MAKE GOOD AGREEMENT
THIS
MAKE GOOD AGREEMENT
(the
“Agreement”),
dated
January 31, 2008, by and among Xxxx Asset Management LLC, a Tennessee Registered
Investment Advisor,
as the
authorized agent of the Investors (as defined below) (the “Investor
Agent”),
China
Sky One Medical, Inc., a Nevada corporation, and its current and future
subsidiaries (collectively, the “Company”)
and
Xxx Xxx-Xxxx, an individual residing in the People’s Republic of China (the
“CSKI
Shareholder”).
This
Agreement shall become effective upon the execution thereof by all
parties.
WHEREAS:
A. 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 to purchase shares of Common Stock in accordance with that
certain Securities Purchase Agreement, dated as of the date hereof (the
“Securities
Purchase Agreement”),
by
and among the Company and the investors signatory thereto (the “Investors”),
and
certain other papers, agreements, documents, instruments and certificates
necessary to carry out the purposes thereof (collectively, the “Transaction
Documents”).
B. The
Company presented financial projections to the Investors, indicating that the
Company will report Earnings Per Share (EPS) of at least (i) $1.05 per share
for
the fiscal year ending December 31, 2007, as adjusted, based on fully
diluted shares outstanding (an aggregate of 13,907,696 shares, including all
outstanding common shares, preferred shares, any convertible security, options,
and warrants) and (ii) $1.75 per share for the fiscal year ending
December 31, 2008, as adjusted, based on fully diluted shares outstanding
(an aggregate of 16,907,696 shares, including all outstanding common shares,
preferred shares, any convertible security, options, and warrants, excluding
the
900,000 warrants to be issued in this Offering), and based upon an audit
conducted in conformity with United States generally accepted accounting
principles (“US
GAAP”).
C. As
an
inducement to the Investors to enter into the Securities Purchase Agreement,
the
CSKI Shareholder desires to place the Escrow Shares (as hereinafter defined)
into escrow for the benefit of the Investors in the event that the Company
fails
to satisfy the FY07 Performance Threshold and/or FY08 Performance Threshold
(as
hereinafter defined).
D. Pursuant
to the requirements of the Securities Purchase Agreement, the Company, the
CSKI
Shareholders and the Investor Agent have agreed to establish an escrow (the
“Escrow”)
on the
terms and conditions set forth in that certain Escrow Agreement, dated of even
date herewith (the “Escrow
Agreement”),
by
and among Interwest Transfer Company, Inc., the transfer agent for the Company
(the “Escrow
Agent”)
and
the parties hereto.
E. Contemporaneously
with the execution and delivery of this Agreement, the Company and the Investors
are executing and delivering (i) a Registration Rights Agreement, dated as
of
even date herewith (the “Registration
Rights Agreement”),
pursuant to which the Company has agreed to provide certain registration rights
with respect to the Escrow Shares (as defined below), under the Securities
Act
of 1933, as amended (the “Securities
Act”),
and
the rules and regulations promulgated thereunder, and applicable state
securities laws and (ii) a Put Agreement, dated as of even date herewith (the
“Put
Agreement”),
pursuant to which the Company and the Investors have agreed upon certain
circumstances under which the
Investors shall have the right, but not the obligation, to require the Company
to repurchase the Shares (the “Put
Right”).
1
NOW,
THEREFORE,
in
consideration of the covenants, promises and representations set forth herein,
and for other good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged, the parties agree as follows:
1. Establishment
of Escrow.
(a) Escrow
Deposit.
Concurrently with the closing of the Offering, the CSKI Shareholder shall
deliver to the Escrow Agent a stock certificate evidencing 3,000,000 shares,
in
the aggregate, of Common Stock (as adjusted for stock splits, stock dividends,
and similar adjustments) (the “Escrow
Shares”),
with
stock powers executed in blank in form and substance reasonably satisfactory
to
the Investor Agent.
(b) Fees
and Expenses.
The
Company shall be responsible for any and all fees and costs related to the
services rendered by Escrow Agent hereunder and pursuant to the Escrow
Agreement.
