REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT
(this
“Agreement”),
dated
as of October _____, 2006, by and among American Dairy, Inc., a corporation
organized under the laws of State of Utah, with its principal executive office
at C-16 Xxxx Xxxx International Building, No. 10, Jiu-shen Road, Zho Xxx Xxx,
Beijing, People’s Republic of China (the “Company”),
and
the undersigned investors (individually, an “Investor”
and
collectively, the “Investors”).
All
terms used but not defined herein shall have the meaning ascribed thereto in
the
Subscription Agreement by and among the Company and the Investors dated of
even
date herewith (the “Subscription
Agreement”).
WHEREAS,
upon
the terms and subject to the conditions of the Subscription Agreement, the
Company has agreed to issue and sell to the Investors, and the Investors have
agreed to purchase, (a) a minimum, in the aggregate, of $10,000,000 of 7.75%
convertible notes of the Company (each, a “Note”
and
collectively, the “Notes”),
and
(b) warrants (the “Investor
Warrants”)
to
purchase shares of the Company’s common stock, $0.001 par value per share
(“Common
Stock”);
and
WHEREAS,
to
induce the Investor to execute and deliver the Subscription Agreement, the
Company has agreed to provide certain registration rights under the Securities
Act of 1933, as amended, and the rules and regulations thereunder, or any
similar successor statute (collectively, the “1933
Act”),
and
applicable state securities laws, with respect to the shares of the Company’s
Common Stock issuable upon conversion of the Notes and as payment of interest
thereon and the exercise of the Investor Warrants.
NOW,
THEREFORE,
in
consideration of the premises and the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the Company and each of the Investors hereby agree as
follows:
1. Definitions.
As
used
in this Agreement, the following terms shall have the following
meanings:
(a) “Investors”
means
the Investors and any transferee or assignee who agrees to become bound by
the
provisions of this Agreement in accordance with Section 9 hereof.
(b) “register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing a Registration Statement
or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis (“Rule
415”),
and
the declaration or ordering of effectiveness of such Registration Statement
by
the United States Securities and Exchange Commission (the “SEC”).
(c) “Registrable
Securities”
means
the shares of the Company’s Common Stock issued or issuable upon (i) conversion
of the principal amount of the Notes (the “Principal
Conversion Shares”),
(ii)
conversion of interest payable on the Notes (the “Interest
Conversion Shares”,
and
together with the Principal Conversion Shares, the “Conversion
Shares”),
and
(iii) exercise of the Investor Warrants (the “Warrant
Shares”),
and
any shares of capital stock issued or issuable as a dividend on or in exchange
for or otherwise with respect to any of the foregoing.
(d) “Registration
Statement”
means
a
registration statement of the Company under the 1933 Act.
2. Registration.
(a) Mandatory
and Demand Registration.
(i) The
Company shall prepare and, on or prior to the three-month anniversary of the
Closing Date (the “Required
Filing Date”),
file
with the SEC a Registration Statement on Form S-1 (or, if Form S-1 is not then
available, on such form of Registration Statement as is then available to effect
a registration of the Registrable Securities, subject to the consent of the
Investors, which consent will not be unreasonably withheld) covering the resale
of the Registrable Securities issued or issuable pursuant to the Subscription
Agreement, which Registration Statement, to the extent allowable under the
1933
Act and the rules and regulations promulgated thereunder (including Rule 416),
shall state that such Registration Statement also covers such indeterminate
number of additional shares of Common Stock as may become issuable upon
conversion of or otherwise pursuant to the Notes and exercise of the Investor
Warrants to prevent dilution resulting from stock splits, stock dividends or
similar transactions. The number of shares of Common Stock initially included
in
such Registration Statement shall be no less than an amount equal to one hundred
percent (100%) of the number of Conversion Shares that are issuable upon
conversion of the Notes and interest thereon and any additional Notes (based
on
the Conversion Price as then in effect), and the number of Warrant Shares that
are then issuable upon exercise of the Investor Warrants, without regard to
any
limitation on the Investor’s ability to convert the Notes or exercise the
Investor Warrants. The Company acknowledges that the number of shares initially
included in the Registration Statement represents a good faith estimate of
the
maximum number of shares issuable upon conversion of the Notes and interest
thereon and upon exercise of the Investor Warrants. The date on which the
Registration Statement actually gets filed shall be referred to herein as the
“Filing
Date.”
(ii) Notwithstanding
the provisions of Section 2(a)(i) above, the holders of a majority of the
principal amount of Notes outstanding (the “Majority
Holders”)
may,
not later than forty-five (45) days prior to the Required Filing Date, give
the
Company written notice that they wish to defer the Required Filing Date (a
“Deferral
Notice”).
