation of mortgages and on power of sale imposed by sections 35
and 40 respectively of the Conveyancing and Law of Property Act 1961 (as amended) (the CPA
Act) shall not apply to the security constituted by this Charge. |
4 | Covenants by the Chargor |
4.1 | it shall deliver to the Chargee the following (on the date hereof) in form and substance
acceptable to the Chargee as security in accordance with the terms of this Charge: |
(b) | blank, signed and undated transfers in respect of the Initial Shares in the
form set out in Schedule 2; |
4.2 | it shall deliver to the Chargee the following (within 10 Business Days from the date hereof),
a certified true copy of the Chargors register of charges, duly stamped and filed at the
Registry, showing details of this Charge; |
4.3 | it shall promptly pay (and shall indemnify the Chargee on demand against) all calls,
instalments and other payments which may be made or become due in respect of the Charged
Shares and so that, in the event of default by the Chargor, the Chargee may do so on behalf of
the Chargor; |
(a) | create or permit to exist over all or part of the Charged Shares (or any
interest therein) any Security Interest (other than created or expressly permitted to
be created under this Charge) whether ranking prior to, pari passu with or behind the
security contained in this Charge; or |
(b) | sell, transfer or otherwise dispose of the Charged Shares or any interest
therein or attempt or agree to so dispose (other than in accordance with this Charge);
or |
(c) | permit any person other than the Chargor or the Chargee or the Chargees
nominee or nominees to be registered as, or become the holder of, the Charged Shares;
or |
(d) | vote in favour of a resolution to amend, modify or change the memorandum and
articles of association of the Charged Company or to continue the Charged Company in a
jurisdiction outside the British Virgin Islands; or |
(e) | to the extent that the same is within the control of the Chargor, allow or
consent to any further shares in the Charged Company being issued to any person other
than the Chargor (and for the avoidance of doubt any such shares issued to the Chargor
will form part of the Charged Shares in accordance with this Charge); |
5
4.5 | it shall promptly forward to the Chargee all material notices, reports, accounts and other
documents relating to the Charged Shares which it may receive from time to time (including all
notices of meetings of the shareholders of the Charged Company); |
4.6 | at any time after the occurrence of a Termination Event it shall exercise all voting and
other rights and powers which may at any time be exercisable by the holder of the Charged
Shares as the Chargee may in its absolute discretion direct; |
4.7 | it shall not take or accept any Security Interest from the Charged Company or, in relation to
the Secured Obligations, from any third party, without the Chargees prior written consent; |
4.8 | unless directed in writing to do so by the Chargee it shall not prove in a liquidation or
winding up of the Charged Company until all the Secured Obligations are paid in full and if
directed to prove by the Chargee (or if the Chargor otherwise receives any payment or other
benefit in breach of this Clause or Clause 4.9) the Chargor shall hold all monies received by
it on trust for the Chargee to satisfy the Secured Obligations; and |
4.9 | until all of the Secured Obligations have been paid in full, it shall not claim payment
whether directly or by set-off, lien, counterclaim or otherwise of any amount which may be or
has become due to the Chargor by the Charged Company other than as contemplated and/or
expressly permitted by the Shareholder Agreement. |
5 | Representations and Warranties by the Chargor |
5.1 | the Chargor is the absolute sole legal and beneficial owner of all of the Initial Shares free
of all Security Interests, trusts, equities and third party claims whatsoever (save those
under this Charge) and that all of the Initial Shares are fully paid up; |
5.2 | the Initial Shares represent 80.81% of the shares issued by the Charged Company; |
5.3 | the Initial Shares are freely transferable on the books of the Charged Company and no
consents or approvals are required in order to register a transfer of the Initial Shares; |
5.4 | no litigation against the Chargor or the Charged Company is current or, to their knowledge
pending or threatened; |
5.5 | it is duly incorporated and in good standing under the laws of the jurisdiction in which it
is incorporated and has and will at all times have the necessary power to enter into and
perform its obligations under this Charge and has duly authorised the execution and delivery of this
Charge and the performance of its obligations hereunder; |
6
5.6 | this Charge constitutes its legal, valid, binding and enforceable obligation and is a first
