REGISTRATION RIGHTS AGREEMENT
THIS
REGISTRATION RIGHTS AGREEMENT,
dated as
of February 26, 2007 (this "Agreement"), is made by and between SKYSTAR
BIO-PHARMACEUTICAL COMPANY,
a
Nevada corporation with headquarters located at Rm. 10601, Jiezuo Plaza, No.
4,
Fenghui Road South, Gaoxin District, Xian Province, P.R. China (the “Company”),
and each entity named on a signature page hereto (each, an “Initial Investor”)
(each agreement with an Initial Investor being deemed a separate and independent
agreement between the Company and such Initial Investor, except that each
Initial Investor acknowledges and consents to the rights granted to each other
Initial Investor under such agreement).
WITNESSETH:
WHEREAS,
upon
the terms and subject to the conditions of the Securities Purchase Agreement
of
even date herewith between the Initial Investor and the Company (the “Securities
Purchase Agreement”; capitalized terms not otherwise defined herein shall have
the meanings ascribed to them in the Securities Purchase Agreement), the Company
has agreed to issue and sell to the Initial Investors the Debentures and the
Warrants; and
WHEREAS,
the
Debentures are convertible into shares of Common Stock (the “Conversion Shares”;
which term, for purposes of this Agreement, shall include shares of Common
Stock
of the Company issuable in lieu of accrued interest through the Maturity Date
of
the Debentures, as that term is defined in and as contemplated by the
Debentures) upon the terms and subject to the conditions contained in the
Debentures; and
WHEREAS,
the
Warrant Shares may be issued upon the exercise of the Warrants; and
WHEREAS,
to
induce the Initial Investor to execute and deliver the Securities Purchase
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 “Securities
Act”), with respect to the Registrable Securities (as defined
below);
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 the Initial Investor hereby agree as
follows:
1. Definitions. As
used
in this Agreement, the following terms shall have the following
meanings:
“Applicable
Conversion Price” means, on the relevant date, the lower of the Voluntary
Conversion Price or the Payment Conversion Price.
“Company
Counsel” means Xxxxxxxxxx & Xxxxx LLP.
“Effective
Date” means the date the SEC declares a Registration Statement covering
Registrable Securities and otherwise meeting the conditions contemplated hereby
to be effective.
“Held
Shares Value” means, for shares of Common Stock acquired by the Investor upon a
conversion of a Debenture within the thirty (30) days preceding the Restricted
Sale Date, but not yet sold by the Investor (“Held Shares”), the principal
amount of the Debentures converted into such Conversion Shares; provided,
however, that if the Investor effected more than one such conversion during
such
thirty (30) day period and sold less than all of such shares, the sold shares
shall be deemed to be derived first from the conversions in the sequence of
such
conversions (that is, for example, until the number of shares from the first
of
such conversions have been sold, all shares shall be deemed to be from the
first
conversion; thereafter, from the second conversion until all such shares are
sold).
“Initial
Required Filing Date” means the date as soon as practicable after the Closing
Date but no later than the forty-five (45) days after the Closing
Date.
“Increased
Shares” means the good faith estimate of the number of shares which the Company
anticipates will be issuable to the Holder as a result of either or both an
adjustment to the Conversion Price resulting from the application of Section
4(g) of the Securities Purchase Agreement.
“Increased
Shares Required Filing Date” means, with respect to the filing of any Additional
Registration Statement (as defined below) the date which is the later of (i)
the
date which is thirty (30) days after the Increased Shares Registration Date
or
(ii) the earliest date the SEC will accept the filing of an Additional
Registration Statement.
“Investor”
means the Initial Investor and any permitted transferee or assignee who agrees
to become bound by the provisions of this Agreement in accordance with Section
9
hereof and who holds Debentures or Registrable Securities.
“Issued
Principal Amount” means the original principal amount of the
Debentures.
“Other
Issuable Shares” means the good faith estimate of the Company of the number of
the Increased Shares, which the Company anticipates, as of the date of the
filing of the Registration Statement and any amendment thereto, will be issuable
to the Holder pursuant to the provisions of the Transaction
Agreements.
“Permitted
Suspension Period” means one or more periods aggregating not more than
forty-five (45) days during any consecutive 12-month period during which the
Holder’s right to sell Registrable Securities under the Registration Statement
is suspended, provided, however, that each of such periods shall neither (i)
be
for more than twenty (20) days nor (ii) begin less than ten (10) Trading Days
after the last day of the preceding suspension period (whether or not such
last
day was during or after a Permitted Suspension Period).
