AMENDMENT, EXCHANGE AND WAIVER AGREEMENT
THIS
AMENDMENT, EXCHANGE AND WAIVER AGREEMENT (this “Amendment”) is made and entered
into this as of the 9th day of November, 2007, by and among Skystar
Bio-Pharmaceutical Company, a Nevada corporation (the “Company”), and the
undersigned Buyers. Capitalized terms used but not defined herein shall have
the
meanings set forth in that certain Securities Purchase Agreement, the
Registration Rights Agreement, the Convertible Debentures and/or the Warrants
(defined in the Recitals below).
RECITALS:
WHEREAS,
reference is made to that certain Securities Purchase Agreement dated as of
February 26, 2007 (the “Securities Purchase Agreement”), by and among the
Company and the Buyers, and the Registration Rights Agreement (the “Registration
Rights Agreement”) dated as of February 26, 2007 by the same parties, and the 8%
Convertible Debentures (the “Convertible Debentures”) and the Warrants (the
“Warrants”) issued pursuant thereto (collectively the “Transaction Documents”);
WHEREAS,
pursuant to the Registration Rights Agreement, the Company has incurred certain
payment obligations (the “Registration Damages”) to the Buyers arising from the
delay in the filing by the Company with the Securities and Exchange Commission
(“SEC”) of a resale registration statement to register the Initial Number of
Shares to Be Registered (the “Late Filing”), and the delay in having the
Registration Statement declared effective by the SEC (the “Late Effectiveness”);
WHEREAS,
the Company has proposed that the Buyers waive the Registration Damages relating
to both the Late Filing and the Late Effectiveness and that the Company and
the
Buyers exchange the Buyers’ Convertible Debentures and Warrants for new
convertible debentures (“New Convertible Debentures”) and new warrants (“New
Warrants”), respectively, on the terms set forth below (the “Proposal”), which
Proposal is acceptable to the Buyers;
WHEREAS,
certain amendments to the Transaction Documents are necessary to effectuate
the
Proposal;
WHEREAS,
the Company and the Buyers signatory hereto are executing and delivering this
Amendment in reliance upon the exemption from securities registration for offers
and sales to accredited investors afforded, inter alia,
by
Section 3(a)(9) of the Securities Act of 1933, as amended (the “1933 Act”) and
Rule 506 under Regulation D (“Regulation D”) as promulgated by the United States
Securities and Exchange Commission (the “SEC”) under the 1933 Act and/or Section
4(2) of the 1933 Act; and
WHEREAS,
the undersigned Buyers represent, in the aggregate, holders of at least
$2,600,000 of the current outstanding principal of the Convertible Debentures;
NOW,
THEREFORE, in consideration of the foregoing recitals and the mutual agreements
herein contained and for other good and valuable consideration, the parties
hereto agree as follows:
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A.
AMENDMENT;
EXCHANGE; WAIVER.
(1) (a) Each
Buyer signatory to this Amendment (i) agrees that such Buyer will make no claims
for damages or for default under any of the Transaction Agreement on account
of
the Late Filing and/or the Late Effectiveness and (ii) waives any claim for
Periodic Amounts or other Registration Damages or for default under any of
the
Transaction Agreements with respect to the Late Filing and/or the Late
Effectiveness.
(b) Each
of
the Buyers signatory to this Amendment, if such Buyers represent a Majority
in
Interest of the Holders (as that term is used in the Registration Rights
Agreement) as of the date hereof, hereby agrees that the Company shall be deemed
to have satisfied all of its covenants under Sections 2 and 3 of the
Registration Rights Agreement with respect to causing the registration of the
Initial Number
of
Shares to Be Registered (as defined in the Registration Rights Agreement) by
the
Initial Required Effective Date; provided, however, that the Company’s ongoing
obligations, such as, but not limited to, its obligation to maintain such
registration and its indemnification obligations shall remain in full force
and
effect.
(c) Each
of
the Buyers signatory to this Amendment, if such Buyers represent a Majority
in
Interest of the Holders as of the date hereof, hereby agrees that the exchange
of securities referred to herein shall not constitute a New Transaction (as
that
term is defined in the Securities Purchase Agreement).
