REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT (“Agreement”) made as of this 18th
day of
September, 2007, by and among Fuqi International, Inc., a Delaware corporation
(the “Company”) and Bay Peak, LLC, a California Limited Liability Corporation
(“Holder”).
WHEREAS,
the
Holder
is an owner of record of 1,360,000 shares (the “Shares”) of common stock, $0.001
par value per share (the “Common Stock”), of the Company,
WHEREAS,
the Company is considering an initial public offering of its Common Stock
(“IPO”);
WHEREAS,
Holder entered into that certain lock up agreement dated June 22, 2007 with
the
managing underwriter of the proposed IPO, Xxxxxxxx Curhan Ford & Co. (the
“Underwriter”), pursuant to which Holder would not, without the prior written
consent of the Underwriter, directly or indirectly, offer to sell, sell or
otherwise dispose of any of the Shares during
the period ending 90 days after the date of the date of IPO;
and
WHEREAS,
the Company and Holder desire to (i) extends the lock up period to 180 days
and
(ii) enter into a registration rights agreement requiring the Company to
register the Shares upon request commencing after the expiration of the 180-day
lock up period if the Company is then eligible to use Form S-3 and if the Shares
are not then saleable under Rule 144.
NOW,
THEREFORE, for and in consideration of the promises and the mutual covenants
hereinafter set forth, the parties hereto do hereby agree as
follows:
1. Lock
Up Agreement. Holder agrees to enter into the lock up agreement, attached
hereto as Exhibit A (the “Lock Up Agreement”), on the date of this Agreement
pursuant to which Holder will not, without the prior written consent of the
Underwriter, directly or indirectly, offer to sell, sell or otherwise dispose
of
any of the Shares during the period ending 180 days after the date of the date
of IPO.
2. Registration
Rights
2.1 Registration
Requirement of Registration Requirement.
Subject
to the terms and limitations hereof, and subject to the terms and conditions
of
the Lock Up Agreement, the parties hereto agree and acknowledge that the Company
shall prepare and file a registration statement (the “Registration Statement”)
on Form S-3 under the Securities Act of 1933, as amended (the “Act”) for resale
of the Shares (the “Registrable Securities”) upon receipt of written request
from the Holder at any time after the expiration of the lock up period as set
forth in the Lock Up Agreement. The Company shall use its reasonable best
efforts to file the Registration Statement within 30 days of receiving the
request for registration. The Company shall also use its reasonable best efforts
to maintain the Registration Statement effective for a period of twenty-four
(24) months at the Company’s expense (the “Effectiveness Period”).
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2.2 Conditions
and Limitations of Registration Requirement.
(a) The
Company shall have no obligation to prepare or file the Registration Statement,
or in any other manner register the Registrable Securities, if the Company
is
not eligible to use a Form S-3 at the time of Holder’s written request for
registration. In such event, the Company shall prepare and file the Registration
Statement at such time it becomes eligible to utilize a Form S-3.
(b) The
Company shall have no obligation to prepare or file the Registration Statement
at any time the Registrable Securities are eligible for sale under Rule 144,
as
promulgated under the Act. For purposes of this Agreement, the Registrable
Securities are eligible for sale under Rule 144 if the Securities and Exchange
Commission (“SEC”) adopts and effectuates currently proposed rules permitting
the sale of securities, subject to Rule 144 requirements, issued by a company
that was a reporting or non-reporting shell company once a reporting company
ceases to be a shell company and there is adequate disclosure in the market.
Such rules were proposed in Securities
Act Release Xx. 0000 (Xxxx 00, 0000), 00 XX 00000 (xxxx://xxx.xxx.xxx/xxxxx/xxxxxxxx/0000/00-0000xx.xxx)
(July 5, 2007).
(c) Holder
agrees to use its reasonable best efforts beginning on the date of this
Agreement until the date of the IPO to assist the Company in contacting and
persuading stockholders of the Company to enter into a lock up agreement in
furtherance of IPO.