“Potential
Material Event” means any of the following: (i) the possession by the Company of
material information not ripe for disclosure in a registration statement, which
shall be evidenced by determinations in good faith by the Board of Directors
of
the Company that disclosure of such information in the registration statement
would be detrimental to the business and affairs of the Company; or (ii) any
material engagement or activity by the Company which would, in the good faith
determination of the Board of Directors of the Company, be adversely affected
by
disclosure in a registration statement at such time, which determination shall
be accompanied by a good faith determination by the Board of Directors of the
Company that the registration statement would be materially misleading absent
the inclusion of such information.
“Register,”
“Registered,” and “Registration” refer to a registration effected by preparing
and filing a Registration Statement or Statements in compliance with the
Securities Act and pursuant to Rule 415 under the Securities 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 SEC.
"Registrable
Securities" means, collectively, the Conversion Shares and the Other Issuable
Shares, but does not include any shares of Common Stock which may be sold by
the
Holder pursuant to Rule 144 without volume or other restrictions or
limits.
“Registration
Statement” means a registration statement of the Company under the Securities
Act covering Registrable Securities on Form SB-2, if the Company is then
eligible to file using such form, and if not eligible, on Form S-1 or other
appropriate form.
“Required
Effective Date” means, initially, the Initial Required Effective Date or the
Increased Required Effective Date (as those terms are defined below), as the
case may be.
“Required
Filing Date” means initially, the Initial Required Filing Date or the Increased
Shares Required Filing Date, as the case may be.
“Restricted
Sale Date” means the first date, other than a date during a Permitted Suspension
Period (as defined below), on which the Investor is restricted from making
sales
of Registrable Securities pursuant to any previously effective Registration
Statement.
“Rule
144" has the meaning ascribed to it in Section 8 hereof.
2. Registration.
(a) Mandatory
Registration.
(i) The
Company shall prepare and file with the SEC, as soon as practicable after the
Closing Date but no later than the Initial Required Filing Date, a Registration
Statement registering for resale by the Investor a sufficient number of shares
of Common Stock for the Initial Investors to sell the Registrable Securities.
Notwithstanding the requirement to register all Registrable Securities, the
Company’s obligation to register the Registrable Securities shall initially be
satisfied by the registration of the Initial Number of Shares to Be Registered
(as defined below). The “Initial Number of Shares to Be Registered” is a number
of shares of Common Stock which is at least equal to the sum of (x) the number
of shares into which the Debentures and all interest thereon through their
respective Maturity Dates would be convertible at the time of filing of such
Registration Statement (assuming for such purposes that all Debentures had
been
eligible to be converted, and had been converted, into Conversion Shares in
accordance with their terms, and that all interest was paid in shares, whether
or not such eligibility, accrual of interest or conversion had in fact occurred
as of such date) based on the Applicable Conversion Price in effect on, or
within three (3) Trading Days prior to, the date the Registration Statement
is
filed (or subsequently amended), and (y) the number of Other Issuable Shares
as
of the date of the filing of the Registration Statement or any amendment
thereto; provided, however, that for purposes of this provision, the Initial
Number of Shares to Be Registered in the initial Registration Statement shall
not be greater than the number of such shares which the SEC permits to be
included in such Registration Statement. Unless otherwise specifically agreed
to
in writing in advance by a Majority in Interest of the Holders, the Registration
Statement (X) shall include only the Registrable Securities, (Y) shall not
restrict or limit the prices at which the shares sold by the selling
stockholders thereunder may be sold, and (Z) shall also state that, in
accordance with Rule 416 and 457 under the Securities Act, it also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of the Debentures, or issuances of Other Issuable Securities
covered by such Registration Statement to prevent dilution resulting from stock
splits, stock dividends or similar transactions.
(ii) The
Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (the “Initial Required Effective
Date”) which is no later than the earlier of (X) five (5) days after oral or
written notice by the SEC that it may be declared effective or (Y) ninety (90)
days after the Closing Date (unless the SEC provides a full review of the
Registration Statement, in which event it will be one hundred twenty (120)
days
after the Closing Date). Notwithstanding the foregoing, failure to cause the
Registration Statement to become effective will be construed as an Event of
Default under Section 14(i)(e) of the Debenture held by the Investor; but the
foregoing proviso shall not limit or restrict the right of a Holder to declare
an Event of Default under the Note if there is a Special Registration Default
(as defined in the Debenture.