(2) The
Company and each Buyer signatory to this Amendment hereby agree to exchange
(a)
such Buyer’s outstanding Convertible Debenture for a New Convertible Debenture
having the terms specified below in the principal amount of such outstanding
Convertible Debenture (provided, further, that accrued but unpaid interest
on
the outstanding Convertible Debenture will also be payable under the New
Convertible Debenture) and (b) such Buyer’s outstanding Warrant for a New
Warrant having the terms specified below for the purchase of the same number
of
shares of Common Stock as provided in the outstanding Warrant. The Buyer is
not
providing any other consideration for such exchange and no fees are payable
to
any broker in connection with such exchange. The exchange is being made under
Section 3(a)(9) of the 1933 Act.
(3) Each
New
Convertible Debenture shall have the same terms as the outstanding Convertible
Debenture, except as follows:
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(a)
in Section 4(A)(iii), the definition of “Fixed Conversion Price” shall
read in its entirety as follows:
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“Fixed
Conversion Price” means the amount equal to $0.85 (such amount is subject to
adjustment as provided herein).
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and
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(b)
with respect to Section 4(G), (i) each of Sections 4(G)(ii) through
(iv)
are identified as “Intentionally omitted” and all references to those
subsections are deemed deleted; (ii) the Company will have the right
to
issue a Mandatory Conversion Notice at any time, and (iii) if the
Company
issues a Mandatory Conversion Notice, the Company may designate any
date
on or after the date of such Mandatory Conversion Notice as the Mandatory
Conversion Date.
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The
New
Convertible Debenture will be deemed represented by the original Convertible
Debenture as amended by this Amendment.
(4) Each
New
Warrant shall have the same terms as the outstanding Warrant, except as follows:
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(a)
in Section 1, the phrase “at
an initial exercise price per share (the ‘Exercise Price’) of $1.20 per
share, subject to further adjustment as set forth herein” is replaced in
its entirety to read “at
an initial exercise price per share (the ‘Exercise Price’) of $0.95 per
share, subject to further adjustment as set forth
herein.”
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and
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(b)
Section 2.1(b) shall read in its entirety as
follows:
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(b)
If
the Notice of Exercise form elects a “cashless” exercise, the Holder shall
thereby be entitled to receive a number of shares of Common Stock
based on
the application of the following formula;
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X=Y
(A-B)
A
Where X= the
number of shares of Common Stock to be issued to the Buyer;
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Y=
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the
number of shares of Common Stock purchasable under the Warrant or,
if only
a portion of the Warrant is being exercised, the portion of the Warrant
being exercised (at the date of such
calculation);
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A=
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the
Fair Market Value (as defined herein) of one share of the Company’s Common
Stock (at the date of delivery of such
exercise).
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B=
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Exercise
Price.
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“Fair
Market Value” shall mean
(a) If
the
Company's Common Stock is traded on an exchange or is quoted on the National
Association of Securities Dealers, Inc. Automated Quotation
("NASDAQ")
Capital,
Global or Global Select Markets or the American Stock Exchange, LLC, then the
closing or last sale price, respectively, reported for the Trading Day
immediately preceding the relevant Exercise Date;
(b) If
the
Company's Common Stock is not traded on an exchange or on the NASDAQ
Capital,
Global or Global Select Markets or the American Stock Exchange, Inc., but is
traded in the over-the-counter market, then the average of the closing bid
and
ask prices reported for the trading day immediately preceding the Exercise
Date;
or
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(c) If
the
Company's Common Stock is not publicly traded, then as the Holder and the
Company agree, or in the absence of such an agreement, by arbitration in
accordance with the rules then standing of the American Arbitration Association,
before a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided.
The
New
Warrant will be deemed represented by the original Warrant as amended by this
Amendment.
(5) The
Company and each Buyer signatory hereto hereby agrees that this Amendment shall
be deemed to be the Company’s issuance of a Mandatory Conversion Notice with
respect to all of the outstanding principal and all accrued but unpaid interest
on the Buyer’s New Convertible Debenture, which amount shall be set forth next
to the Buyer’s name on the attached Schedule
A.