In
such event, the date on which the Company shall be obligated to file a
Registration Statement to register the Registrable Securities shall be deferred
until the three-month anniversary of the date on which the Company receives
a
written demand (in this case, a “Demand
Notice”)
from
the Majority Holders (in this case, the “Demand
Filing Date”).
(iii) Subject
to the conditions set forth herein, and prior to the fifth anniversary of the
Closing Date, the Company, upon written demand of the Majority Holders (in
this
case, a “Demand
Notice”),
agrees to register on one occasion, any Interest Conversion Shares which have
not been included in a Registration Statement of the Company pursuant to Section
2(a)(i) or (ii) above, or which have been included in a Registration Statement,
but have not been disposed of by the Investors pursuant to Section 3(b) below.
In such event, the date on which the Company shall be obligated to file a
Registration Statement to register the Conversion Shares shall be the
three-month anniversary of the date on which the Company receives a Demand
Notice with respect thereto (in this case, the “Demand
Filing Date”)
(b) Underwritten
Offering.
If any
offering pursuant to a Registration Statement pursuant to Section 2(a) hereof
involves an underwritten offering, the Majority Holders shall have the right
to
select one legal counsel and an investment banker or bankers and manager or
managers to administer the offering, which investment banker or bankers or
manager or managers shall be reasonably satisfactory to the
Company.
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(c) Payments
by the Company.
The
Company shall use its best efforts to obtain effectiveness of the Registration
Statement as soon as practicable. If (i) the Registration Statement(s) covering
the Registrable Securities required to be filed by the Company pursuant to
Section 2(a) hereof is not filed by the Required Filing Date or any Demand
Filing Date, as applicable, or declared effective by the SEC one hundred and
twenty (120) days thereafter, or (ii) after the Registration Statement has
been
declared effective by the SEC, sales of all of the Registrable Securities cannot
be made pursuant to the Registration Statement, or (iii) the Common Stock is
not
listed or included for quotation on the Nasdaq Global Market (“Nasdaq”),
the
Nasdaq Capital Market (“Nasdaq
Capital”),
the
New York Stock Exchange (the “NYSE”),
the
NYSE Archipelago Exchange (“ArcaEx”),
or
the American Stock Exchange (the “AMEX”)
after
being so listed or included for quotation, or (iv) the Common Stock ceases
to be
traded on the Over-the-Counter Bulletin Board (the “OTC BB”) prior to being
listed or included for quotation on one of the aforementioned markets, then
the
Company will make payments to the Investors in such amounts and at such times
as
shall be determined pursuant to this Section 2(c) as partial relief for the
damages to the Investors by reason of any such delay in or reduction of their
ability to sell the Registrable Securities (which remedy shall not be exclusive
of any other remedies available at law or in equity). The Company shall pay
to
each holder of the Notes or Registrable Securities an amount equal to the then
outstanding principal amount of the Notes (and, in the case of holders of
Registrable Securities, the principal amount of Notes from which such
Registrable Securities were converted) (“Outstanding
Principal Amount”)
multiplied by the Applicable Percentage (as defined below) times the sum of:
(i)
the number of months (prorated for partial months) after the Required Filing
Date or Demand Filing Date, as applicable, or the end of the aforementioned
ninety-day period and prior to the date the Registration Statement is declared
effective by the SEC; provided,
however,
that
there shall be excluded from such period any delays which are solely
attributable to changes required by the Investors in the Registration Statement
with respect to information relating to the Investors, including, without
limitation, changes to the plan of distribution, or to the failure of the
Investors to conduct their review of the Registration Statement pursuant to
Section 3(h) below in a reasonably prompt manner; and (ii) the number of months
(prorated for partial months) that sales of all of the Registrable Securities
cannot be made pursuant to the Registration Statement after the Registration
Statement has been declared effective (including, without limitation, when
sales
cannot be made by reason of the Company’s failure to properly supplement or
amend the prospectus included therein in accordance with the terms of this
Agreement, but excluding any days during an Allowed Delay (as defined in Section
3(f)). The term “Applicable
Percentage”
means
two hundredths (.02) with respect to the first thirty (30) days of any
calculation under clause (i) of the sentence in which the term is used, and
two
hundredths (.02) for any other purpose. (For example, if the Registration
Statement becomes effective one (1) month after the end of such thirty-day
period, the Company would pay $5,000 for each $250,000 of Outstanding Principal
Amount. If thereafter, sales could not be made pursuant to the Registration
Statement for an additional period of one (1) month, the Company would pay
an
additional $5,000 for each $250,000 of Outstanding Principal Amount.) Such
amounts shall be paid in cash in U.S. dollars and in immediately available
funds
or, at each Investors’ option, in shares of Common Stock priced at the
Conversion Rate of the Notes, at the end of each month during which any such
amounts are incurred hereunder.
(d) Piggy-Back
Registrations.