(iii) If
at any
time (an “Increased Registered Shares Date”), the number of shares of Common
Stock represented by the Registrable Securities, issued or to be issued as
contemplated by the Transaction Agreements, exceeds the aggregate number of
shares of Common Stock then registered or sought to be registered in a
Registration Statement which has not yet been declared effective (it being
acknowledged that the date of an adjustment in the Conversion Price pursuant
to
Section 4(g) of the Securities Purchase Agreement is an Increased Registered
Shares Date), the Company shall either
(X)
amend
the relevant Registration Statement filed by the Company pursuant to the
preceding provisions of this Section 2, if such Registration Statement has
not
been declared effective by the SEC at that time, to register the Increased
Number of Shares to Be Registered (as defined below). The “Increased Number of
Shares to Be Registered” is a number of shares of Common Stock which is at least
equal to (A) the number of shares theretofore issued on conversion of the
Debentures (including any interest paid on conversion by the issuance of
Conversion Shares) and held by each Holder, plus (B) the sum of (x) the number
of shares into which the unconverted Debentures and all interest thereon through
their respective Maturity Dates would be convertible at the time of filing
of
such Registration Statement or amendment (assuming for such purposes that all
Debentures, reduced by any previously converted Debentures, had been eligible
to
be converted, and had been converted, into Conversion Shares in accordance
with
their terms and that all interest thereon was paid in shares, whether or not
such eligibility, accrual of interest or conversion had in fact occurred as
of
such date) based on the Applicable Conversion Price in effect on, or within
three (3) Trading Days prior to, the date the amendment to the Registration
Statement is filed, and (y) the number of Other Issuable Shares as of the date
of the filing of the Registration Statement or any amendment thereto; provided,
however, that for purposes of this provision, the Increased Number of Shares
to
Be Registered shall not be greater than the number of such shares which the
SEC
permits to be included in the amended Registration Statement or the Additional
Registration Statement, defined below), or
(Y)
if
such Registration Statement has been declared effective by the SEC at that
time,
file with the SEC an additional Registration Statement (an “Additional
Registration Statement”) to register the number of shares equal to the excess of
the Increased Number of Shares to Be Registered (where the number of shares
determined by clause (x) is based on the Applicable Conversion Price in effect
on, or within three (3) Trading Days prior to, the date the additional
Registration Statement (or any amendment thereto) is filed, over the aggregate
number of shares of Common Stock already registered. The Company shall prepare
and file the Additional Registration Statement by the Increased Shares Required
Filing Date.
The
Company will use its reasonable best efforts to cause such Registration
Statement to be declared effective on a date (each, an “Increased Required
Effective Date”) which is no later than (q) with respect to a Registration
Statement under clause (X) of this subparagraph (iii), the Initial Required
Effective Date and (r) with respect to an Additional Registration Statement,
the
earlier of (I) five (5) days after notice by the SEC that it may be declared
effective or (II) sixty (60) days after the Increased Shares Required Filing
Date, unless the SEC provides a full review of the Additional Registration
Statement, in which event it will be ninety (90) days after the Increased Shares
Required Filing Date.
(iv) Anything
in this Agreement or any other Transaction Agreement to the contrary
notwithstanding, the Company agrees to file a registration statement (a “Warrant
Share Registration Statement”) to register the resale of Warrant Shares
(including shares issuable on exercise of any Added Warrants) as promptly as
possible after (x) all of the Conversion Shares and Other Registrable Shares
have been registered (or as part of a Registration Statement covering the
balance of such shares) or (y) the SEC indicates a policy which would allow
for
such shares to be registered contemporaneously with any other shares registered
under the same or a different registration statement and to use its best efforts
to have such Warrant Share Registration Statement declared effective as soon
as
practicable thereafter.
(v) Shares
included in a registration statement contemplated by this Agreement shall be
allocated among the Investors, if more than one, based on their respective
Buyer’s Allocable Shares.
(b) Payments
by the Company.
(i) If
the
Registration Statement or an Additional Registration Statement covering the
Registrable Securities is not filed as contemplated by this Agreement with
the
SEC by the relevant Required Filing Date, the Company will make payment to
the
Initial Investor in such amounts and at such times as shall be determined
pursuant to this Section 2(b).
(ii) If
the
Registration Statement covering the Registrable Securities is not effective
by
the relevant Required Effective Date or if there is a Restricted Sale Date,
then
the Company will make payments to the Initial Investor in such amounts and
at
such times as shall be determined pursuant to this Section 2(b).
(iii) The
amount (the “Periodic Amount”) to be paid by the Company to the Initial Investor
shall be determined as of each Computation Date (as defined below) and such
amount shall be equal to the Periodic Amount Percentage (as defined below)
of
the Issued Principal Amount of all Debentures, for the period from the date
following the relevant Required Filing Date or the Required Effective Date
or a
Restricted Sale Date, as the case may be, to the first relevant Computation
Date, and thereafter to each subsequent Computation Date (each such period,
a
“Computation Period”). The “Periodic Amount Percentage” means two percent (2) of
the Purchase Price of such Issued Principal Amount for each Computation Period
(and pro rata for any Computation Period which is less than thirty [30] days).