Such
conversion shall be effected at the Fixed Conversion Price as specified in
the
New Convertible Debenture. The date designated for such conversion shall be
the
effective date of this Amendment and such date shall be deemed a Conversion
Date
for purposes of the New Convertible Debenture.
(6) The
Company and each Buyer signatory hereto hereby agrees that this Amendment shall
be deemed to be each Buyer’s Notice of Exercise with respect to all of the
unexercised warrants of such Buyer on the Buyer’s New Warrant, which amount
shall be set forth next to the Buyer’s name on the attached Schedule
A.
Such
exercise shall be effected at the Exercise Price as specified in the New Warrant
and on a cashless basis as described in Section 4(b) of this Amendment. The
date
designated for such exercise shall be the effective date of this Amendment
and
such date shall be deemed an Exercise Date for purposes of the New
Warrant.
(7) (a)
The
Company will file a Current Report on Form 8-K (or other form deemed appropriate
by Company counsel) to reflect the changes in the terms of the debentures and
warrants held by the Buyers and to the terms of other Transaction Agreements
amended hereby.
(b)
The
Company represents that the current effective Registration Statement (in the
form filed with the SEC on September 13, 2007) covering the registration of
Registrable Securities (as defined in the Registration Rights Agreement)
continues to be effective with respect to the resale of shares issued to the
Buyers signatory hereto (i) on conversion of the Convertible Debentures
converted prior to the effectiveness of this Amendment and (ii) on conversion
of
the New Convertible Debentures (in each case, including shares issued on
conversion of interest). All such shares are “Debenture Shares” (as that term is
used in the Registration Statement) and each Buyer may sell such shares, up
to
the number specified opposite such Buyer’s name under the column “Number of
Shares Being Offered” in the Registration Statement, pursuant to such
Registration Statement.
(8) The
Company confirms to each Buyer signatory to this Amendment, and, in connection
with the effectiveness of this Amendment, will deliver to each such Buyer an
opinion of counsel to the Company, that (i) the holding period for the New
Convertible Debentures and any shares issued on conversion of principal or
interest thereof commenced on the Closing Date (as defined in the Securities
Purchase Agreement) and (ii) the holding period for the shares issued to the
holder in connection with the cashless exercise of the New Warrants commenced
on
the Closing Date.
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(9) Anything
herein to the contrary notwithstanding, this Amendment shall be effective only
if it is executed by Buyers holding outstanding Convertible Debentures having,
in the aggregate, current principal balance of at least $2,600,000 no later
than
October 31, 2007.
(10) Except
as
expressly set forth herein, this Amendment shall not be deemed to be a
waiver, amendment or modification of any provisions of the Transaction
Documents, or of any right, power or remedy of the Buyers, or constitute a
waiver, amendment or modification of any provision of the Transaction
Documents (except to the extent herein set forth), or any other document,
instrument and/or agreement executed or delivered in connection therewith,
in
each case whether arising before or after the date hereof or as a result of
performance hereunder or thereunder, all of which (except as specified herein)
remain in full force and effect. Except as set forth herein, the Buyers
reserve all rights, remedies, powers, or privileges.
B. CONFLICTS.
Except
as expressly set forth in this Amendment, the terms and provisions of each
of
the Transaction Documents shall continue unmodified and in full force and
effect. In the event of any conflict between this Amendment and any one of
the
Transaction Documents, this Amendment shall control.
C. GOVERNING
LAW.
This
Amendment shall be governed and construed under the laws of the State of New
York, and shall be binding on and shall inure to the benefit of the parties
and
their respective successors and permitted assigns.
D. COUNTERPARTS.
This
Amendment may be executed in any number of counterparts, each of which shall
be
an original, but all of which together shall constitute one instrument.
A
facsimile or other electronic transmission of this signed Amendment shall be
legal and binding on all parties hereto.
[Remainder
of page left blank intentionally.]
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IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date
first set forth above.
COMPANY:
By:
_____________________________
Name: _____________________________
Title: _____________________________
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IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date
first set forth above.
BUYERS:
[BUYER
NAME]
By:
_____________________________
Name: _____________________________
Title:
_____________________________
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