Subject
to the last sentence of this Section 2(d), if at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company
shall, if permitted to do so under the Subscription Agreement, determine to
file
with the SEC a registration statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other bona fide,
employee benefit plans), it will give at least thirty (30) calendar days prior
written notice to the record holders of the Investor Warrants (the “Warrantholders”)
of its
intention so to do and, if within thirty (30) calendar days after the effective
date of such notice, such Warrantholders shall so request in writing, the
Company shall include in such Registration Statement all or any part of the
Warrant Shares such Warrantholder requests to be registered, except that if,
in
connection with any underwritten public offering for the account of the Company
the managing underwriter(s) thereof shall impose a limitation on the number
of
shares of Common Stock which may be included in the Registration Statement
because, in such underwriter(s)’ judgment, marketing or other factors dictate
such limitation is necessary to facilitate public distribution, then the Company
shall be obligated to include in such Registration Statement only such limited
portion of the Warrant Shares with respect to which such Warrantholder has
requested inclusion hereunder as the underwriter shall permit; provided,
however,
that
the Company shall notify each of the Warrantholders in writing of any such
reduction. Any exclusion of Warrant Shares shall be made pro rata among the
Warrantholders seeking to include Warrant Shares in proportion to the number
of
Warrant Shares sought to be included by such Warrantholders; provided,
however,
that
the Company shall not exclude any Warrant Shares unless the Company has first
excluded all securities offered other than by the Company. No right to
registration of Warrant Shares under this Section 2(d) shall be construed to
limit any registration required under Section 2(a) hereof.
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(e) Eligibility
for Form X-0, XX-0 or S-1; Conversion to Form S-3.
The
Company represents and warrants that it meets the requirements for the use
of
Form X-0, XX-0 or S-1 for registration of the sale by the Investors of the
Registrable Securities. The Company agrees to file all reports required to
be
filed by the Company with the SEC in a timely manner so as to remain eligible
or
become eligible, as the case may be, and thereafter to maintain its eligibility,
for the use of Form S-3. If the Company is not currently eligible to use Form
S-3, not later than five (5) business days after the Company first meets the
registration eligibility and transaction requirements for the use of Form S-3
(or any successor form) for registration of the offer and sale by the Investors
of Registrable Securities, the Company shall file a Registration Statement
on
Form S-3 (or such successor form) with respect to the Registrable Securities
covered by the Registration Statement on Form SB-2 or Form S-1, whichever is
applicable, filed pursuant to Section 2(a) (and include in such Registration
Statement on Form S-3 the information required by Rule 429 under the 0000 Xxx)
or convert the Registration Statement on Form SB-2 or Form S-1, whichever is
applicable, filed pursuant to Section 2(a) to a Form S-3 pursuant to Rule 429
under the 1933 Act and cause such Registration Statement (or such amendment)
to
be declared effective no later than thirty (30) days after filing. In the event
of a breach by the Company of the provisions of this Section 2(e), the Company
will be required to make payments pursuant to Section 2(c) hereof.
3. Obligations
of the Company.
In
connection with the registration of the Registrable Securities, the Company
shall have the following obligations:
(a) The
Company shall prepare promptly and file with the SEC not later than the Required
Filing Date or any Demand Filing Date, as applicable, a Registration Statement
with respect to the number of Registrable Securities provided in Section 2(a),
and thereafter use its best efforts to cause such Registration Statement
relating to Registrable Securities to become effective as soon as possible
after
such filing but in no event later than one hundred twenty (120) days from the
Required Filing Date or Demand Filing Date, as applicable), and keep the
Registration Statement effective pursuant to Rule 415 at all times until such
date as is the earlier of (i) the date on which all of the Registrable
Securities have been sold and (ii) the date on which the Registrable Securities
(in the opinion of counsel to the Initial Investors) may be immediately sold
to
the public without registration or restriction (including, without limitation,
as to volume by each holder thereof) under the 1933 Act (the “Registration
Period”),
which
Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein) shall not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
or
necessary to make the statements therein not misleading.
(b) The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the Registration Statements and
the prospectus used in connection with the Registration Statements as may be
necessary to keep the Registration Statements effective at all times during
the
Registration Period, and, during such period, comply with the provisions of
the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by the Registration Statements until such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof as set forth in the
Registration Statements. In the event the number of shares available under
a
Registration Statement filed pursuant to this Agreement is insufficient to
cover
all of the Registrable Securities issued or issuable upon conversion of the
Notes and interest thereon and exercise of the Investor Warrants, the Company
shall amend the Registration Statement, or file a new Registration Statement
(on
the short form available therefor, if applicable), or both, so as to cover
all
of the Registrable Securities, in each case, as soon as practicable, but in
any
event within fifteen (15) days after the necessity therefor arises (based on
the
market price of the Common Stock and other relevant factors on which the Company
reasonably elects to rely). The Company shall use its best efforts to cause
such
amendment and/or new Registration Statement to become effective as soon as
practicable following the filing thereof, but in any event within thirty (30)
days after the date on which the Company reasonably first determines (or
reasonably should have determined) the need therefor. The provisions of Section
2(c) above shall be applicable with respect to such obligation, with the thirty
(30) days running from the day the Company reasonably first determines (or
reasonably should have determined) the need therefor.