(d) The
Company shall not be obligated to effect any registration of the Registrable
Securities or take any other action pursuant to this Agreement: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service
in
such jurisdiction and except as may be required by the Act, or (ii) during
any
period in which the Company suspends the rights of a Holder after giving the
Holder written notification of a Potential Material Event (defined below)
pursuant to Section 2.6 hereof.
2.3 Expenses
of Registration.
Except
as otherwise expressly set forth, the Company shall bear all expenses incurred
by the Company in compliance with the registration obligation of the Company,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company incurred in
connection with any registration, qualification or compliance pursuant to this
Agreement and all underwriting discounts, selling commissions and expense
allowances applicable to the sale of any securities by the Company for its
own
account in any registration. All underwriting discounts, selling commissions
and
expense allowances applicable to the sale by Holder of Registrable Securities
and all fees and disbursements of counsel for the Holder shall be borne by
the
Holder.
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2.4 Indemnification.
(a) To
the
extent permitted by law the Company will indemnify each Holder, each of its
officers, directors, agents, employees and partners, and each person controlling
such Holder, with respect to each registration, qualification or compliance
effected pursuant to this Agreement, and each underwriter, if any, and each
person who controls any underwriter, and their respective counsel against all
claims, losses, damages and liabilities (or actions, proceedings or settlements
in respect thereof) arising out of or based on (i) any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document prepared by the Company (including any
related registration statement, notification or the like) incident to any such
registration, qualification or compliance, or (ii) any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the
Company of the Act or any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and subject to the
provisions of Section 2.4(c) below, will reimburse each such Holder, each of
its
officers, directors, agents, employees and partners, and each person controlling
such Holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses as they are reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in
any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement (or alleged untrue statement)
or omission (or alleged omissions) based upon written information furnished
to
the Company by (or on behalf of) such Holder or underwriter, or if the person
asserting any such loss, claim, damage or liability (or action or proceeding
in
respect thereof did not receive a copy of an amended preliminary prospectus
or
the final prospectus (or the final prospectus as amended and supplemented)
at or
before the written confirmation of the sale of such Registrable Securities
to
such person because of the failure of the Holder or underwriter to so provide
such amended preliminary or final prospectus (or the final prospectus as amended
and supplemented); provided, however, that the indemnity agreement contained
in
this subsection shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld),
nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability or action to the extent that it arises out of or is based upon a
violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
by
the Holder, any such partner, officer, director, employee, agent or controlling
person of such Holder, or any such underwriter or any person who controls any
such underwriter; provided, however, that the obligations of the Company
hereunder shall be limited to an amount equal to the portion of net proceeds
represented by the Registrable Securities pursuant to this
Agreement.
(b) To
the
extent permitted by law, each Holder whose Registrable Securities are included
in any registration, qualification or compliance effected pursuant to this
Agreement will indemnify the Company, and its directors, officers, agents,
employees and each underwriter, if any, of the Company’s securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of the Act and the rules and regulations
thereunder, each other such Holder and each of their officers, directors,
partners, agents and employees, and each person controlling such Holder, and
their respective counsel against all claims, losses, damages and liabilities
(or
actions in respect thereof) arising out of or based on any untrue statement
(or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission
(or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company and such Holders, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses as they
are
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder;
provided,
however,
that
the obligations of any Holder hereunder shall be limited to an amount equal
to
the net proceeds to such Holder from Registrable Securities sold under such
registration statement, prospectus, offering circular or other document as
contemplated herein; provided, further, that the indemnity agreement contained
in this subsection shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld
or
delayed.