2. Disbursement
of Escrow Shares.
(a) Performance
Threshold for Fiscal 2007.
The
Company covenants to the Investors and Investor Agent that Adjusted EPS (as
defined below) for the fiscal year ending December 31, 2007 (“FY07
Adjusted EPS”)
of the
Company will be greater than or equal to $1.05 per share (the “FY07
Performance Threshold”),
as
set forth in financial statements of the Company (the “FY07
Financial Statements”)
for
the period ending December 31, 2007 prepared in accordance with the
published rules and regulations of US GAAP applied on a consistent basis
throughout the periods involved and audited in accordance with the auditing
standards of the Public Company Accounting Oversight Board (“PCAOB”)
by a
nationally recognized independent accountant registered with PCAOB (the
“Independent
Accountant”),
with
such statements fairly presenting in all material respects the financial
position of the Company and its subsidiaries, on a consolidated basis, as of
the
fiscal year ending December 31, 2007 (the “FY07”)
and
the FY07 Financial Statements shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. For the purpose of this Section
2(a), “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.
2
(b) FY07
Financial Statements.
The
Company shall provide the Investor Agent and the Investors (as defined below)
with its audited FY07 Financial Statements on or before March 31, 2008.
Concurrently with the release of the audited FY07 Financial Statements to the
Investor Agent and the Investors, (i) the Company shall provide to the
Investor Agent and the Investors a written certification as to the amount of
the
Adjusted EPS for FY07 and whether the FY07 Performance Threshold, as adjusted,
has been met and (ii) the Company shall make such FY07 Financial Statements
and certification publicly available (as part of an Annual Report on Form 10-KSB
or on a Current Report on Form 8-K, or otherwise). Subject to Section 3
below, in the event the FY07 Performance Threshold, as adjusted, is not
attained, the Company and the Investor Agent shall promptly provide a joint
written instruction to the Escrow Agent (the “Investor
Joint Instructions”),
to
deliver as promptly as practicable (such date, the “FY07
Released Escrow Shares Release Date”)
to the
Investors that did not exercise their Put Rights pursuant to the Put Agreement
(as further discussed in Section 2(d) below) (the “Eligible
Investors”),
on a
Pro Rata Basis (as defined below), an aggregate amount of Escrow Shares based
from the following formula (the “FY07
Released Escrow Shares”):
(i) If
the
FY07 Adjusted EPS is less than $0.80, then the number of FY07 Released Escrow
Shares will be 3,000,000.
(ii) If
the
FY07 Adjusted EPS is $0.80 or greater, but less than $1.05, the number of FY07
Released Escrow Shares shall be calculated as follows:
A
= 2 x B
x C
where
A
= the
aggregate number of FY07 Released Escrow Shares;
B
= the
percentage under the FY07 Performance Threshold; and
C
= 3,000,000.
(iii) If
the
FY07 Adjusted EPS is $1.05 or greater, then none of the Escrow Shares will
be
released to the Investors.
(c) Allocation
of FY07 Released Escrow Shares; Transfer of FY07 Released Escrow
Shares.
(i) The
Eligible Investors shall be entitled to receive allocations of the FY07 Released
Escrow Shares on a Pro Rata Basis. For the purpose of this Section 2(c)(i),
“Pro
Rata Basis”
means
such portion of the FY07 Released Escrow Shares equal to the product of
(i) the number of FY07 Released Escrow Shares (as calculated in accordance
with Section 2(b) above) and (ii) the quotient of (x) the number
of shares of Common Stock acquired by such Eligible Investor in the Offering
and
(y) the number of shares of Common Stock acquired by all Investors in the
Offering. Any distribution of FY07 Released Escrow Shares hereunder shall also
include a distribution to such Investor of any dividends or other distributions
in the Escrow, which were issued or otherwise obtained or deposited with respect
to such FY07 Released Escrow Shares distributed to such Investor
hereunder.