4
(c) The
Company shall furnish to each Investor whose Registrable Securities are included
in a registration statement and its legal counsel (i) promptly (but in no
event more than five (5) business days) after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company, one copy of each
registration statement and any amendment thereto, each preliminary prospectus
and prospectus and each amendment or supplement thereto, and, in the case of
the
Registration Statement referred to in Section 2(a), each letter written by
or on
behalf of the Company to the SEC or the staff of the SEC, and each item of
correspondence from the SEC or the staff of the SEC, in each case relating
to
such Registration Statement (other than any portion of any thereof which
contains information for which the Company has sought confidential treatment),
and (ii) promptly (but in no event more than two (2) business days) after
the Registration Statement is declared effective by the SEC, such number of
copies of a prospectus, including a preliminary prospectus, and all amendments
and supplements thereto and such other documents as such Investor may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such Investor. The Company will immediately notify each Investor by
facsimile of the effectiveness of each Registration Statement or any
post-effective amendment. The Company will promptly respond to any and all
comments received from the SEC (which comments shall promptly be made available
to the Investors upon request), with a view towards causing each Registration
Statement or any amendment thereto to be declared effective by the SEC as soon
as practicable, shall promptly file an acceleration request as soon as
practicable (but in no event more than five (5) business days) following the
resolution or clearance of all SEC comments or, if applicable, following
notification by the SEC that any such Registration Statement or any amendment
thereto will not be subject to review and shall, if required by SEC Rules,
promptly file with the SEC a final prospectus as soon as practicable (but in
no
event more than two (2) business days) following receipt by the Company from
the
SEC of an order declaring the Registration Statement effective. In the event
of
a breach by the Company of the provisions of this Section 3(c), the Company
will
be required to make payments pursuant to Section 2(c) hereof.
(d) The
Company shall (i) register and qualify the Registrable Securities covered by
the
Registration Statements under such other securities or “blue sky” laws of such
jurisdictions in the United States as any of the Investors may reasonably
request, (ii) prepare and file in those jurisdictions such amendments
(including post-effective amendments) and supplements to such registrations
and
qualifications as may be necessary to maintain the effectiveness thereof during
the Registration Period, (iii) take such other actions as may be necessary
to
maintain such registrations and qualifications in effect at all times during
the
Registration Period, and (iv) take all other actions reasonably necessary
or advisable to qualify the Registrable Securities for sale in such
jurisdictions; provided,
however,
that
the Company shall not be required in connection therewith or as a condition
thereto to (A) qualify to do business in any jurisdiction where it would
not otherwise be required to qualify but for this Section 3(d), or
(B) subject itself to general taxation in any such
jurisdiction.
5
(e) In
the
event the Majority Holders of the Registrable Securities select underwriters
for
the offering, the Company shall enter into and perform its obligations under
an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
(f) As
promptly as practicable after becoming aware of such event, the Company shall
notify each Investor of the happening of any event, of which the Company has
knowledge, as a result of which the prospectus included in any Registration
Statement, as then in effect, includes an untrue statement of a material fact
or
omission to state a material fact required to be stated therein or necessary
to
make the statements therein not misleading, and promptly to prepare a supplement
or amendment to any Registration Statement to correct such untrue statement
or
omission, and deliver such number of copies of such supplement or amendment
to
each Investor as such Investor may reasonably request; provided that, for not
more than fifteen (15) days in any twelve (12) month period, the Company may
delay the disclosure of material non-public information concerning the Company
(as well as prospectus or Registration Statement updating) if a majority of
any
independent directors (as such term is defined in the rules of the primary
securities exchange or automated inter-dealer quotation system on which the
Company’s equity securities are listed) on the Board of Directors of the Company
or any committee of the Board of Directors comprised solely of such independent
directors determines in good faith (provided, that in the event there are not
two or more such independent directors, a majority of the Board of Directors
shall make such determination) that it would be materially detrimental to the
Company and its equity holders for such registration statement to become
effective or to remain effective as long as such registration statement would
otherwise be required to remain effective because such action (i) would
materially interfere with a significant acquisition, corporate reorganization
or
other similar transaction involving the Company, (ii) would require premature
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential or (iii) would render the Company unable
to comply with requirements under the 1933 Act or 1934 Act (an “Allowed
Delay”);
provided, further, that the Company shall promptly (x) notify the Investors
in writing of the existence of (but in no event, without the prior written
consent of an Investor, shall the Company disclose to such Investor any of
the
facts or circumstances regarding) material non-public information giving rise
to
an Allowed Delay and (y) advise the Investors in writing to cease all sales
under such Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 3(f) with respect to the information giving rise
thereto.