priority security interest over the Charged Shares effective in accordance with its terms; |
5.7 | the execution, delivery, observance and performance by the Chargor of this Charge will not
require the Chargor to obtain any licences, consents or approvals and will not result in any
violation of any law, statute, ordinance, rule or regulation applicable to it; |
5.8 | it is not necessary to file details of this Charge anywhere in the world, save as set out in
sections 162 and 163 of the BCA; |
5.9 | it has obtained all the necessary authorisations and consents to enable it to enter into this
Charge and the necessary authorisations and consents will remain in full force and effect at
all times during the subsistence of the security constituted by this Charge; |
5.10 | the execution, delivery, observance and performance by the Chargor of the Charge will not
constitute an event of default or trigger any enforcement under any Security Interest in the
Chargors assets nor will it result in the creation of any Security Interest over or in
respect of the present or future assets of the Charged Company; |
5.11 | the execution, enforcement or payments made under this Charge will not be subject to any
taxes, fees or charges (including stamp duty) in the British Virgin Islands; and |
5.12 | it will procure that details of the Charged Shares shall be entered into the register of
members of the relevant Charged Company. |
6 | Power of Attorney |
7 | Enforcement |
7.1 | The percentage of the Companys shares that may be enforceable under this charge shall be
equal to the Repurchase Price (as defined in the Shareholders Agreement) as a percentage of
the fair value of the Companys equity. |
7
7.2 | After this Charge has become enforceable, in accordance with Clause 7.3, the Chargee may in
its absolute discretion enforce all or any part of this Charge in any manner it sees fit. For
the avoidance of doubt, the Chargees rights of enforcement shall include (without limitation)
the right: |
(a) | to perfect or improve its title to and security over the Charged Shares in such
manner as the Chargee may in its absolute discretion determine; |
(b) | with notice to, or upon consent or concurrence by, the Chargor to sell the
Charged Shares or any part thereof by such method, at such place and upon such terms as
the Chargee may in its absolute discretion determine, with power to postpone any such
sale and in any such case the Chargee may exercise any and all rights attaching to the
Charged Shares as the Chargee in its absolute discretion may determine and without
being answerable for any loss occasioned by such sale or resulting from postponement
thereof or the exercise of such rights; |
(c) | to receive and retain all dividends and other distributions made on or in
respect of the Charged Shares or any thereof and any such dividends and other
distributions received by the Chargor after such time shall be held in trust by the
Chargor for the Chargee and be paid or transferred to the Chargee on demand to be
applied towards the discharge of the Secured Obligations; |
(d) | to exercise (or enable its nominees to exercise) any and all powers,
discretion, voting or other rights or entitlements conferred on a holder of the Charged
Shares in such manner as the Chargee may in its absolute discretion determine; |
(e) | to exercise any and all other rights, powers and discretions of the Chargor in
respect of the Charged Shares in such manner as the Chargee may in its absolute
discretion determine; |
(f) | to procure that the Chargee or its nominee or nominees is registered in the
Register of Members of the Charged Company as holder of the legal title in and to the
Charged Shares; |
(g) | otherwise to enforce any of the rights of the Chargee under or in connection
with this Charge in such manner as the Chargee may in its absolute discretion
determine; and |
(h) | to date and deliver the documents delivered to it pursuant to this Charge as it
considers appropriate and to take all steps to register the Charged Shares in the name
of the Chargee or its nominee or nominees and to assume control as the registered owner
of the Charged Shares. |
7.3 | Subject to Clause 7.4 below, the Chargees rights of enforcement in relation to this Charge
(other than those listed in section 66(5) of the BCA) shall become immediately enforceable
upon the occurrence of a Termination Event. |
7.4 | For the purposes of section 66(7) of the BCA, notwithstanding any other provision of this
Charge, the Chargee may enforce all rights of enforcement set out in section 66(5) of the BCA
immediately upon the occurrence of a Termination Event that has been continuing for one day
and which remains unrectified for a period of not less than one Business Day following notice