3
(ii) The
Company and the Investor Agent shall cause the Investor Joint Instructions
to
instruct the Escrow Agent to either (x) deliver the FY07 Released Escrow
Shares allocated to each Eligible Investor by crediting such aggregate number
of
shares of Common Stock to which such Eligible Investor is entitled to such
Eligible Investor’s or such Eligible Investor’s designee’s balance account with
the Depository Trust Company through the Deposit Withdrawal Agent Commission
system or (y) if the Escrow Agent is unable to distribute the FY07 Released
Escrow Shares of any Eligible Investor in accordance with the foregoing, to
deliver stock certificates evidencing the FY07 Released Escrow Shares of such
Eligible Investor registered in the name of each such Eligible Investor or
such
Eligible Investor’s designee at such address as set forth in the Securities
Purchase Agreement or such other address provided to the Investor Agent by
such
Eligible Investor.
(d) Termination
of Rights to Escrow Shares upon Exercise of Put Right.
Notwithstanding anything to the contrary set forth herein, upon any Investor’s
exercise of its Put Right pursuant to the Put Agreement, such Investor’s right
to receive Escrow Shares on a Pro Rata Basis hereunder shall automatically
and
permanently terminate. The Investor Joint Instructions delivered to the Escrow
Agent by the Company and Investor Agent pursuant to Section 2(b) hereof shall
indicate (i) which Investors, if any, have exercised their Put Rights and (ii)
the corresponding number of Escrow Shares that shall be released from escrow
and
delivered back to the CSKI Shareholder (the “Returned
Shares”).
(e) Performance
Threshold for Fiscal 2008.
The
Company covenants to the Investors and Investor Agent that Adjusted EPS (as
defined below) for the fiscal year ending December 31, 2008 (“FY08
Adjusted EPS”)
of the
Company will be greater than or equal to $1.75 per share (the “FY08
Performance Threshold”),
as
set forth in financial statements of the Company (the “FY08
Financial Statements”)
for
the period ending December 31, 2008 prepared in accordance with the
published rules and regulations of US GAAP applied on a consistent basis
throughout the periods involved and audited in accordance with the auditing
standards of PCAOB by the Company’s Independent Accountant, with such statements
fairly presenting in all material respects the financial position of the Company
and its subsidiaries, on a consolidated basis, as of the fiscal year ending
December 31, 2008 (the “FY08”)
and
the FY08 Financial Statements shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. For the purpose of this Section
2(e), “Adjusted
EPS”
means
the net income (or loss) of the Company and its subsidiaries for such period,
determined on a consolidated basis divided by 16,907,696 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 the Closing Deadline, the FY08 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.
4
(f) FY08
Financial Statements.
The
Company shall provide the Investor Agent and the Eligible Investors with its
audited FY08 Financial Statements on or before March 31, 2009. Concurrently
with the release of the audited FY08 Financial Statements to the Investor Agent
and the Eligible Investors, (i) the Company shall provide to the Investor
Agent and the Eligible Investors a written certification as to the amount of
the
Adjusted EPS for FY08 and whether the FY08 Performance Threshold, as adjusted,
has been met and (ii) the Company shall make such FY08 Financial Statements
and certification publicly available (as part of an Annual Report on Form 10-KSB
or on a Current Report on Form 8-K, or otherwise). Subject to Section 3
below, in the event the FY08 Performance Threshold, as adjusted, is not
attained, the Company and the Investor Agent shall promptly provide Investor
Joint Instructions, to deliver as promptly as practicable (such date, the
“FY08
Released Escrow Shares Release Date”)
to the
Eligible Investors, on a Pro Rata Basis (as defined below), an aggregate amount
of Escrow Shares based from the following formula (the “FY08
Released Escrow Shares”):
(i) If
the
FY08 Adjusted EPS is $0.87 or less, then the number of FY08 Released Escrow
Shares will be 3,000,000, decreased by the amount of the FY07 Released Escrow
Shares.
(ii) If
the
FY08 Adjusted EPS is greater than $0.87, but less than $1.50, the number of
FY08
Released Escrow Shares shall be calculated as follows:
A
= 2 x B
x C
where
A
= the
aggregate number of FY08 Released Escrow Shares;
B
= the
percentage under the FY08 Performance Threshold; and
C
= 3,000,000,
decreased by the amount of the FY07 Released Escrow Shares.