Anything in the preceding provisions of this paragraph (iii) to the contrary
notwithstanding, after the relevant Effective Date the Issued Principal Amount
shall be deemed to refer to the sum of (X) the principal amount of all such
Debentures not yet converted and (Y) the Held Shares Value for such Debentures.
By way of illustration and not in limitation of the foregoing, if the
Registration Statement is filed on or before the Required Filing Date, but
is
not declared effective until seventy-five (75) days after the Initial Required
Effective Date, the Periodic Amount will aggregate five percent (5%) of the
Issued Principal Amount (2% for days 1-30, plus 2% for days 31-60, plus 1%
for
days 61-75). Anything herein to the contrary notwithstanding Periodic Amounts
shall cease to accrue, (1) with respect to any outstanding Debenture, as of
the
date the Conversion Shares issuable thereunder are no longer Registrable
Securities and (2) with respect to Held Shares used in determining the Held
Shares Value, if any, as of the date such shares are no longer Registrable
Securities.
(iv) Each
Periodic Amount, if any, will be payable by the Company in cash or other
immediately available funds to the Investor on the third Trading Day after
(A)
with
respect to Periodic Amounts for Computation Periods ending on or before the
relevant Effective Date, (i) the earlier of the Effective Date or the date
which
is thirty days after the relevant Required Effective Date (each, a “First
Specified Periodic Payment Date”) and (ii) if relevant, the last day of each
Computation Period after the First Specified Periodic Payment Date,
and
(B)
with
respect to all Periodic Amounts accruing after the Effective Date, the last
day
of the relevant Computation Period,
in
each
case, without requiring demand therefor by the Investor.
(v) Notwithstanding
the preceding provisions of this Section 2(b), if the Company timely files
a
Registration Statement or an Additional Registration Statement, which, as may
be
relevant, complies with the provisions of Section 2(a) of this Agreement and
the
SEC raises issues relating to the applicability of Rule 415 to the number of
shares sought to be registered under such Registration Statement, the provisions
regarding the accrual of Periodic Amounts shall be suspended for one full
Computation Period from the date of the Company’s receipt of such communication
from the SEC.
(vi) The
parties acknowledge that the damages which may be incurred by the Investor
if
the Registration Statement is not filed by the Required Filing Date or the
Registration Statement has not been declared effective by a Required Effective
Date, including if the right to sell Registrable Securities under a previously
effective Registration Statement is suspended or the shares of the Company’s
stock are not listed on the Principal Trading Market, may be difficult to
ascertain. The parties agree that, subject to the provisions of Section 11(k),
the amounts payable pursuant to the foregoing provisions of this Section 2(b)
represent a reasonable estimate on the part of the parties, as of the date
of
this Agreement, of the amount of such damages.
(vii) Notwithstanding
the foregoing, the amounts payable by the Company pursuant to this provision
shall not be payable to the extent any delay in the filing or effectiveness
of
the Registration Statement occurs because of an act of, or a failure to act
or
to act timely by the Initial Investor or its counsel or any Holder named as
a
selling stockholder in the Registration Statement.
(viii) "Computation
Date" means (A) the date which is the earlier of (1) thirty (30) days after
the
Required Filing Date, the Required Effective Date or a Restricted Sale Date,
as
the case may be, or (2) the date after the Required Filing Date, the Required
Effective Date or Restricted Sale Date on which the Registration Statement
is
filed (with respect to payments due as contemplated by Section 2(b)(i) hereof)
or is declared effective or has its restrictions removed or the shares of the
Company’s stock are listed on the Principal Trading Market (with respect to
payments due as contemplated by Section 2(b)(ii) hereof), as the case may be,
and (B) each date which is the earlier of (1) thirty (30) days after the
previous Computation Date or (2) the date after the previous Computation Date
on
which the Registration Statement is filed (with respect to payments due as
contemplated by Section 2(b)(i) hereof) or is declared effective or has its
restrictions removed or the shares of the Company’s stock are listed on the
Principal Trading Market (with respect to payments due as contemplated by
Section 2(b)(ii) hereof), as the case may be.
3. Obligations
of the Company.