given by the Chargee to the Chargor instructing the Chargor to immediately rectify such
Termination Event (an Unrectified Termination Event). |
8
7.5 | Neither the Chargee nor any Receiver (as defined in Clause 8 below) will be liable, by reason
of entering into possession of a Charged Share, to account as mortgagee in possession or for
any loss on realisation or for any default or omission for which a mortgagee in possession
might be liable. |
8 | Receiver |
8.1 | Without prejudice to the provisions of Clause 7 above, upon the service of an Enforcement
Notice the Chargee shall immediately become entitled to appoint one or more person or persons
eligible to be appointed as a receiver under the Insolvency Act as the Chargee thinks fit to
be a receiver (the Receiver) in relation to the Charged Shares. Where the Chargee appoints
two or more persons as Receiver, the Receivers may act jointly or independently. |
8.2 | The Receiver may take such action in relation to the enforcement of this Charge including,
without limitation, to sell, charge or otherwise dispose of the Charged Shares, to exercise
any powers, discretion, voting or other rights or entitlements in relation to the Charged
Shares and generally to carry out any other action which he may in his sole discretion deem
necessary in relation to the enforcement of this Charge. |
8.3 | To the fullest extent permissible under law, the Chargee may exercise any right or power that
the Receiver may exercise in relation to the enforcement of this Charge. |
8.4 | The Receiver shall have, in addition to the other powers set out in this Clause, the
following powers: |
(a) | power to take possession of, collect and get in the Charged Shares and, for
that purpose, to take such proceedings as may seem to him to be expedient; |
||
(b) | power to raise or borrow money and grant security over the Charged Shares; |
(c) | power to appoint an attorney or accountant or other professionally qualified
person to assist him in the performance of his functions; |
(d) | power to bring or defend any action or other legal proceedings in the name of
and on behalf of the Chargor in respect of the Charged Shares; |
(e) | power to do all acts and execute in the name and on behalf of the Chargor any
document or deed in respect of the Charged Shares; |
(f) | power to make any payment which is necessary or incidental to the performance
of his functions; |
(g) | power to make any arrangement or compromise on behalf of the Chargor in respect
of the Charged Shares; |
(h) | power to rank and claim in the insolvency or liquidation of the Charged Company
and to receive dividends and to accede to agreements for the creditors of the Charged
Company; |
(i) | power to present or defend a petition for the winding up of the Charged
Company; and |
(j) | power to do all other things incidental to the exercise of the foregoing
powers. |
9
8.5 | The Receiver shall be the agent of the Chargor and the Chargor alone shall be responsible for
his acts and defaults and liable on any contracts made, entered into or adopted by the
Receiver. The Chargee shall not be liable for the Receivers acts, omissions, negligence or
default, nor be liable on contracts entered into or adopted by the Receiver. |
9 | Application of Monies |
9.1 | The Chargee (and any Receiver) shall apply the monies received by it as a result of the
enforcement of the security: |
(a) | first, in payment or satisfaction of the expenses related to enforcement of
this security (including without limitation the fees and expenses of the Receiver); |
(b) | secondly, in meeting claims of the Chargee in respect of the Secured
Obligations; and |
||
(c) | thirdly, in payment of the balance (if any) to the Chargor. |
9.2 | The Chargee shall not be liable for any loss or damage: |
(a) | occasioned by any sale or disposal of the Charged Shares or an interest in the
Charged Shares; or |
(b) | arising out of the exercise, or failure to exercise, any of its powers under
this Charge; or |
(c) | occasioned by any neglect or default to pay any instalment or accept any offer
or notify the Chargor of any such neglect or default; or |
(d) | occasioned by any other loss of whatever nature in connection with the Charged
Shares. |
10 | Protection of Purchasers |
11 | Continuing Security and Non-Merger |
10
12 | Currency |
12.1 | For the purpose of, or pending the discharge of, any of the Secured Obligations the Chargee
may, in its sole discretion, convert any moneys received or recovered in any currency under
this Charge (including the proceeds of any previous conversion under this Clause) from their
existing currency of denomination into any other currency at such rate or rates of exchange
and at such time as the Chargee thinks fit. |
12.2 | No payment to the Chargee (whether under any judgment or court order or otherwise) shall