(iii) If
the
FY08 Adjusted EPS is $1.50 or greater, but less than $1.75, the number of FY08
Released Escrow Shares shall be calculated as follows:
A
= 1 x B
x C
where
A
= the
aggregate number of FY08 Released Escrow Shares;
B
= the
percentage under the FY08 Performance Threshold; and
5
C
= 3,000,000,
decreased by the amount of the FY07 Released Escrow Shares.
(iv) If
the
FY08 Adjusted EPS is $1.75 or greater, then none of the Escrow Shares will
be
released to the Investors.
(g) Allocation
of FY08 Released Escrow Shares; Transfer of FY08 Released Escrow
Shares.
(i) The
Eligible Investors shall be entitled to receive allocations of the FY08 Released
Escrow Shares on a Pro Rata Basis. For the purpose of this Section 2(g)(i),
“Pro
Rata Basis”
means
such portion of the Released Escrow Shares equal to the product of (i) the
number of FY08 Released Escrow Shares (as calculated in accordance with
Section (e) above) and (ii) the quotient of (x) the number of
shares of Common Stock acquired by such Eligible Investor in the Offering and
(y) the number of shares of Common Stock acquired by all Investors in the
Offering. Any distribution of FY08 Released Escrow Shares hereunder shall also
include a distribution to such Eligible Investor of any dividends or other
distributions in the Escrow, which were issued or otherwise obtained or
deposited with respect to such FY08 Released Escrow Shares distributed to such
Eligible Investor hereunder.
(ii) The
Company and the Investor Agent shall cause the Investor Joint Instructions
to
instruct the Escrow Agent to either (x) deliver the FY08 Released Escrow
Shares allocated to each Eligible Investor by crediting such aggregate number
of
shares of Common Stock to which such Eligible Investor is entitled to such
Eligible Investor’s or such Eligible Investor’s designee’s balance account with
the Depository Trust Company through the Deposit Withdrawal Agent Commission
system or (y) if the Escrow Agent is unable to distribute the FY08 Released
Escrow Shares of any Eligible Investor in accordance with the foregoing, to
deliver stock certificates evidencing the FY08 Released Escrow Shares of such
Eligible Investor registered in the name of each such Eligible Investor or
such
Eligible Investor’s designee at such address as set forth in the Securities
Purchase Agreement or such other address provided to the Investor Agent by
such
Eligible Investor.
(g) Distribution
of Remaining Escrow Shares.
If
there are any Escrow Shares remaining in the Escrow after the distribution
of
the FY07 Released Escrow Shares, the Returned Shares and/or FY08 Released Escrow
Shares, or if the Company’s FY07 Performance Threshold and/or FY08 Performance
Threshold obligation ceases in accordance with Section 3 below (the Escrow
Shares held in the Escrow at such time, the “Remaining
Escrow Shares”),
the
Company and the Investor Agent shall promptly thereafter provide a joint written
instruction to the Escrow Agent (the “Shareholder
Joint Instructions”)
to
deliver the Remaining Escrow Shares to the CSKI Shareholder. The Company and
the
Investor Agent shall cause the Shareholder Joint Instructions to instruct the
Escrow to promptly deliver stock certificates evidencing the Remaining Escrow
Shares registered in the name of the CSKI Shareholder to the addresses set
forth
in the Escrow Agreement. Any distribution of Remaining Escrow Shares hereunder
shall also include a distribution to the CSKI Shareholder of any dividends
or
other distributions in the Escrow, which were issued or otherwise obtained
or
deposited with respect to such Remaining Escrow Shares distributed
to
the CSKI Shareholder hereunder.
6
3. Force
Majeure.
(a) Upon
the
occurrence of an event of Force Majeure (as defined below), the obligation
of
the Company to meet the FY07 Performance Threshold and/or FY08 Performance
Threshold shall cease and all Escrow Shares shall be immediately deemed
Remaining Shares for all purposes hereunder. For the purpose of this Agreement,
“Force
Majeure”
means
a
natural disaster (e.g., earthquakes, typhoons, flood, fire), war, epidemic,
civil disturbance, strike, major failure of domestic transportation, act of
government or public agency that directly and substantially prevents the Company
from operating a significant part of its business, which was unforeseeable
at
the time of the closing and the occurrence and consequences thereof could not
reasonably be avoided or overcome.