In
connection with the registration of the Registrable Securities, the Company
shall do each of the following:
(a) Prepare
promptly, and file with the SEC by any Required Filing Date a Registration
Statement with respect to not less than the number of Registrable Securities
provided in Section 2(a) above, and thereafter use its reasonable best efforts
to cause such Registration Statement relating to Registrable Securities to
become effective by the relevant Required Effective Date and keep the
Registration Statement effective at all times during the period (the
“Registration Period”) continuing until the earlier of (i) the date when the
Investors may sell all Registrable Securities under Rule 144 without volume
or
other restrictions or limits, (ii) the date the Investors no longer own any
of
the Registrable Securities, 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,
in
light of the circumstances in which they were made, not misleading;
(b) Prepare
and file with the SEC such amendments (including post-effective amendments)
and
supplements to the Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to keep the Registration
Statement effective at all times during the Registration Period, and, during
the
Registration Period, comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities of the Company covered
by the Registration Statement 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
Statement;
(c) Permit
a
single firm of counsel designated by the Initial Investors (which, until further
notice, shall be deemed to be Xxxxxxx & Prager llp,
Attn:
Xxxxxx Xxxxxxxx, Esq., which firm has requested to receive such notification;
each, an “Investor’s Counsel”) to review the Registration Statement and all
amendments and supplements thereto a reasonable period of time (but not less
than three (3) Trading Days) prior to their filing with the SEC, and not file
any document in a form to which such counsel reasonably objects;
(d) Notify
the Placement Agent (with a copy to the Investor’s Counsel) immediately (and, in
the case of (i)(A) below, not less than three (3) Trading Days prior to such
filing) and (if requested by any such person) confirm such notice in writing
no
later than one (1) Trading Day following the day (i)(A) when a Prospectus or
any
Prospectus supplement or post-effective amendment to the Registration Statement
is proposed to be filed; (B) whenever the SEC notifies the Company whether
there
will be a “review” of such Registration Statement; (C) whenever the Company
receives (or a representative of the Company receives on its behalf) any oral
or
written comments from the SEC in respect of a Registration Statement (copies
or,
in the case of oral comments, summaries of such comments shall be promptly
furnished by the Company to the Investor’s Counsel); and (D) with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC or any other Federal or state
governmental authority for (A) amendments or supplements to the Registration
Statement or Prospectus, (B) additional information not pertaining to the
Investors or (C) additional information pertaining to the Investors; (iii)
of
the issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement covering any or all of the Registrable Securities or
the
initiation of any proceedings for that purpose; (iv) if at any time any of
the
representations or warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated hereby ceases to be true
and
correct in all material respects; (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose; and (vi) of the occurrence of any event that to the best knowledge
of
the Company makes any statement made in the Registration Statement or Prospectus
or any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case
of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. In
addition, the Company shall communicate with the Investor’s Counsel with regard
to its proposed written responses to the comments contemplated in clause (i)(C)
of this Section 3(d), so that, to the extent practicable, the Investor’s Counsel
shall have the opportunity to comment thereon;
(e) Unless
such filing is publicly available on the SEC’s XXXXX system (via the SEC’s web
site at no additional charge), furnish to each Investor and to Investor’s
Counsel (i) promptly after the same is prepared and publicly distributed, filed
with the SEC, or received by the Company, one (1) copy of the Registration
Statement, each preliminary prospectus and prospectus, and each amendment or
supplement thereto, and (ii) such number of copies of a 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;
(f) As
promptly as practicable after becoming aware thereof, notify each Investor
of
the happening of any event of which the Company has knowledge, as a result
of
which the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
use its best efforts promptly to prepare a supplement or amendment to the
Registration Statement or other appropriate filing with the SEC to correct
such
untrue statement or omission, and, unless such filing is publicly available
on
the SEC’s XXXXX system (via the SEC’s web site at no additional charge), deliver
a number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request;
(g) As
promptly as practicable after becoming aware thereof, notify each Investor
who
holds Registrable Securities being sold (or, in the event of an underwritten
offering, the managing underwriters) of the issuance by the SEC of a Notice
of
Effectiveness or any notice of effectiveness or any stop order or other
suspension of the effectiveness of the Registration Statement at the earliest
possible time;
(h) As
promptly as practicable after becoming aware thereof, notify each Investor
who
holds Registrable Securities of the fact that the ability of the Investor to
sell Registrable Securities under the Registration Statement will soon be
unavailable as a result of the impending cessation or expiration of the
effectiveness of the Registration Statement, for which notice should be given
at
least twenty (20) days in advance, except that the Company's obligation under
this clause shall be satisfied if the Company has previously given written
notice of such date to such Investor and such date has not changed since the
date of such written notice.