discharge the Secured Obligations in respect of which it was made unless and until the Chargee
shall have received payment in full in the currency in which such Secured Obligations were
incurred and, to the extent that the amount of any such payment shall on actual conversion
into such currency fall short of such Secured Obligations expressed in that currency, the
Chargee shall have a further separate cause of action against the Chargor and shall be
entitled to enforce this Charge to recover the amount of the shortfall. |
13 | Costs |
14 | Variation and Amendment |
15 | Assignment |
15.1 | The Chargor may not assign or transfer all or any part of its rights, benefits or obligations
under this Charge to any other person without the prior written consent of the Chargee. |
15.2 | The Chargee may not assign or otherwise transfer the whole or any part of the rights,
benefits and obligations under the Charge to any other person without the prior written
consent of the Chargor. |
16 | Entire Agreement |
17 | Further Assurance |
17.1 | The Chargor shall promptly execute all documents and do all things that the Chargee may
specify for the purpose of: |
(a) | securing and perfecting its security over or title to all or any of the Charged
Shares; or |
(b) | enabling the Chargee to vest all or part of the Charged Shares in its name or
in the names of its nominee(s), agent or any purchaser. |
11
18 | Notices |
18.1 | Without prejudice to any other method of service of notices and communications provided by
law, a demand or notice under this Charge shall be in writing signed by an officer or agent of
the Chargee or the Chargor, as the case may be, and may be served on the Chargor or the Chargee,
as the case may be, by hand, by post, or by facsimile transmission. Any such notice or
communication shall be sent to the address or number of the relevant party as set out below: |
18.2 | Any such notice or communication given by the Chargee shall be deemed to have been received: |
(a) | if sent by facsimile transmission, at the time of transmission, or the
following Business Day if transmitted after normal business hours; |
(b) | if delivered personally (including being sent by courier), at the time of
delivery, or the following Business Day if delivered after normal business hours; and |
(c) | if posted, on the fifth Business Day following the day on which it was properly
despatched by courier. |
18.3 | Any notice given by the Chargor shall be deemed to have been given only on actual receipt by
the Chargee. |
18.4 | In proving such service it shall be sufficient to prove that the envelope containing such
notice was addressed to the address of the relevant party set out in Clause 18.1 (or as
otherwise notified by that party hereunder) and delivered either to that address or into the
custody of the postal authorities as a pre-paid recorded delivery, registered post or airmail
letter, or that the notice was transmitted by fax to the fax number of the relevant party set
out in Clause 18.1 (or as otherwise notified by that party hereunder). |
18.5 | For the avoidance of doubt, notice given under this Charge shall not be validly served if
sent by e-mail. |
12
19 | Miscellaneous |
19.1 | All sums payable by the Chargor under this Charge shall be paid without any set-off,
counterclaim, withholding or deduction whatsoever unless required by law in which event the
Chargor will simultaneously with making the relevant payment under this Charge pay to the
Chargee such additional amount as will result in the receipt by the Chargee of the full amount
which would otherwise have been receivable and will supply the Chargee promptly with evidence
satisfactory to the Chargee that the Chargor has accounted to the relevant authority for the
sum withheld or deducted. |
19.2 | No delay or omission on the part of the Chargee in exercising any right or remedy under this
Charge shall impair that right or remedy or operate as or be taken to be a waiver of it nor
shall any single, partial or defective exercise of any such right or remedy preclude any other
or further exercise under this Charge of that or any other right or remedy. |
19.3 | The Chargees rights powers and remedies under this Charge are cumulative and are not, nor
are they to be construed as, exclusive of any rights, powers or remedies provided by law or
otherwise and may be exercised from time to time and as often as the Chargee deems expedient. |
19.4 | Any waiver by the Chargee of any terms of this Charge or any consent or approval given by the
Chargee under it shall be effective only if given in writing and then only for the purpose and
upon the terms and conditions (if any) on which it is given. |
19.5 | If at any time any one or more of the provisions of this Charge is or becomes illegal,
invalid or unenforceable in any respect under any law of any jurisdiction neither the