(b) If
the
Company intends to claim a Force Majeure has occurred, it must promptly inform
the Investor Agent in writing within thirty (30) days from the occurrence of
such event and provide detailed evidence of the occurrence and the duration
of
such occurrence.
(c) Should
any controversy arise with respect to the Company’s claim that a Force Majeure
has occurred and/or with respect to the right of the Investors to receive the
Escrow Shares, the Investor Agent shall have the right to consult counsel at
the
expense of the Company and/or to institute an appropriate interpleader action
to
determine the rights of the parties.
4. Representations
and Warranties of the CSKI Shareholder.
The
CSKI Shareholder hereby represents and warrants that:
(a) Legal
Capacity; Organization.
The
CSKI Shareholder has the legal capacity and right to execute, deliver, enter
into, consummate and perform the transactions contemplated by hereby and in
the
Escrow Agreement and otherwise to carry out its obligations hereunder and
thereunder.
(b) Accredited
Investor Status.
The
CSKI Shareholder is an “accredited investor” as that term is defined in
Rule 501(a) of Regulation D under the Securities Act.
(c) Securities
Ownership.
As of
the Closing Date (as defined in the Securities Purchase Agreement), the CSKI
Shareholder owns the Escrow Shares to be deposited hereunder (i) as the
sole record and beneficial owner, free from all taxes, liens, claims,
encumbrances and charges and there are no outstanding rights, options,
subscriptions or other agreements or commitments obligating the CSKI Shareholder
to sell or transfer such Escrow Shares and, except in connection with the
Offering, such Escrow Shares are not subject to any lock-up or other restriction
on their transfer or on the ability of the Investors to sell or transfer such
Escrow Shares. As of the Closing Date, the CSKI Shareholder shall have paid
any
and all amounts and charges due and owing to the Company with respect to the
Escrow Shares and there shall be no unpaid amounts or charges claimed to be
due
to the Company from the CSKI Shareholder with respect to the Escrow
Shares.
7
(d) Authorization;
Enforcement; Validity.
This
Agreement has been duly authorized, executed and delivered by the CSKI
Shareholder and constitutes a valid and legally binding agreement of the CSKI
Shareholder enforceable against the CSKI Shareholder in accordance with its
terms, except as such enforceability may be limited by general principles of
equity or to applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors’ rights and remedies.
(e) Consents.
All
government and other consents that are required to have been obtained by the
CSKI Shareholder with respect to this Agreement have been obtained and are
in
full force and effect and all conditions of any such consents have been complied
with. The CSKI Shareholder has complied and will comply with all applicable
disclosure or reporting requirements in respect of the transaction contemplated
hereby.
(f) No
Conflicts.
The
execution and delivery by the CSKI Shareholder of this Agreement, the sale
and
delivery of the Escrow Shares and the performance by the CSKI Shareholder of
its
obligations under this Agreement do not and will not violate or conflict with
(i) any law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations and the rules and regulations of
the
Principal Market (as defined in the Warrants)), or (ii) any order or
judgment of any court or other agency of government or any of the CSKI
Shareholder’s assets or any contractual restriction binding on or affecting the
CSKI Shareholder or any of the CSKI Shareholder’s assets.
(g) Independent
Decision.
The
CSKI Shareholder is acting solely for his own account, and has made his own
independent decision to enter into this Agreement and as to whether this
Agreement is appropriate or proper for the CSKI Shareholder based upon his
own
judgment and upon advice of such advisors as the CSKI Shareholder deems
necessary. The CSKI Shareholder acknowledges and agrees that he is not relying,
and has not relied, upon any communication (written or oral) of any Investor
or
any affiliate, employee or agent of any Investor with respect to the legal,
accounting, tax or other implications of this Agreement and that he has
conducted his own analyses of the legal, accounting, tax and other implications
hereof and thereof; it being understood that information and explanations
related to the terms and conditions of this Agreement shall not be considered
investment advice or a recommendation to enter into this Agreement. The CSKI
Shareholder acknowledges that no Investor nor any affiliate, employee or agent
of any Investor is acting as a fiduciary for or an advisor to the CSKI
Shareholder in respect of this Agreement.