(i) Comply
with Regulation FD or any similar rule or regulation regarding the dissemination
of information regarding the Company, and in furtherance of the foregoing,
and
not in limitation thereof, and notwithstanding anything to the contrary in
this
Agreement or in any of the other Transaction Agreements, without the prior
written consent of the Investor in each instance, not disclose to the Investor
any non-public material information regarding the Company;
(j) Notwithstanding
the foregoing, if at any time or from time to time after the date of
effectiveness of the Registration Statement, the Company notifies the Investors
in writing that the effectiveness of the Registration Statement is suspended
for
any reason, whether due to a Potential Material Event or otherwise, the
Investors shall not offer or sell any Registrable Securities, or engage in
any
other transaction involving or relating to the Registrable Securities, from
the
time of the giving of such notice until such Investor receives written notice
from the Company that such the effectiveness of the Registration Statement
has
been restored, whether because the Potential Material Event has been disclosed
to the public or it no longer constitutes a Potential Material Event or
otherwise; provided, however,
that the
Company may not so suspend the right to such holders of Registrable Securities
during the periods the Registration Statement is required to be in effect other
than during a Permitted Suspension Period (and the applicable provisions of
Section 2(b) shall apply with respect to any such suspension other than during
a
Permitted Suspension Period);
(k) Use
its
reasonable efforts to secure and maintain the designation of all the Registrable
Securities covered by the Registration Statement on the Principal Trading Market
and the quotation of the Registrable Securities on the Principal Trading
Market;
(l) Provide
a
transfer agent (“Transfer Agent”) and registrar, which may be a single entity,
for the Registrable Securities not later than the initial Effective Date;
(m) Cooperate
with the Investors who hold Registrable Securities being offered to facilitate
the timely preparation and delivery of certificates for the Registrable
Securities to be offered pursuant to the Registration Statement and enable
such
certificates for the Registrable Securities to be in such denominations or
amounts as the case may be, as the Investors may reasonably request, and, within
five (5) Trading 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 appropriate
instruction and opinion of such counsel, which shall include, without
limitation, directions to the Transfer Agent to issue certificates of
Registrable Securities(including certificates for Registrable Securities to
be
issued after the Effective Date and replacement certificates for Registrable
Securities previously issued) without legends or other restrictions, subject
to
compliance with applicable law and other rules and regulations, including,
without limitation, prospectus delivery requirements;
(n) Take
all
other reasonable administrative steps and actions (including the participation
of Company counsel) necessary to expedite and facilitate disposition by the
Investor of the Registrable Securities pursuant to the Registration Statement;
provided, however, that the foregoing does not require that the Company take
any
steps whatsoever regarding the identification or selection of a broker to sell
the Registrable Securities, the identification of buyers of the Registrable
Securities, or the negotiation of the sale terms of the Registrable Securities;
and
(o) Not
file
any other registration statement (other than the Registration Statement and
amendments thereto and except for (i) registration statements on Form S-8 and
post-effective amendments thereto and (ii) post-effective amendments to a
registration statement which had been declared effective prior to the Closing
Date) during the period commencing on the Closing Date and ending on the
Effective Date.
4. Obligations
of the Investors.
In
connection with the registration of the Registrable Securities, the Investors
shall have the following obligations:
(a) Each
Investor, by such Investor's acceptance of the Registrable Securities, agrees
to
cooperate with the Company to provide factual information regarding the Investor
as reasonably requested by the Company in connection with the preparation and
filing of the Registration Statement 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 Statement;
and
(b) 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), (g) or (i) above,
such Investor will 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), (g) or (i), 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.
5. Expenses
of Registration.