legality, validity or enforceability of the remaining provisions of this Charge nor the
legality, validity or enforceability of such provision under the law of any other jurisdiction
shall be in any way affected or impaired as a result. |
19.6 | Any statement, certificate or determination of the Chargee as to the Secured Obligations or
(without limitation) any other matter provided for in this Charge shall, in the absence of
manifest error, be conclusive and binding on the Chargor. |
19.7 | The Chargor shall at all times maintain an agent for service of process in the British Virgin
Islands. Such agent shall be ______ of ______ and any writ, judgment or other notice of
legal process shall be sufficiently served on the Chargor if delivered to such agent at its
address set out above. The Chargor undertakes not to revoke the authority of the above agent
and if, for any reason, such agent no longer serves as agent of the Chargor to receive service
of process the Chargor shall promptly appoint another such agent and advise the Chargee of the
new agents name and address for service. |
20 | Law and Jurisdiction |
20.1 | This Charge is governed by, and shall be construed in accordance with, the laws of the
British Virgin Islands. |
20.2 | The Chargor irrevocably agree for the exclusive benefit of the Chargee that the courts of the
British Virgin Islands shall have jurisdiction to hear and determine any suit, action or
proceeding and to settle any dispute which may arise out of or in connection with this Charge
and for such purposes irrevocably submits to the jurisdiction of such courts. |
13
/s/ Lai Guanglin | ||||
Name:
|
Lai Guanglin | |||
Title:
|
Director | |||
In the presence of: | ||||
/s/ Mia Li | ||||
Name:
|
Mia Li | |||
Title:
|
In-house Counsel |
/s/ [Illegible] | ||||
Name: |
||||
Title:
|
Director | |||
In the presence of: | ||||
Name: |
||||
Title: |
14
Column A | Column B | Column C | Column D | Column E | ||||||
Chargor
|
Place of incorporation of Charged Company |
Charged Company |
Place of incorporation of Chargor |
No. of shares |
||||||
Agria Group Limited
|
British Virgin Islands |
Agria Asia Investment Limited |
British Virgin Islands |
84,078,522 |
16
Clause | Page | |||
1. Interpretation |
1 | |||
2. Guarantee |
2 | |||
3. Discharge And Release |
2 | |||
4. Demands |
3 | |||
5. Permitted Transfer |
3 | |||
6. Choice Of Law |
3 | |||
7. Jurisdiction And Process Agent |
3 |
THIS GUARANTEE is made on 28 June 2011 |
BETWEEN |
(1) | Guanglin Lai, holding passport (No. ________) (the Guarantor) and |
(2) | Agria Group Limited, a company incorporated under the laws of the British Virgin Island (the Company); |
(3) | New Hope International (Hong Kong) Limited, a company incorporated in Hong Kong ( the Beneficiary) |
(A) | the Company and the Beneficiary entered into a shareholders agreement on_____, 2011 (the Shareholders Agreement) in connection with their shareholding in Agria Asia Investments Limited, a company incorporated under the laws of the British Virgin Island (Agria Asia). |
(B) | under the Shareholders Agreement, the Company agreed that it will cause the Guarantor to enter into this Guarantee; and | |
(C) | it is intended by the parties hereto that this Guarantee shall take effect as a deed. |
1. | Interpretation | |
1.1 | Definitions: In this Guarantee (including the recitals), except where the context otherwise requires: |
1.2 | Interpretation: except where the context otherwise requires, any references in this Guarantee to: |
(a) | a clause shall be to a clause of this Guarantee; |
(b) | any agreement or document (including, without limitation, references to this Guarantee) shall be deemed to include references to a concession, contract, deed, franchise, license, treaty or undertaking and to such agreement or other document as varied, supplemented, novated or replaced from time to time; |
(c) | persons shall be deemed to be references to or to include, as appropriate, any corporation, association, partnership or other entity and includes their respective successors, transferees, assigns and any persons with whom they may at any time amalgamate; and |
(d) | winding up includes bankruptcy and any procedure under any applicable law which is analogous to winding up or bankruptcy. |
1
2. | Guarantee |
2.1 | At the request of Agria Corporation and in the interest of Agria Corporation, the Guarantor hereby unconditionally and irrevocably: |
(a) | guarantees to the Beneficiary prompt payment by the Company on the due date and due discharge of all of the Guaranteed Obligations in accordance with the Shareholders Agreement; and |