(h) Brokerage
Fees.
Other
than amounts payable to the Investor Agent or its affiliates, the CSKI
Shareholder has taken no action that would give rise to any claim by any person
for brokerage commissions, finder’s fees or similar payments relating to this
Agreement or the transactions contemplated hereby.
8
(i) Litigation.
There
is no action, suit, claim, proceeding, inquiry or investigation before or by
any
court, public board, government agency or self regulatory organization or body
pending or, to the knowledge of the CSKI Shareholder, threatened against or
affecting the CSKI Shareholder that could reasonably be expected to have a
material adverse affect on his ability to perform its obligations
hereunder.
5. Registration
Rights.
The
Company acknowledges that the FY07 Released Escrow Shares and FY08 Released
Escrow Shares are Registrable Securities (as defined in the Registration Rights
Agreement) and the Investors shall have such registration rights set forth
in
the Registration Rights Agreement related thereto.
6. Termination.
This
Agreement shall terminate at such time as all of the Escrow Shares shall have
been released by the Escrow Agent from the Escrow in accordance with
Section 2 hereof; provided however, that Sections 1(b), 5, 6, 7 and 8
shall survive any such termination.
7. Indemnity.
The
Investor Agent will be indemnified and held harmless, jointly and severally,
by
the Company and the CSKI Shareholder from and against any expenses, including
reasonable attorneys’ fees and disbursements, damages or losses suffered by
Investor Agent in connection with any claim or demand, which, in any way,
directly or indirectly, arises out of or relates to this Agreement or the
services of Investor Agent hereunder or under the Escrow Agreement; except,
that
if Investor Agent is guilty of willful misconduct, fraud or gross negligence
under this Agreement then Investor Agent will bear all losses, damages and
expenses arising as a result of such willful misconduct, fraud or gross
negligence. Promptly after the receipt by Investor Agent of notice of any such
demand or claim or the commencement of any action, suit or proceeding relating
to such demand or claim, Investor Agent will notify the other parties hereto
in
writing. For the purposes hereof, the terms “expense” and “loss” will include
all amounts paid or payable to satisfy any such claim or demand, or in
settlement of any such claim, demand, action, suit and all costs and expenses,
including, but not limited to, reasonable attorneys’ fees and disbursements,
paid or incurred in investigating or defending against any such claim, demand,
action, suit or proceeding.
8. Miscellaneous.
(a) Notices.
Any
communication, notice or document required or permitted to be given under this
Agreement shall be given in writing and shall be deemed received (i) when
personally delivered to the relevant party at such party’s address as set forth
below, (ii) if sent by mail (which must be certified or registered mail,
postage prepaid) or overnight courier, when received or rejected by the relevant
party at such party’s address indicated below, or (iii) if sent by
facsimile, when confirmation of delivery is received by the sending
party:
If
to the
Investor Agent, to:
Xxxx
Asset Management LLC
0000
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
XX 00000
Attn.:
Xxxx Xxxxx, President
tel.:
(000) 000-0000
fax.:
(000) 000-0000
e-mail:
xxxxxxxxx@xxxxxxxxx.xxx
9
with
a
copy to (for informational purposes only):
Wells,
Moore, Xxxxxxx & Xxxxxxx, PLLC
0000
Xxx
Xxxxxx Xxxx, Xxxxx 000
P.O.