(g) The
Company shall use its best efforts to prevent the issuance of any stop order
or
other suspension of effectiveness of any Registration Statement, and, if such
an
order is issued, to obtain the withdrawal of such order at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
(or, in the event of an underwritten offering, the managing underwriters) of
the
issuance of such order and the resolution thereof.
(h) The
Company shall permit a single firm of counsel designated by the Majority Holders
to review such Registration Statement and all amendments and supplements thereto
(as well as all requests for acceleration or effectiveness thereof) a reasonable
period of time prior to their filing with the SEC, and not file any document
in
a form to which such counsel reasonably objects and will not request
acceleration of such Registration Statement without prior notice to such
counsel. The sections of such Registration Statement covering information with
respect to the Investors, the Investor’s beneficial ownership of securities of
the Company or the Investors intended method of disposition of Registrable
Securities shall conform to the information provided to the Company by each
of
the Investors.
6
(i) At
the
request of any Investor, the Company shall furnish, on the date that Registrable
Securities are delivered to an underwriter, if any, for sale in connection
with
any Registration Statement or, if such securities are not being sold by an
underwriter, on the date of effectiveness thereof (i) an opinion, dated as
of such date, from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given
in
an underwritten public offering, addressed to the underwriters, if any, and
the
Investors and (ii) a letter, dated such date, from the Company’s
independent certified public accountants in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and the
Investors.
(j) The
Company shall hold in confidence and not make any disclosure of information
concerning an Investor provided to the Company unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release
of such information is ordered pursuant to a subpoena or other order from a
court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees
that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
(k) The
Company shall (i) cause all the Registrable Securities covered by the
Registration Statement to be listed on each national securities exchange on
which securities of the same class or series issued by the Company are then
listed, if any, if the listing of such Registrable Securities is then permitted
under the rules of such exchange, or (ii) to the extent the securities of the
same class or series are not then listed on a national securities exchange,
secure the designation and quotation, of all the Registrable Securities covered
by the Registration Statement on the ArcaEx or Nasdaq or, if not eligible for
Nasdaq, on Nasdaq Capital or, if not eligible for Nasdaq or Nasdaq Capital,
on
OTC BB and, without limiting the generality of the foregoing, to arrange for
at
least two market makers to register with the National Association of Securities
Dealers, Inc. (“NASD”)
as
such with respect to such Registrable Securities.
(l) The
Company shall provide a transfer agent and registrar, which may be a single
entity, for the Registrable Securities not later than the Closing Date of the
Offering.
(m) The
Company shall cooperate with the Investors who hold Registrable Securities
being
offered and the managing underwriter or underwriters, if any, to facilitate
the
timely preparation and delivery of certificates (not bearing any restrictive
legends) representing Registrable Securities to be offered pursuant to a
Registration Statement and enable such certificates to be in such denominations
or amounts, as the case may be, as the managing underwriter or underwriters,
if
any, or the Investors may reasonably request, and registered in such names
as
the managing underwriter or underwriters, if any, or the Investors may request,
and, within three (3) business days after a Registration Statement which
includes Registrable Securities is ordered effective by the SEC, the Company
shall deliver, and shall cause legal counsel selected by the Company to deliver,
to the transfer agent for the Registrable Securities (with copies to the
Investors whose Registrable Securities are included in such Registration
Statement) an instruction in such form attached hereto as Exhibit
A
and an
opinion of such counsel in the form attached hereto as Exhibit
A.
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(n) At
the
request of any holder of the Registrable Securities, the Company shall at its
own expense prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
any
prospectus used in connection with the Registration Statement as may be
necessary in order to change the plan of distribution set forth in such
Registration Statement.
(o) The
Company shall take all other reasonable actions necessary to expedite and
facilitate disposition by the Investors of Registrable Securities pursuant
to a
Registration Statement.
(p) The
Company shall not grant any registration rights to third parties that are
superior to the rights granted herein.
4. Obligations
of the Investors.
In
connection with the registration of the Registrable Securities, the Investors
shall have the following obligations:
(a) It
shall
be a condition precedent to the obligations of the Company to complete the
registration pursuant to this Agreement with respect to the Registrable
Securities of a particular Investor that such Investor shall furnish to the
Company such information regarding itself and the Registrable Securities held
by
it as shall be reasonably required to effect the registration of such
Registrable Securities and shall execute such documents in connection with
such
registration as the Company may reasonably request. Each of the Investors shall
be required to complete and deliver to the Company, within ten (10) calendar
days of the Closing date, the questionnaire attached hereto as Exhibit
B.
(b) Each
Investor, by such Investor’s acceptance of the Registrable Securities, agrees to
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Registration Statements hereunder, unless
such Investor has notified the Company in writing of such Investor’s election to
exclude all of such Investor’s Registrable Securities from the Registration
Statements.