(b) | subject to the terms of the Shareholders Agreement, undertakes to the Beneficiary that, if and each time that the Company does not make payment of any amount of the Guaranteed Obligations, in each case in accordance with the Shareholders Agreement, the Guarantor shall pay to the Beneficiary to which the amount is due in whatever currency denominated or, as the case may be, perform or procure performance of any of the Companys other obligations not performed upon first written demand by the Beneficiary. |
2.2 | The Guarantor acknowledges having received a copy of the Shareholders Agreement and confirms its acceptance of the provisions thereof. |
3. | Discharge And Release | |
3.1 | Upon the first to occur of the following events: |
(a) | the Guaranteed Obligations have been irrevocably discharged in full; |
(b) | the Second Pledge Agreement (as defined in the Shareholders Agreement) has been duly executed and delivered by Agria (Singapore) Pte. Ltd. to the Beneficiary; |
(c) | the Put Options (as defined in the Shareholders Agreement) have been exercised by the Beneficiary to the fullest extent and the Company has paid to the Beneficiary all of the considerations in connection with the Put Options as determined by Section 4.2 of the Shareholders Agreement; | ||
(d) | (i) New Hope does not exercise the Put Option within 30 days after three years following the Completion Date (as defined in the Shareholders Agreement) or (ii) New Hope does not exercise the Put Option within 45 days after the occurrence of all of the events set forth in Section 4.1.2 (a) (b) of the Shareholders Agreement, which occurrence shall be communicated to New Hope by Agria Group within 5 days after such occurrence; and |
(e) | the Beneficiary has waived the Companys performance of the Guaranteed Obligations. |
2
4. | Demands |
5. | Permitted Transfer |
6. | Choice Of Law |
7. | Jurisdiction And Process Agent |
7.1 | All the parties agree that any dispute or claim arising out of or in connection with or relating to this Guarantee, or the breach, termination or invalidity hereof (including the validity, scope and enforceability of this arbitration provision), shall be finally resolved by arbitration in Hong Kong under the auspices of the Arbitration Centre and in accordance with the Hong Kong International Arbitration Centre Procedures for the Administration of International Arbitration (Arbitration Rules) as are in force at the date of this Guarantee and as may be amended by the rest of this Clause 7.1. For the purpose of such arbitration, there shall be three arbitrators (Arbitration Board). The Beneficiary(ies) involving the dispute shall select one arbitrator and the Guarantor shall select one arbitrator. All selections shall be made within 30 days after the selecting party gives or receives the demand for arbitration. Such arbitrators shall be freely selected, and the parties shall not be limited in their selection to any prescribed list. The Chairman of the Arbitration Centre shall select the third arbitrator. If any arbitrator to be appointed by a party has not been appointed and consented to participate within 30 days after the selection of the first arbitrator, the relevant appointment shall be made by the Chairman of the Arbitration Centre. |
7.2 | All arbitration proceedings shall be conducted in English in strict confidence. The Arbitration Board shall decide any such dispute or claim strictly in accordance with the governing law specified in Clause 6. The order for enforcement of any arbitral award rendered hereunder may be entered in any court having jurisdiction, or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. |
3
7.3 | Any award made by the Arbitration Board shall be final and binding on each of the Parties that were parties to the dispute. The Parties expressly agree to waive the applicability of any laws and regulations that would otherwise give the right to appeal the decisions of the Arbitration Board so that there shall be no appeal to any court of law for the award of the Arbitration Board, and a Party shall not challenge or resist the enforcement action taken by any other Party in whose favour an award of the Arbitration Board was given. |
7.4 | The Guarantor irrevocably waives any objections to the jurisdiction of any courts referred to in this Clause 7. |
7.5 | The Guarantor irrevocably consents to service of process or any other document in connection with the arbitration proceedings by facsimile transmission, personal service, delivery at any address specified in this Guarantee or in the Shareholders Agreement or any other usual address, mail or in any other manner permitted by Hong Kong law, the law of the place of service or the law of the jurisdiction where proceedings are instituted. |
4
SIGNED, SEALED AND DELIVERED | ) | |||||||||||
as a DEED by | ) | /s/ Lai Guanglin | ||||||||||
the Guarantor | ) | |||||||||||
in the presence of: Mia Li | ) | |||||||||||
SIGNED for and on behalf of | ) | |||||||||||
Agria Group Limited | ) | /s/ Lai Guanglin | ||||||||||
