PUT AGREEMENT
THIS
PUT AGREEMENT
(this
“Agreement”)
is
made and entered into this 31st day of January, 2008, by and between China
Sky
One Medical, Inc., a corporation organized and existing under the laws of the
State of Nevada, with an address at Xxxx 0000, Xx. 00 Xx Xxxx Building, Gan
Shui
Road, Nandang District, Harbin, People’s Republic of China 150001 (the
“Company”)
and
the Investors set forth on the signature pages affixed hereto (each an
“Investor”
and
collectively the “Investors”).
RECITALS:
WHEREAS,
the
Company has offered for sale (the “Offering”)
certain shares (the “Shares”)
of
common stock of the Company, $.001 par value per share (“Common
Stock”)
and
attached warrants (the “Warrants”)
to
purchase shares of Common Stock in accordance with that certain Securities
Purchase Agreement by and among the Company and the Investors, dated as of
even
date herewith (the “Securities
Purchase Agreement”);
and
WHEREAS,
the
Company has represented to the Investors that the Adjusted EPS (as defined
below) of the Company for the fiscal year ending December 31, 2007, will be
greater than or equal to $1.05 per share (the “FY07
Performance
Threshold”),
as
set forth in audited financial statements of the Company for the period ending
December 31, 2007 (the “FY07
Financial Statements”)
(For
the purposes hereof, “Adjusted
EPS”
means
the net income (or loss) of the Company and its subsidiaries for such period,
determined on a consolidated basis divided by 13,907,696 shares; provided,
however,
that
(i) the Adjusted EPS for such period will be increased by any cash charges
related to the Offering and non-cash charges incurred as a result of the
Offering (due to non-cash amortization on warrants charged to the Company’s
results of operation, if any), and (ii) if the Offering does not close on or
before January 7, 2008 (the “Closing
Deadline”),
the
FY07 Performance Threshold will be decreased in an amount equal to 2% for each
7-day period, or pro rata for any portion thereof, following the Closing
Deadline, until such time as the Offering is consummated); and
WHEREAS,
as an
inducement to the Investors to enter into the Securities Purchase Agreement,
a
certain shareholder of the Company (the “CSKI
Shareholder”)
has
agreed to place an aggregate of 3,000,000 shares of Common Stock of the Company
(the “Escrow
Shares”)
into
escrow for the benefit of the Investors in the event that the Company fails
to
satisfy the FY07 Performance Threshold, pursuant to the terms and conditions
of
a Make Good Agreement by and among Xxxx Asset Management LLC, as the authorized
agent of the Investors, the Company
and the
CSKI
Shareholder,
dated
as of even date herewith (the “Make
Good Agreement”);
and
WHEREAS,
the
parties hereto desire to set forth the circumstances under which the
Investors shall have the right, but not the obligation, to require the Company
to repurchase the Shares.
NOW,
THEREFORE,
in
consideration of the foregoing recitals, the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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1. Put
Right.
(a) Grant
of Put Right.
Subject
to the terms and conditions hereof, each Investor shall have the right (the
“Put
Right”),
but
not the obligation, to cause the Company to repurchase the Shares such Investor
purchased in the Offering (the “Purchased
Shares”).
(b) Put
Repurchase Price.
In the
event an Investor exercises his, her or its Put Right, the repurchase price
for
the Purchased Shares shall be $10.00 per share (the “Repurchase
Price”).
(c) Exercise
of Put Right.
(i) An
Investor shall exercise his, her or its Put Right by giving written notice
of
its exercise of the Put Right to the Company (“Put
Exercise Notice”),
in
accordance with the provisions of Section 6 hereof.
(ii) Each
Investor may only exercise his, her or its Put Right as to all, but not less
than all, of such Investor’s Purchased Shares.
(iii) Upon
exercise of the Put Right by an Investor, the repurchase of such Investor’s
Purchased Shares by the Company shall be consummated within sixty (60) days
following the date of the Put Exercise Notice (the “Repurchase
Deadline”).
In
the event the Company does not pay the Repurchase Price to an Investor on or
prior to the Repurchase Deadline, interest shall be payable on the Repurchase
Amount at the rate of ten (10%) percent per annum until the Repurchase Amount,
and any accrued and unpaid interest thereon, is paid in full.
(iv) Concurrently
with the Company’s payment of the Repurchase Price to an exercising Investor,
such Investor shall deliver to the Company (A) the original stock certificate
representing his, her or its Purchased Shares and (B) the original warrant
certificate representing Warrants such Investor purchased in the Offering (the
“Purchased
Warrants”).
(v)
After
exercise of the Put Right, and upon delivery by the Company to the Investor
of
the applicable Repurchase Price, such Investor shall no longer be deemed to
be
the owner of the Purchased Shares and Purchased Warrants. The Purchased Shares
shall be returned to the Company’s treasury and the Purchased Warrants shall be
cancelled on the books of the Company.
(d) Conditions
to Exercise of Put Right.