Box
1970
Xxxxxxx,
XX 00000
Attn.:
Xxxx Xxxxxxx, Esq.
tel.:
(000) 000-0000
fax:
(000) 000-0000
e-mail:
xxxxxxx@xxxxxxxxxx.xxx
If
to the
Company, to:
Xxxx
0000, Xx. 00 Xx Xxxx Building, Gan Shui Road,
Nandang
District, Harbin, People’s Republic of China 150001
Attn.:
Xxx Xxx-Xxxx, Chairman
tel.:
+
00-000-00000000
fax.:
+
00-000-0000-0000
e-mail:
xxxxxxxxxxx@xxxxx.xxx.xx
or
such
other address as indicated by the Company as its primary business address in
its
SEC filings.
with
a
copy to:
Xxxxxxx
Xxxx, LLP
0000
Xxxxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attn.:
Xxxxxxx X. Xxxxx, Esq.
tel.:
(000) 000-0000
fax.:
(000) 000-0000
e-mail:
xxxxxx@xxxxxxxxxxx.xxx
If
to the
CSKI Shareholder, to:
Xxx
Xxx-Xxxx
Xxxx
0000, Xx. 00 Xx Xxxx Building, Gan Shui Road,
Nandang
District, Harbin, People’s Republic of China 150001
tel.:
+
00-000-00000000
fax.:
+
00-000-0000-0000
e-mail:
xxxxxxxxxxx@xxxxx.xxx.xx
10
If
to the
Escrow Agent:
Interwest
Transfer Company, Inc.
0000
Xxxx
Xxxxxx Xxxxxxxx Xxxx, Xxxxx 000
X.X.
Xxx
00000
Xxxx
Xxxx
Xxxx, XX 00000
Attn.:
Xxxx Xxxxxx, Vice President
tel.:
(000) 000-0000
fax.:
(000) 000-0000
e-mail:
xx@xxxxxxxxxxx.xxx
(b) Appointment
of Agent for Service of Process.
The
CSKI Shareholder and the Company (the “Foreign
Parties”)
hereby
irrevocably appoints ______________________, of ________________________, U.S.A.
(“[_____]”) as its agent for the receipt of service of process in the United
States. Each Foreign Party agrees that any document may be effectively served
on
it in connection with any action, suit or proceeding in the United States by
service on its agents. The Investor Agent consents and agrees that each Foreign
Party may, in its reasonable discretion, irrevocably appoint a substitute agent
for the receipt of service of process located within the Untied States, and
that
upon such appointment, the appointment of [_____] may be revoked.
Any
document shall be deemed to have been duly served if marked for the attention
of
the agent at its address as set forth in this Section 8(b) or such other
address in the United States as may be notified to the party wishing to serve
the document and (a) left at the specified address if its receipt is
acknowledged in writing; or (b) sent to the specified address by post,
registered mail return receipt requested. In the case of (a), the document
will
be deemed to have been duly served when it is left and signed for. In the case
of (b), the document shall be deemed to have been duly served when received
and
acknowledged.
If
any
Foreign Party’s agent at any time ceases for any reason to act as such, such
Foreign Party shall appoint a replacement agent having an address for service
in
the United States and shall notify the Investor Agent of the name and address
of
the replacement agent. Failing such appointment and notification, the holders
of
a majority of the Shares (as defined in the Securities Purchase Agreement)
shall
be entitled by notice to such Foreign Party to appoint a replacement agent
to
act on such Foreign Party’s behalf. The provisions of this Section 8(b)
applying to service on an agent apply equally to service on a replacement
agent.
(c) Currency.
As used
herein, “Dollar,”
“US
Dollar”
and
“$”
each
mean the lawful money of the United States.
(d) Assignment;
Amendment.
This
Agreement and the rights and obligations hereunder of any of the parties hereto
may not be assigned without the prior written consent of the other parties
hereto. Subject to the foregoing, this Agreement will be binding upon and insure
to the benefit of each of the parties hereto and their respective successors
and
permitted assigns. No portion of the Escrow Shares shall be subject to
interference or control by any creditor to any party hereto, or be subject
to
being taken or reached by any legal or equitable process in satisfaction of
any
debt or other liability of any such party hereto prior to the disbursement
thereof to such party hereto in accordance with the provisions of this
Agreement. This Agreement may be changed or modified only in writing signed
by
all of the parties hereto. No provision hereof may be waived other than by
an
instrument in writing signed by the party against whom enforcement is sought.