by: | /s/ Lai Guanglin | ) | ||||||||||
Title: | Director | ) | ||||||||||
) | ||||||||||||
SIGNED for and on behalf of | ) | |||||||||||
New Hope International (Hong Kong) Limited | ||||||||||||
by: | /s/ [Illegible] | ) | ||||||||||
Title: | Director | ) | ||||||||||
) |
5
(1) | Agria Corporation, a company incorporated under the laws of Cayman Islands (the Company);
and |
|
(2) | Guanglin Lai (the Indemnified Person) |
(A) | Agria Group Limited (Agria Group), a company incorporated under the laws of British Virgin
Islands and a wholly-owned subsidiary of the Company, and New Hope International (Hong Kong)
Limited (New Hope) entered into a shareholders agreement on 28 June 2011 (the Shareholders
Agreement) in connection with their shareholding in Agria Asia Investments Limited (Agria
Asia), a company incorporated under the laws of the British Virgin Island. |
(B) | Pursuant to the Shareholders Agreement, New Hope and the Indemnified Person entered into a
Deed of Guarantee on 28 June, 2011 (the Deed of Guarantee), whereby the Indemnified Person
made a personal guarantee (the Guarantee) to New Hope for Agria Groups payment obligation
in the event that New Hope exercises its put option pursuant to the Shareholders Agreement. |
(C) | The Company has agreed to indemnify the Indemnified Person in respect of his obligations and
liabilities arising out of the Guarantee (the Obligations) in accordance with this Deed. |
(a) | The Company unconditionally and irrevocably agrees to: |
(i) | indemnify the Indemnified Person for all amounts paid to New Hope under the
Deed of Guarantee together with relevant expenses he may incur; and |
(ii) | indemnify and hold harmless the Indemnified Person from and against all
losses, costs, damages, expenses, liabilities, actions, claims and demands whatsoever
which the Indemnified Person may incur or sustain or which may be made against the
Indemnified Person by reason of or in any way whatsoever in connection with the
performance of the Obligations under the Deed of Guarantee. |
(b) | All payments to be made under this Deed shall be made in full by cash or shares of the
Company at the election of the Indemnified Person, without any set-off or counterclaim
whatsoever and free and clear of any deductions or withholdings in the relevant currency on
the due date to such account as the Indemnified Person may from time to time specify. |
(c) | In the event that the Indemnified Person elects to receive the payment to be made by the
Company in the form of shares of the Company pursuant to Section 1(b), the number of shares of
the Company shall be determined based on the volume weighted average price of the ADSs
representing the Companys ordinary shares on the New York Stock Exchange during the three
months from April 13, 2011 being the date on which the Indemnity was approved by the Board of Directors. |
1
2. | MISCELLANEOUS |
(a) | This Deed shall be continuing and will extend to the ultimate balance of the Obligations,
regardless of any intermediate payment or discharge in whole or in part. |
(b) | This Deed shall be binding on the Company and its successors but the Company may not assign
or transfer all or any of its rights or obligations under this Deed. If the Indemnified
Person transfers all or part of its liability under the Obligations to a third party, it shall
so notify the Company and the Indemnified Person shall be entitled to assign to such third
party all rights and benefits under this Deed as relate to the liability of the Indemnified
Person under such Obligations. |
(c) | This Deed shall come into effect on the date it is signed by the parties and shall remain in
full force until the Guarantee has been terminated or has expired. |
|
(d) | It is intended that this document takes effect as a deed. |
3. | NOTICES |
(a) | Any notice or other communication to a party to this Deed must be in writing. It must be
addressed for the attention of such person, and sent to such address or fax number as set
forth on signature page hereto or to such other address or fax number as that party may from
time to time notify to the other parties. |
(b) | Any notice or other communication made or delivered by one person to another under or in
connection with this Deed will only be effective: |
(i) | if by way of fax, when received in legible form; or |
(ii) | if by way of letter, when it has been left at the relevant address or five (5)
Business Days after being deposited in the post postage prepaid in an envelope
addressed to it at that address. |
4. | LAW AND JURISDICTION |
(a) | This Deed is governed by Hong Kong law. |
(b) | All the parties agree that any dispute or claim arising out of or in connection with or
relating to this Deed, or the breach, termination or invalidity hereof (including the