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(c) Each
party entitled to indemnification under this Section (the “Indemnified Party”)
shall give notice to the party required to provide indemnification (the
“Indemnifying Party”) promptly after such Indemnified Party has actual knowledge
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who
shall
conduct the defense of such claim or any litigation resulting therefrom, shall
be approved by the Indemnified Party (whose approval shall not unreasonably
be
withheld), and the Indemnified Party may participate in such defense at such
party’s expense; and provided further that if any Indemnified Party reasonably
concludes that there may be one or more legal defenses available to it that
are
not available to the Indemnifying Party, or that such claim or litigation
involves or could have an effect on matters beyond the scope of this Agreement,
then the Indemnified Party may retain its own counsel at the expense of the
Indemnifying Party; and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying
Party
of its obligations under this Agreement unless and only to the extent that
such
failure to give notice results in material prejudice to the Indemnifying Party.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and
as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If
the
indemnification provided for in this Section is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any
loss,
liability, claim, damage or expense referred to herein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party hereunder, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party on the
one
hand and of the Indemnified Party on the other in connection with the statements
or omissions which resulted in such loss, liability, claim, damage or expense
as
well as any other relevant equitable considerations. The relative fault of
the
Indemnifying Party and of the Indemnified Party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the Indemnifying Party or by the Indemnified Party and the parties’
relative intent, knowledge, access to information and opportunity to correct
or
prevent such statement or omission.
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2.5 Transfer
or Assignment of Registration Rights.
The
Registrable Securities, and any related benefits to the Holder hereunder may
be
transferred or assigned by the Holder to a permitted transferee or assignee,
provided that the Company is given written notice of such transfer or
assignment, stating the name and address of said transferee or assignee and
identifying the Registrable Securities with respect to which such registration
rights are being transferred or assigned; provided further that the transferee
or assignee of such Registrable Securities shall be deemed to have assumed
the
obligations of the Holder under this Agreement by the acceptance of such
assignment and shall, upon request from the Company, evidence such assumption
by
delivery to the Company of a written agreement assuming such obligations of
the
Holder.
2.6 Registration
Procedures.
In the
case of the registration effected by the Company pursuant to this Agreement,
the
Company will keep the Holder advised in writing as to the initiation of each
registration and as to the completion thereof. The Company will:
(a) Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement
as may be necessary to comply with the provisions of the Act with respect to
the
disposition of securities covered by such registration statement;
(b) Respond
as promptly as reasonably practicable to any comments received from the SEC
with
respect to a registration statement or any amendment thereto.
(c) Notify
the Holder as promptly as reasonably practicable and (if requested by any such
person) confirm such notice in writing no later than one trading day following
the day (A) when a prospectus or any prospectus supplement or post-effective
amendment to a registration statement is proposed to be filed and (B) with
respect to a registration statement or any post-effective amendment, when the
same has become effective;
(d) Furnish
such number of prospectuses and other documents incident thereto, including
supplements and amendments, as the Holder may reasonably request;
(e) Furnish
to the Holder, upon request, a copy of all documents filed with and all
correspondence from or to the SEC in connection with any such registration
statement other than non-substantive cover letters and the like;
(f) Use
its
reasonable best efforts to avoid the issuance of, or, if issued, obtain the
withdrawal of (i) any order suspending the effectiveness of a registration
statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment; and
(g) Use
its
reasonable best efforts to comply with all applicable rules and regulations
of
the SEC.
Notwithstanding
the foregoing, if at any time or from time to time after the date hereof, the
Company notifies the Holder in writing of the existence of an event or
circumstance that is not disclosed in the Registration Statement and that may
have a material effect on the Company or its business (a “Potential Material
Event”), the Holder shall not offer or sell any Registrable Securities, or
engage in any other transaction involving or relating to the Registrable
Securities, from the time of the giving of notice with respect to a Potential
Material Event until the Company notifies the Holder that such Potential
Material Event either has been added to the Registration Statement by amendment
or supplement or no longer constitutes a Potential Material Event; provided,
that
the Company may not so suspend the right of Holder for more than one hundred
twenty (120) days in the aggregate.
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2.7 Statement
of Beneficial Ownership.
The
Company may require the Holder to furnish to the Company a certified statement
as to the number of shares of Common Stock beneficially owned, including
derivative instruments underlying Common Stock, by such Holder and the
controlling person thereof and any other such information regarding the Holder,
the Registrable Securities held by the Holder and the intended method of
disposition of such securities as shall be reasonably required with respect
to
the registration of the Holder’s Registrable Securities. The Holder hereby
understands and agrees that the Company may, in its sole discretion, exclude
the
Holder’s shares of Common Stock from the Registration Statement in the event
that the Holder fails to provide such information requested by the Company
within the time period reasonably specified by the Company or is required to
do
so by law or the SEC.