(c) If
the
Majority Holders determine to engage the services of an underwriter, each
Investor agrees to enter into and perform such Investor’s obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor’s election to exclude all of such Investor’s Registrable
Securities from such Registration Statement.
(d) Each
Investor agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(f) or 3(g), such
Investor will use its best efforts to immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities until such Investor’s receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(f) or 3(g) and,
if
so directed by the Company, such Investor shall deliver to the Company (at
the
expense of the Company) or destroy (and deliver to the Company a certificate
of
destruction) all copies in such Investor’s possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
8
(e) No
Investor may participate in any underwritten registration hereunder unless
such
Investor(i) agrees to sell such Investor’s Registrable Securities on the basis
provided in any underwriting arrangements in usual and customary form entered
into by the Company, (ii) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements, and
(iii) agrees to pay its pro rata share of all underwriting discounts and
commissions and any expenses in excess of those payable by the Company pursuant
to Section 5 below.
5. Expenses
of Registration.
All
reasonable expenses, other than underwriting discounts and commissions, incurred
in connection with registrations, filings or qualifications pursuant to Sections
2 and 3, including, without limitation, all registration, listing and
qualification fees, printers and accounting fees, and the fees and disbursements
of counsel for the Company and a single counsel for the Investors shall be
borne
by the Company.
6. Indemnification.
In
the
event any Registrable Securities are included in a Registration Statement under
this Agreement:
(a) To
the
extent permitted by law, the Company will indemnify, hold harmless and defend
(i) each Investor who holds such Registrable Securities, (ii) directors,
officers, partners, employees, agents and each person who controls any Investor
within the meaning of the 1933 Act or the Securities Exchange Act of 1934,
as
amended (the “1934
Act”),
if
any, (iii) any underwriter (as defined in the 1933 Act), and (iv) the
directors, officers, partners, employees and each person who controls any such
underwriter within the meaning of the 1933 Act or the 1934 Act, if any (each,
an
“Indemnified
Person”),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, “Claims”)
to
which any of them may become subject insofar as such Claims arise out of or
are
based upon: (A) any untrue statement or alleged untrue statement of a material
fact in a Registration Statement or the omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements therein not misleading; (B) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus if used
prior to the effective date of such Registration Statement, or contained in
the
final prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading; or (C) any violation or alleged violation by the Company
of the 1933 Act, the 1934 Act, any other law, including, without limitation,
any
state securities law, or any rule or regulation thereunder relating to the
offer
or sale of the Registrable Securities (the matters in the foregoing clauses
(A)
through (C) being, collectively, “Violations”).
Subject to the restrictions set forth in Section 6(c) with respect to the number
of legal counsel, the Company shall reimburse the Indemnified Person, promptly
as such expenses are incurred and are due and payable, for any reasonable legal
fees or other reasonable expenses incurred by them in connection with
investigating or defending any such Claim. Notwithstanding anything to the
contrary contained herein, the indemnification agreement contained in this
Section 6(a): (i) shall not apply to a Claim arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by any Indemnified Person or underwriter
for
such Indemnified Person expressly for use in connection with the preparation
of
such Registration Statement or any such amendment thereof or supplement thereto,
if such prospectus was timely made available by the Company pursuant to Section
3(c) hereof; (ii) shall not apply to amounts paid in settlement of any Claim
if
such settlement is effected without the prior written consent of the Company,
which consent shall not be unreasonably withheld; and (iii) with respect to
any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, such corrected prospectus was timely made
available by the Company pursuant to Section 3(c) hereof, and the Indemnified
Person was promptly advised in writing not to use the incorrect prospectus
prior
to the use giving rise to a Violation and such Indemnified Person,
notwithstanding such advice, used it. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the
Indemnified Person and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
9
(b) In
connection with any Registration Statement in which an Investor is
participating, each such Investor agrees severally and not jointly to indemnify,
hold harmless and defend, to the same extent and in the same manner set forth
in
Section 6(a), the Company, each of its directors, each of its officers who
signs
the Registration Statement, each person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act, any underwriter and any other
shareholder selling securities pursuant to the Registration Statement or any
of
its directors or officers or any person who controls such shareholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively
an
“Indemnified
Party”),
against any Claim to which any of them may become subject, under the 1933 Act,
the 1934 Act or otherwise, insofar as such Claim arises out of or is based
upon
any Violation by such Investor, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for
use
in connection with such Registration Statement; and subject to Section 6(c)
such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided,
however,
that
the indemnity agreement contained in this Section 6(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided,
further,
however,
that
the Investor shall be liable under this Agreement (including this Section 6(b)
and Section 7) for only that amount as does not exceed the net proceeds to
such
Investor as a result of the sale of Registrable Securities pursuant to such
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Indemnified Party
and shall survive the transfer of the Registrable Securities by the Investors
pursuant to Section 9. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(b) with
respect to any preliminary prospectus shall not inure to the benefit of any
Indemnified Party if the untrue statement or omission of material fact contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented.