The
Investors may only exercise their Put Right in the event that
either:
(i) the
Adjusted EPS of the Company for the fiscal year ending December 31, 2007 is
less than $0.80 per share, as set forth in the FY07 Financial Statements; or
(ii) the
Company’s accounts receivable exceeds $12,000,000 at the end of fiscal 2007, as
set forth in the FY07 Financial Statements (each of 1(d)(i) and (ii), a
“Put
Right Trigger”).
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(e) Put
Right Term.
Within
two (2) business days after the filing of Company’s Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2007 (the “2007
10-KSB”),
the
Company will provide the Investors written notice of such filing (“Filing
Notice”).
The
Investors may only exercise their Put Right by delivering a Put Exercise Notice
to the Company within ten (10) days of the date of the Filing Notice;
provided,
however,
if the
Company has not provided the Investors with Filing Notice within twelve (12)
days after the filing of the 2007 10-KSB (the “Filing
Notice Deadline”),
then
the Investors may exercise their Put Right by delivering a Put Exercise Notice
to the Company within ten (10) days of the Filing Notice Deadline.
(f) Termination
of Certain Rights.
Upon
the Company’s receipt of a Put Exercise Notice from any Investor:
(i) such
Investor’s right to receive Escrow Shares on a Pro Rata Basis (as defined in the
Make Good Agreement) shall automatically and permanently terminate, subject
only
to the satisfaction of the Company’s obligations hereunder; and
(ii) such
Investor’s right to exercise the Purchased Warrants shall be suspended pending
the satisfaction of the Company’s obligation to pay the Repurchase Price in
full, and any interest accrued thereon, to the applicable Investor.
2.
Title.
Upon
exercise of the Put Right by an Investor, such Investor shall deliver to the
Company good and marketable title to his, her or its Shares, free and clear
of
any liens or other restrictions, except for applicable restrictions on transfer
under federal and state securities laws.
3.
Binding
Effect.
This
Agreement and the rights and obligations hereunder shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
4.
Amendments.
This
Agreement may not be altered, modified, or amended except by a writing signed
by
each of the parties hereto.
5.
Further
Assurances.
Each of
the parties hereto agrees to execute, acknowledge, deliver, file, record and
publish certificates, instruments, agreements and documents, and to take all
action which may be required by law or may be deemed by the Investors or the
Company, in the exercise of their reasonable good faith discretion, to be
reasonably necessary in furtherance of the purposes and the objectives and
intentions underlying this Agreement and not inconsistent with the terms hereof.
6.
Notices.
All
notices required or permitted hereunder shall be in writing and shall be deemed
effectively given: (a) upon personal delivery to the party to be notified;
(b)
when sent by confirmed telex or facsimile if sent during normal business hours
of the recipient, if not, then on the next business day; (c) five days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (d) two days after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification
of
receipt. All communications shall be sent to the parties hereto at the
respective addresses set forth below, or as notified by such party from time
to
time at least ten (10) days prior to the effectiveness of such notice:
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if
to the
Company, to:
Xxxx
0000, Xx. 00 Xx Xxxx Building
Gan
Shui
Road, Nandang District, Harbin
People’s
Republic of China 150001
Attention:
Xxx Xxx-Xxxx, Chairman
Facsimile:
+ 00-000-0000-0000
with
a
copy to:
Xxxxxxx
Xxxx LLP
0000
Xxxxxxxx, 00xx Xxxxx
Xxx
Xxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxxx, Esq.
Facsimile:
(000) 000-0000
if
to the
Investors:
to
the
address provided by such Investor on the signature page hereto.
7.
Governing
Law; Jurisdiction.
This
Agreement shall be governed by, interpreted under, and construed in accordance
with the laws of the State of New York, applicable to contracts made and to
be
performed therein, without giving effect to the principles of conflicts of
law.
Except in respect of an action commenced by a third party in another
jurisdiction, the Investors and the Company agree that any legal suit, action,
or proceeding arising out of or relating to this Agreement must be instituted
in
a state or federal court in the State of New York, County of New York, if there
is any such court which has and will exercise its jurisdiction in any such
matter, and they hereby irrevocably subject to the jurisdiction of any such
court and agree not to assert therein any objection based on venue or the
inconvenience of such forum.
8.
Captions.
Captions
used herein are inserted for reference purposes only and shall not affect the
interpretation or construction of this Agreement.
9.
Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
agreement. This Agreement may be executed and delivered by facsimile
transmission.
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10.
No
Third Party
Beneficiaries.
This
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto and their successors and assigns and nothing herein, express or implied,
is intended to or shall confer upon any other person any legal or equitable
right, benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
11.
Expenses.
All
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.
[The
Remainder Of This Page Is Left Blank Intentionally. Signature pages
follow.]
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IN
WITNESS WHEREOF,
the
undersigned have executed this Agreement as of the date and year first written
above.
By:
______________________________
Name:
Title:
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COUNTERPART
SIGNATURE PAGE
IN
WITNESS WHEREOF,
the
undersigned have executed this Agreement as of the date and year first written
above.
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INVESTOR:
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Number
of Shares being purchased:
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Name:
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Number
of Warrants being purchased:
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Title:
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| ___________________________________ |
Address:
_________________________
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Facsimile:
_________________________
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