All
reasonable expenses (other than underwriting discounts and commissions of the
Investor) incurred in connection with registrations, filings or qualifications
pursuant to Section 3, but including, without limitation, all registration,
listing, and qualifications fees, printers and accounting fees, the fees and
disbursements of counsel for the Company shall be borne by the Company. In
addition, a fee for a single counsel for the Investors (as a group and not
individually) equal to $5,000 for the review of each Registration Statement
and
$2,300 for the review of each post-effective amendment to a Registration
Statement 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 and hold harmless each
Investor who holds such Registrable Securities, the directors, if any, of such
Investor, the officers, if any, of such Investor, and each Buyer Control Person
(each, an “Indemnified Party”), against any losses, claims, damages, liabilities
or expenses (joint or several) incurred (collectively, “Claims”) to which any of
them may become subject under the Securities Act, Securities Exchange Act of
1934, as amended (the “Exchange Act”), or otherwise, insofar as such Claims (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations in the Registration Statement, or any post-effective amendment
thereof, or any prospectus included therein: (i) any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
or
any post-effective amendment thereof or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading, (ii) any untrue statement or alleged
untrue statement of a material fact 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 (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation under the Securities Act, the Exchange Act or any state securities
law (the matters in the foregoing clauses (i) through (iii) being, collectively
referred to as “Violations”). Subject to clause (b) of this Section 6, the
Company shall reimburse the Investors, promptly as such expenses are incurred
and are due and payable, for any 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) shall not (I) apply to any 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 or on behalf
of such Indemnified Party expressly for use in connection with the preparation
of the Registration Statement, any such amendment thereof or supplement thereto
or prospectus, if such prospectus (or supplement or amendment thereto) was
timely made available by the Company pursuant to Section 3(b) hereof; (II)
be
available to the extent such Claim is based on a failure of the Investor to
deliver or cause to be delivered the prospectus made available by the Company
or
the amendment or supplement thereto made available by the Company; (III) be
available to the extent such Claim is based on the delivery of a prospectus
by
the Investor after receiving notice from the Company under Section 3(f), (g)
or
(i) hereof (other than a notice regarding the effectiveness of the Registration
Statement or any amendment or supplement thereto), or (IV) 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
or delayed. The Investor will indemnify the Company and its officers, directors
and agents (each, an “Indemnified Party”) against any claims 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 or on behalf of such
Investor, expressly for use in connection with the preparation of the
Registration Statement or the amendment or supplement thereto, subject to such
limitations and conditions as are applicable to the indemnification provided
by
the Company pursuant to this Section 6. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to Section 9.
(b) Promptly
after receipt by an Indemnified Party under this Section 6 of notice of the
commencement of any action (including any governmental action), such 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 satisfactory to the indemnifying
party (provided such counsel shall not have a conflict of interest with the
Indemnified Party and provided that all defenses available to the Indemnified
Party can be maintained without prejudicing the rights of the indemnifying
party). In case any such action is brought against any Indemnified Party, and
it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate in, and, to the extent that it may wish,
jointly with any other indemnifying party similarly notified, assume the defense
thereof, subject to the provisions herein stated and after notice from the
indemnifying party to such Indemnified Party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such Indemnified
Party under this Section 6 for any legal or other reasonable out-of-pocket
expenses subsequently incurred by such Indemnified Party in connection with
the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and reasonable
out-of-pocket expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel as provided above. 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 Party under this Section 6, except to the extent that the
indemnifying party is 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; provided,
however, that the Investor shall not obligated to make any indemnification
payment to the Company under this Section 6 unless and until there has been
a
final adjudication of liability on the part of the Investor.
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
(a) 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; (b) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any seller of Registrable Securities
who
was not guilty of such fraudulent misrepresentation; and (c) except where the
seller has committed fraud (other than a fraud by reason of the information
included or omitted from the Registration Statement as to which the Company
has
not given notice as contemplated under Section 3 hereof) or intentional
misconduct, contribution 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 Securities Act and Exchange Act.
With a
view to making available to Investor the benefits of Rule 144 promulgated under
the Securities Act or any other similar rule or regulation of the SEC that
may
at any time permit Investor to sell securities of the Company to the public
without Registration (“Rule 144”), the Company agrees, subject to the provisions
of Section 4 (d) of the Securities Purchase Agreement, 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 Securities Act and the Exchange Act; and
(c) furnish
to the Investor so long as the Investor owns Registrable Securities, promptly
upon reasonable request, (i) a written statement by the Company that it has
complied with the reporting requirements of Rule 144, the Securities Act and
the
Exchange Act, (ii) if not available on the SEC’s XXXXX system, 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 Investor to sell such securities pursuant
to
Rule 144 without Registration; and
(d) at
the
request of any Investor holding Registrable Securities (a “Holder”), give its
Transfer Agent instructions (supported by an opinion of Company Counsel or
other
counsel to the Company, if required or requested by the Transfer Agent) to
the
effect that, upon the Transfer Agent’s receipt from such Holder of
(i)
a
certificate (a “Rule 144 Certificate”) certifying (A) that the Holder’s holding
period (as determined in accordance with the provisions of Rule 144) for the
shares of Registrable Securities which the Holder proposes to sell (the
“Securities Being Sold”) is not less than (1) year and (B) as to such other
matters as may be appropriate in accordance with Rule 144 under the Securities
Act, and
(ii)
an
opinion of counsel acceptable to the Company (for which purposes it is agreed
that the initial Investor’s Counsel shall be deemed acceptable if not given by
Company Counsel) that, based on the Rule 144 Certificate, Securities Being
Sold
may be sold pursuant to the provisions of Rule 144, even in the absence of
an
effective Registration Statement,
the
Transfer Agent is to effect the transfer of the Securities Being Sold and issue
to the buyer(s) or transferee(s) thereof one or more stock certificates
representing the transferred Securities Being Sold without any restrictive
legend and without recording any restrictions on the transferability of such
shares on the Transfer Agent’s books and records (except to the extent any such
legend or restriction results from facts other than the identity of the Holder,
as the seller or transferor thereof, or the status, including any relevant
legends or restrictions, of the shares of the Securities Being Sold while held
by the Holder). If the Transfer Agent reasonably requires any additional
documentation at the time of the transfer, the Company shall deliver or cause
to
be delivered all such reasonable additional documentation as may be necessary
to
effectuate the issuance of an unlegended certificate.