(c) Promptly
after receipt by an Indemnified Person or Indemnified Party under this Section
6
of notice of the commencement of any action (including any governmental action),
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to
the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person
or
the Indemnified Party, as the case may be; provided,
however,
that an
Indemnified Person or Indemnified Party shall have the right to retain its
own
counsel with the fees and expenses to be paid by the indemnifying party, if,
in
the reasonable opinion of counsel retained by the indemnifying party, the
representation by such counsel of the Indemnified Person or Indemnified Party
and the indemnifying party would be inappropriate due to actual or potential
differing interests between such Indemnified Person or Indemnified Party and
any
other party represented by such counsel in such proceeding. The indemnifying
party shall pay for only one separate legal counsel for the Indemnified Persons
or the Indemnified Parties, as applicable, and such legal counsel shall be
selected by Investors holding a majority-in-interest of the Registrable
Securities included in the Registration Statement to which the Claim relates,
if
the Investors are entitled to indemnification hereunder, or the Company, if
the
Company is entitled to indemnification hereunder, as applicable. The failure
to
deliver written notice to the indemnifying party within a reasonable time of
the
commencement of any such action shall not relieve such indemnifying party of
any
liability to the Indemnified Person or Indemnified Party under this Section
6,
except to the extent that the indemnifying party is actually prejudiced in
its
ability to defend such action. The indemnification required by this Section
6
shall be made by periodic payments of the amount thereof during the course
of
the investigation or defense, as such expense, loss, damage or liability is
incurred and is due and payable.
10
7. Contribution.
To
the
extent any indemnification by an indemnifying party is prohibited or limited
by
law, the indemnifying party agrees to make the maximum contribution with respect
to any amounts for which it would otherwise be liable under Section 6 to the
fullest extent permitted by law; provided,
however,
that
(i) no contribution shall be made under circumstances where the maker would
not have been liable for indemnification under the fault standards set forth
in
Section 6(a), (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 0000 Xxx) shall
be
entitled to contribution from any seller of Registrable Securities who was
not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount
of
proceeds received by such seller from the sale of such Registrable
Securities.
8. Reports
Under the 1934 Act.
With
a
view to making available to the Investors the benefits of Rule 144 promulgated
under the 1933 Act or any other similar rule or regulation of the SEC that
may
at any time permit the Investors to sell securities of the Company to the public
without registration (“Rule
144”),
the
Company agrees to:
(a) make
and
keep public information available, as those terms are understood and defined
in
Rule 144;
(b) file
with
the SEC in a timely manner all reports and other documents required of the
Company under the 1933 Act and the 1934 Act so long as the Company remains
subject to such requirements and the filing of such reports and other documents
is required for the applicable provisions of Rule 144; and
(c) furnish
to each Investor so long as such Investor owns Registrable Securities, promptly
upon request, (i) a written statement by the Company that it has complied
with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act,
(ii) a copy of the most recent annual or quarterly report of the Company
and such other reports and documents so filed by the Company, and (iii) such
other information as may be reasonably requested to permit the Investors to
sell
such securities pursuant to Rule 144 without registration.
9. Assignment
of Registration Rights.
The
rights under this Agreement shall be automatically assignable by the Investors
to any transferee of all or any portion of Registrable Securities if:
(a) the Investor agrees in writing with the transferee or assignee to
assign such rights, and a copy of such agreement is furnished to the Company
within a reasonable time after such assignment, (b) the Company is, within
a reasonable time after such transfer or assignment, furnished with written
notice of (i) the name and address of such transferee or assignee, and
(ii) the securities with respect to which such registration rights are
being transferred or assigned, (c) following such transfer or assignment, the
further disposition of such securities by the transferee or assignee is
restricted under the 1933 Act and applicable state securities laws, (d) at
or
before the time the Company receives the written notice contemplated by clause
(b) of this sentence, the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein, (e) such transfer
shall have been made in accordance with the applicable requirements of the
Subscription Agreement, and (f) such transferee shall be an “accredited
investor” as that term defined in Rule 501 of Regulation D promulgated under the
1933 Act.
11
10. Amendment
of Registration Rights.
Provisions
of this Agreement may be amended and the observance thereof may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with written consent of the Company and Investors who
hold
a majority in interest of the Registrable Securities. Any amendment or waiver
effected in accordance with this Section 10 shall be binding upon each Investor
and the Company.