2.8 Compliance.
Holder
covenants and agrees that such Holder will comply with the prospectus delivery
requirements of the Act as applicable to such Holder in connection with sales
of
Registrable Securities pursuant to the registration statement required
hereunder.
3. Miscellaneous
3.1 Any
notice or other communication given hereunder shall be deemed sufficient if
in
writing and sent by registered or certified mail, return receipt requested,
addressed to the Company, at 5/F., Block 1, Shi Hua Industrial Zone, Xxx Xxx
Road North, Shenzhen, 518019, People’s Republic of China, Attention: Yu Xxxx
Xxxxx with
a copy to
(which
shall not constitute notice) Xxxxxxxxxxx & Xxxxxxxx Xxxxxxx Xxxxx Xxxxx LLP,
00000 Xxxxx Xxxxxx Xxxx., Xxxxxxx Xxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000,
Attention: Xxxxxx X. Xxxxxxx, Esq., and to the Holder at his or her address
indicated on the signature page of this Agreement. Notices shall be deemed
to
have been given three (3) business days after the date of mailing, except
notices of change of address, which shall be deemed to have been given when
received.
3.2 This
Agreement may only be amended through a written instrument signed by the Holder
and the Company.
3.3 This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and to their respective heirs, legal representatives, successors and assigns.
This Agreement sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges and supersedes all prior
discussions, agreements and understandings of any and every nature among
them.
3.4 Notwithstanding
the place where this Agreement may be executed by any of the parties hereto,
the
parties expressly agree that all the terms and provisions hereof shall be
construed in accordance with and governed by the laws of the State of Delaware.
3.5 This
Agreement may be executed in counterparts. Upon the execution and delivery
of
this Agreement, this Agreement shall become a binding obligation of the parties
hereto. This Agreement may be executed and delivered by facsimile.
3.6 The
holding of any provision of this Agreement to be invalid or unenforceable by
a
court of competent jurisdiction shall not affect any other provision of this
Agreement, which shall remain in full force and effect.
3.7 It
is
agreed that a waiver by either party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of any subsequent
breach by that same party.
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3.8 The
parties agree to execute and deliver all such further documents, agreements
and
instruments and take such other and further action as may be necessary or
appropriate to carry out the purposes and intent of this Agreement.
3.9 The
Company agrees not to disclose the names, addresses or any other information
about the Holders, except as required by law, provided that the Company may
provide information relating to the Holder as required in any registration
statement under the Act that may be filed by the Company pursuant to the
requirements of this Agreement.
3.10 The
obligation of the Holder hereunder is several and not joint with the obligations
of any other Holders (the “Other Holders”), and the Holder shall not be
responsible in any way for the performance of the obligations of any Other
Holders. Nothing contained herein or in any other agreement or document
delivered at the Closing, and no action taken by the Holder pursuant hereto,
shall be deemed to constitute the Holder and the Other Holders as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Holder and the Other Holders are in any way acting in
concert with respect to such obligations or the transactions contemplated by
this Agreement. The Holder shall be entitled to protect and enforce the Holder’s
rights, including without limitation the rights arising out of this Agreement,
and it shall not be necessary for any Other Holder to be joined as an additional
party in any proceeding for such purpose. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
The Holder is not acting as part of a “group” (as that term is used in Section
13(d) of the 0000 Xxx) in negotiating and entering into this Agreement or
purchasing the Shares or acquiring, disposing of or voting any of the underlying
shares of Common Stock. The Company hereby confirms that it understands and
agrees that the Holder is not acting as part of any such group.
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year
first written above.
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Bay
Peak llc
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/s/
Yu Xxxx Xxxxx
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/s/
Xxxx Xxxxxxx
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By:
Yu Xxxx Xxxxx
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By:
Xxxx Xxxxxxx
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Its:
CEO
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Its:
Managing Member
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