9. Assignment
of the Registration Rights.
The
rights to have the Company register Registrable Securities pursuant to this
Agreement and the rights of the Investor under Section 8 hereof shall be
automatically assigned by the Investor to any transferee of the Registrable
Securities (excluding any transfer of such Registrable Securities by a sale
pursuant to an effective Registration Statement or pursuant to Rule 144) or
of
all or any portion of any unconverted Debentures or, to the extent relevant,
to
a Warrant Share Registration Statement, shares issued or issuable on exercise
of
Warrants, but , only if the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (a) the name and
address of such transferee or assignee, (b) the securities with respect to
which
such registration rights are being transferred or assigned, and (c) written
evidence of the transferee’s assumption of the Investor’s obligations under this
Agreement. Notwithstanding the foregoing, the Company shall have no obligation
to amend any then effective Registration Statement covering the resale of such
transferred Registrable Securities or, to the extent relevant, transferred
shares issued on exercise of Warrants or shares issuable on the exercise of
transferred Warrants to include the transferee as a selling shareholder of
such
shares, if inclusion of the transferee would require a post-effective amendment
to such Registration Statement.
10. Amendment
of Registration Rights.
Any
provision 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 the written consent of the Company and Investors
who
represent a Majority in Interest of the Holders as of the relevant date. 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) Notices
required or permitted to be given hereunder shall be given in the manner
contemplated by the Securities Purchase Agreement, (i) if to the Company or
to
the Initial Investor, to their respective address contemplated by the Securities
Purchase Agreement, and (ii) if to any other Investor, at such address as such
Investor shall have provided in writing to the Company, or at such other address
as each such party furnishes by notice given in accordance with this Section
11(b).
(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 governed by and interpreted in accordance with the laws
of
the State of New York for contracts to be wholly performed in such state and
without giving effect to the principles thereof regarding the conflict of laws.
Each of the parties consents to the exclusive jurisdiction of the federal courts
whose districts encompass any part of the County of New York or the state courts
of the State of New York sitting in the County of New York in connection with
any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based
on
forum non coveniens,
to the
bringing of any such proceeding in such jurisdictions.
(e) The
Company and the Investor hereby waive a trial by jury in any action, proceeding
or counterclaim brought by either of the parties hereto against the other in
respect of any matter arising out of or in connection with this Agreement or
any
of the other Transaction Agreements.
(f) If
any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
(g) Subject
to the requirements of Section 9 hereof, this Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto.
(h) All
pronouns and any variations thereof refer to the masculine, feminine or neuter,
singular or plural, as the context may require.
(i) The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning thereof.
(j) This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which shall constitute one and the same agreement.
This Agreement, once executed by a party, may be delivered to the other party
hereto by telephone line facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
(k) The
Company acknowledges that any failure by the Company to perform its obligations
under Section 3(a) hereof, or any delay in such performance, whether or not
as a
result of the Company’s negligence, failure to act or otherwise, could result in
loss to the Investors, and the Company agrees that, in addition to any other
liability the Company may have by reason of such failure or delay, the Company
shall be liable for all direct damages caused by any such failure or delay,
unless the same is the result of force majeure. NEITHER PARTY SHALL BE LIABLE
TO
THE OTHER FOR CONSEQUENTIAL DAMAGES.
(l) This
Agreement (including to the extent relevant the provisions of other Transaction
Agreements) constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof and supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
IN
WITNESS WHEREOF,
the
parties have caused this Agreement to be duly executed by their respective
officers thereunto duly authorized as of the day and year first above
written.
| INITIAL INVESTOR: | ||
| [Print Name of Initial Investor] | ||
| |
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| By: | ||
| Name: | ||
| Title: | ||
| COMPANY: | ||
| SKYSTAR BIO-PHARMACEUTICAL COMPANY | ||
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| By: | ||
| Name: | ||
| Title: | ||