11. Miscellaneous.
(a) A
person
or entity is deemed to be a holder of Registrable Securities whenever such
person or entity owns of record such Registrable Securities. If the Company
receives conflicting instructions, notices or elections from two or more persons
or entities with respect to the same Registrable Securities, the Company shall
act upon the basis of instructions, notice or election received from the
registered owner of such Registrable Securities.
(b) Any
notices required or permitted to be given under the terms hereof shall be sent
by certified or registered mail (return receipt requested) or delivered
personally or by courier (including a recognized overnight delivery service)
or
by facsimile and shall be effective five days after being placed in the mail,
if
mailed by regular United States mail, or upon receipt, if delivered personally
or by courier (including a recognized overnight delivery service) or by
facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If
to the
Company:
American
Dairy, Inc.
C-16
Xxxx
Xxxx International Building, No. 10
Jiu-shen
Road, Zho Xxx Xxx, Beijing
People’s
Republic of China
Attention:
Xxxxx Xxx
Telephone:
(000)
000-0000
Facsimile:
(000)
000-0000
With
a
copy to:
Xxxxxxx
Xxxx, LLP
00
Xxxx
00xx Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx Xxxxx, Esq.
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
12
If
to an
Investor: to the address set forth immediately below such Investor’s name on the
signature pages to the Subscription Agreement.
(c) Failure
of any party to exercise any right or remedy under this Agreement or otherwise,
or delay by a party in exercising such right or remedy, shall not operate as
a
waiver thereof.
(d) THIS
AGREEMENT SHALL BE ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF
LAWS. THE PARTIES HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
UNITED STATES FEDERAL COURTS LOCATED NEW YORK, NEW YORK WITH RESPECT TO ANY
DISPUTE ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
UPON
A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING. NOTHING HEREIN
SHALL AFFECT EITHER PARTY’S RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED
BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE JUDGMENT IN ANY SUCH
SUIT
OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS
BY
SUIT ON SUCH JUDGMENT OR IN ANY OTHER LAWFUL MANNER. THE PARTY WHICH DOES NOT
PREVAIL IN ANY DISPUTE ARISING UNDER THIS AGREEMENT SHALL BE RESPONSIBLE FOR
ALL
FEES AND EXPENSES, INCLUDING ATTORNEYS’ FEES, INCURRED BY THE PREVAILING PARTY
IN CONNECTION WITH SUCH DISPUTE.
(e) In
the
event that any provision of this Agreement is invalid or unenforceable under
any
applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof
which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof.
(f) This
Agreement, the Notes, the Investor Warrants and the Subscription Agreement
and
the other Transaction Documents (including all schedules and exhibits thereto)
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof and thereof. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
and
therein. This Agreement and the Subscription Agreement supersede all prior
agreements and understandings among the parties hereto with respect to the
subject matter hereof and thereof. In the event of a conflict between this
Agreement and the Subscription Agreement, the terms of the Subscription
Agreement shall be controlling.
(g) Subject
to the requirements of Section 9 hereof, this Agreement shall be binding upon
and inure to the benefit of the parties and their successors and
assigns.
(h) The
headings in this Agreement are for convenience of reference only and shall
not
form part of, or affect the interpretation of, this Agreement.
13
(i) This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement
and shall become effective when counterparts have been signed by each party
and
delivered to the other party. This Agreement, once executed by a party, may
be
delivered to the other party hereto by facsimile transmission of a copy of
this
Agreement bearing the signature of the party so delivering this
Agreement.
(j) Each
party shall do and perform, or cause to be done and performed, all such further
acts and things, and shall execute and deliver all such other agreements,
certificates, instruments and documents, as the other party may reasonably
request in order to carry out the intent and accomplish the purposes of this
Agreement and the consummation of the transactions contemplated
hereby.
(k) Except
as
otherwise provided herein, all consents and other determinations to be made
by
the Investors pursuant to this Agreement shall be made by Investors holding
a
majority of the Registrable Securities, determined as if the all of the Notes
and Investor Warrants then outstanding have been converted into Registrable
Securities.
(l) The
Company acknowledges that a breach by it of its obligations hereunder will
cause
irreparable harm to each Investor by vitiating the intent and purpose of the
transactions contemplated hereby. Accordingly, the Company acknowledges that
the
remedy at law for breach of its obligations under this Agreement will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of any of the provisions under this Agreement, that each Investor shall
be entitled, in addition to all other available remedies in law or in equity,
and in addition to the penalties assessable herein, to an injunction or
injunctions restraining, preventing or curing any breach of this Agreement
and
to enforce specifically the terms and provisions hereof, without the necessity
of showing economic loss and without any bond or other security being
required.
(m) 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.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
14
IN
WITNESS WHEREOF,
the
Company and the undersigned Investors have caused this Agreement to be duly
executed as of the date first above written.
| AMERICAN DAIRY, INC. | ||
| |
|
|
| By: | ||
|
Name: |
||
| Title | ||
| INVESTORS: | ||
15