A
waiver or amendment of any term or provision of this Agreement shall not be
construed as a waiver or amendment of any other term or provision of this
Agreement or any other Transaction Document.
11
(e) Entire
Agreement.
This
Agreement, together with the Escrow Agreement and the other Transaction
Documents, contains the entire understanding and agreement between the parties
hereto with respect to the subject matter of this Agreement, and all prior
writings and discussions are hereby merged into this Agreement.
(f) Counterparts.
This
Agreement may be executed by facsimile signatures and in multiple counterparts,
each of which shall be deemed an original. It shall not be necessary that each
party executes each counterpart, or that any one counterpart be executed by
more
than one party so long as each party executes at least one
counterpart.
(g) Headings.
The
headings contained in this Agreement are for convenience or reference only
and
shall not affect the construction of this Agreement.
(h) Governing
Law; Jurisdiction.
All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. The parties hereby agree that all actions or proceedings arising
directly or indirectly from or in connection with this Agreement shall be
litigated only in the Supreme Court of the State of New York or the United
States District Court for the Southern District of New York located in New
York
County, New York. The parties consent to the jurisdiction and venue of the
foregoing courts and consent that any process or notice of motion or other
application to any of said courts or a judge thereof may be served inside or
outside the State of New York or the Southern District of New York by registered
mail, return receipt requested, directed to the party being served at its
address set forth on the signature ages to this Agreement (and service so made
shall be deemed complete three (3) days after the same has been posted as
aforesaid) or by personal service or in such other manner as may be permissible
under the rules of said courts. Each of the parties hereto irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action, or
proceeding brought in such a court and any claim that suit, action, or
proceeding has been brought in an inconvenient forum. EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
12
(i) Third-Party
Beneficiaries.
The
Investors shall be intended third party beneficiaries of this Agreement to
the
same extent as if they were parties hereto, and shall be entitled to enforce
the
provisions hereof.
(j) Severability.
If any
term or other provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full force and effect
so long as the economic or legal substance of this Agreement is not affected
in
any manner materially adverse to any party. 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 Agreement so as
to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the terms of this Agreement remain as originally
contemplated to the fullest extent possible.
(k) Dispute
Resolution.
In the
case of a dispute as to the determination of the number of FY07 Released Escrow
Shares, FY08 Released Escrow Shares, Remaining Escrow Shares or other arithmetic
calculation hereunder, the Company shall submit the disputed determinations
or
arithmetic calculations via facsimile within one (1) Business Day (as defined
in
the Securities Purchase Agreement) of receipt, or deemed receipt, of the event
giving rise to such dispute, as the case may be, to the Investor Agent. If
the
Investor Agent and the Company are unable to agree upon such determination
or
calculation within one (1) Business Day of such disputed determination or
arithmetic calculation being submitted to the Investor Agent, then the Company
shall, within one Business Day submit via facsimile the disputed determination
or (the disputed arithmetic calculation to the Independent Accountant. The
Company at the Company’s expense, shall cause the Independent Accountant to
perform the determinations or calculations and notify the Company and the
Investor Agent of the results no later than five (5) Business Days from the
time
it receives the disputed determinations or calculations. The Independent
Accountant’s determination or calculation, as the case may be, shall be binding
upon all parties absent demonstrable error.
[The
remainder of the page is intentionally left blank]
13
IN
WITNESS WHEREOF,
each of
the parties hereto has executed this Agreement by the authorized officer named
below.
INVESTOR
AGENT:
XXXX
ASSET MANAGEMENT LLC
By:
____________________________
Name:
__________________________
Its:
____________________________
Dated:
__________________________
14
IN
WITNESS WHEREOF,
each of
the parties hereto has executed this Agreement by the authorized officer named
below.
THE
COMPANY:
By:
____________________________
Name:
__________________________
Its:
____________________________
Dated:
__________________________
15
IN
WITNESS WHEREOF,
each of
the parties hereto has executed this Agreement by the authorized officer named
below.
THE
CSKI SHAREHOLDER:
____________________________
Name:
___________________________
Dated:
___________________________
16