validity, scope and enforceability of this arbitration provision), shall be finally resolved
by arbitration in Hong Kong under the auspices of the Arbitration Centre and in accordance
with the Hong Kong International Arbitration Centre Administered Arbitration Rules
(Arbitration Rules) as are in force at the date of this Guarantee and as may be amended by
the rest of this Clause 4(b). For the purpose of such arbitration, there shall be three
arbitrators (Arbitration Board). The Company shall select one arbitrator and the Indemnified
Person shall select one arbitrator. All selections shall be made within 30 days after the
selecting party gives or receives the demand for arbitration. Such arbitrators shall be freely
selected, and the parties shall not be limited in their selection to any prescribed list. The
Chairman of the Arbitration Centre shall select the third arbitrator. If any arbitrator to be
appointed by a party has not been appointed and consented to participate within 30 days after
the selection of the first arbitrator, the relevant appointment shall be made by the Chairman
of the Arbitration Centre. |
2
(c) | All arbitration proceedings shall be conducted in English in strict confidence. The
Arbitration Board shall decide any such dispute or claim strictly in accordance with the
governing law specified in 4(a). The order for enforcement of any arbitral award rendered
hereunder may be entered in any court having jurisdiction, or application may be made to such
court for a judicial acceptance of the award and an order of enforcement, as the case may be. |
(d) | Any award made by the Arbitration Board shall be final and binding on each of the Parties
that were parties to the dispute. The Parties expressly agree to waive the applicability of
any laws and regulations that would otherwise give the right to appeal the decisions of the
Arbitration Board so that there shall be no appeal to any court of law for the award of the
Arbitration Board, and a Party shall not challenge or resist the enforcement action taken by
any other Party in whose favour an award of the Arbitration Board was given. |
(e) | The Indemnified Person irrevocably waives any objections to the jurisdiction of any courts
referred to in this Clause 4. |
(f) | The Indemnified Person irrevocably consents to service of process or any other document in
connection with the arbitration proceedings by facsimile transmission, personal service,
delivery at any address specified in this Deed or in the Shareholders Agreement or any other
usual address, mail or in any other manner permitted by Hong Kong law, the law of the place of
service or the law of the jurisdiction where proceedings are instituted. |
3
SIGNED, SEALED AND DELIVERED
|
) | /s/ Lai Guanglin | ||||||
as a DEED by
|
) | |||||||
the Indemnified Person
|
) | |||||||
in the presence of: Mia Li
|
) | |||||||
SIGNED, SEALED AND DELIVERED
|
) | /s/ Gary Yeung | ||||||
as a DEED by |
||||||||
for and on behalf of
|
) | |||||||
AGRIA CORPORATION
|
) | |||||||
in the presence of:
|
) |
4
Name | Place of Incorporation | |
Agria Group Limited
|
British Virgin Islands | |
China Victory International Holdings Limited
|
Hong Kong | |
Agria Asia Investments Limited
|
British Virgin Islands | |
Agria (Singapore) Pte. Ltd.
|
Singapore | |
Aero Biotech Science & Technology Co., Ltd.
|
PRC | |
Agria Brother Biotech (Shenzhen) Co., Ltd.
|
PRC | |
Agria Biotech Overseas Limited
|
Hong Kong | |
PGG Wrightson Group Ltd.
|
New Zealand | |
Agria Corporation (New Zealand) Ltd.
|
New Zealand |
Name | Place of Incorporation | |
Shenzhen Guanli Agricultural Technology Co., Ltd.
|
PRC | |
Shenzhen Agria Agricultural Co., Ltd.
|
PRC | |
Shenzhen Zhongyuan Agriculture Co., Ltd.
|
PRC | |
Beijing Nong Ke Yu Seeds International Co., Ltd.
|
PRC | |
Tianjin Beiao Seed Technology Development Co., Ltd.
|
PRC | |
Wuwei NKY Seeds Co., Ltd.
|
PRC | |
Agria Asia International Limited
|
Hong Kong | |
Agria HongKong Limited
|
Hong Kong |
By: | /s/ Xie Tao | |||||
Name: | Xie Tao | |||||
Title: | Chief Executive Officer |
By: | /s/ John Layburn | |||||
Name: | John Layburn | |||||
Title: | Acting Chief Financial Officer |
By: | /s/ Xie Tao | |||||
Name: | Xie Tao | |||||
Title: | Chief Executive Officer |
By: | /s/ John Layburn | |||||
Name: | John Layburn | |||||
Title: | Acting Chief Financial Officer |
Sincerely yours, |
||||
/s/ Commerce & Finance Law Offices | ||||
Commerce & Finance Law Offices |
Our ref
|
GDK/JLL/630408/3932871v1 | |
Direct tel
|
+852 2971 3090 | |
Email
|
jo.lit@maplesandcalder.com |
Yours faithfully, |
||
/s/ Maples and Calder
|
||
Maples and Calder |
/s/ Ernst & Young Hua Ming
|
||
Shenzhen, Peoples Republic of China |
||
June 28, 2011 |
/s/ GHP Horwath, P.C.
|
||
GHP
Horwath, P.C. |
||
Denver, Colorado June 28, 2011 |
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