REGISTRATION RIGHTS AGREEMENT
EXECUTION
COPY
REGISTRATION
RIGHTS AGREEMENT
(this
“Agreement”),
dated
as of December 11, 2007, by and among China-Biotics, Inc., a Delaware
corporation, with headquarters located at No. 999 Ningqiao Road, Jingiao Export
Processing Zone, Pudong, Shanghai, China 201206 (the ”Company”),
and
Xxxx Investments II LLC, a Delaware limited liability company (“Buyer”)
with
headquarters located at 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxx 00000.
WHEREAS:
A. In
connection with the Investment Agreement by and between the Company and Buyer
dated even date herewith (the “Investment
Agreement”),
the
Company has agreed, upon the terms and subject to the conditions set forth
in
the Investment Agreement, to issue and sell to Buyer a promissory note
convertible into shares (the “Common
Shares”)
of the
Company's common stock, par value $0.001 per share (the “Common
Stock).
B. To
induce
the Buyer to execute and deliver the Investment 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.
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 Buyer hereby agree as follows:
1. Definitions.
Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings set forth in the Investment Agreement. As used in this Agreement,
the
following terms shall have the following meanings:
a. “Business
Day”
means
any day other than Saturday, Sunday or any other day on which commercial banks
in the State of Delaware are authorized or required by law to remain
closed.
b. “Buyer”
means
a
Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights
under this Agreement and who agrees to become bound by the provisions of this
Agreement in accordance with Section 8.
c. “Closing
Date”
shall
have the meaning set forth in the Investment Agreement.
d. “Effective
Date”
means
the date the Registration Statement is declared effective by the
SEC.
e. “Effectiveness
Deadline”
means
December 31, 2008.
f. “Person”
means
an individual, a limited liability company, a partnership, a joint venture,
a
corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
g. “Previous
Registration Rights Agreement” means
that certain Registration Rights Agreement dated March 22, 2006, by and among
the Company and the other parties thereto.
h. “register,”
“registered,”
and
“registration”
refer
to a registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant
to
Rule 415 and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.
i. “Registrable
Securities”
means
(i) the Common Shares, (ii) any capital stock of the Company issued or issuable
with respect to the Common Shares as a result of any stock split, stock
dividend, recapitalization, exchange or similar event or otherwise, without
regard to any limitations on conversion of the promissory notes purchased by
the
Buyer under the Investment Agreement, and (iii) any Guarantee Shares (as defined
in the Investment Agreement) which the Buyer may acquire pursuant to the
Guarantee or Pledge Agreement, as those terms are defined in the Investment
Agreement.
j. “Registration
Statement”
means
a
registration statement or registration statements of the Company filed under
the
1933 Act covering the Registrable Securities.
k. “Required
Holders”
means
the holders of at least a majority of the Registrable Securities.
l. “Required
Registration Amount”
means
the sum of (i) the number of Common Shares issued, and (ii) 150% of the number
of Note Shares issued and issuable pursuant to the Notes as of the trading
day
immediately preceding the applicable date of determination, all subject to
adjustment as provided in Section 2(e).
m. “Rule
415”
means
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis.
n. “SEC”
means
the United States Securities and Exchange Commission.
All
terms
that are defined hereinabove shall refer to their respective meanings in the
Previous Registration Rights Agreement
2. Registration.
a. Mandatory
Registration; Additional Registrations.
As soon
as practicable after the date hereof the Company shall file with the SEC, a
Registration Statement on Form SB-2 covering the resale of all of the
Registrable Securities. In the event that Form SB-2 is unavailable for such
a
registration, the Company shall use such other form as is available for such
a
registration on another appropriate form reasonably acceptable to the Required
Holders, subject to the provisions of Section 2(e). The Registration Statement
prepared pursuant hereto shall register for resale at least the number of shares
of Common Stock equal to the Required Registration Amount determined as of
date
the Registration Statement is initially filed with the SEC. The Company shall
use commercially reasonable efforts to have the Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the
Effectiveness Deadline. By 9:30 am Pacific Time on the Business Day following
the Effective Date,
the Company shall file with the SEC in accordance with Rule 424 under the 1933
Act, the final prospectus to be used in connection with sales pursuant to such
Registration Statement. The
Company and Buyer hereby acknowledge that in accordance with Rule 415 of the
1933 Securities Act (“Rule 415”), the Company may not be allowed to register all
of the Registrable Securities in the Registration Statement. If this occurs,
the
Company, upon Buyer’s request, shall be required to file additional Registration
Statements to include any of the Registrable Securities that were not registered
in the Registration Statement, provided that such Registrable Securities can
be
registered at such time to comply with Rule 415. In addition, if any of the
Registrable Securities have not been registered in the Registration Statement
or
additional Registration Statements and the Company is undertaking a Registration
Statement on Form SB-2 (or a similar form), the Buyer shall be provided with
notice of the filing of a Registration Statement ten (10) days prior to such
filing and given the opportunity to request the inclusion of any Registrable
Securities that have not previously been registered in a Registration Statement,
provided that such Registrable Securities can be registered at such time to
comply with Rule 415.
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b. Allocation
of Registrable Securities.
The
initial number of Registrable Securities included in any Registration Statement
and any increase in the number of Registrable Securities included therein shall
be allocated to the Buyer. In the event that the Buyer sells or otherwise
transfers any of the Registrable Securities, each transferee shall be allocated
a pro rata portion of the then remaining number of Registrable Securities
included in such Registration Statement for such transferor. In no event shall
the Company include any securities other than Registrable Securities on any
Registration Statement without the prior written consent of the Required Holders
on the Closing Date.
c. Legal
Counsel.
Subject
to Section 5 hereof, the Required Holders shall have the right to select one
legal counsel to review any registration pursuant to this Section 2
(“Legal
Counsel”),
which
shall be Wells, Moore, Xxxxxxx & Xxxxxxx, PLLC or such other counsel as
thereafter designated by the Required Holders. The Company and Legal Counsel
shall reasonably cooperate with each other in performing the Company's
obligations under this Agreement.
d. Sufficient
Number of Shares Registered.
In the
event the number of shares available under a Registration Statement filed
pursuant to Section 2(a) is insufficient to cover all of the Registrable
Securities required to be covered by such Registration Statement or any Buyer's
allocated portion of the Registrable Securities pursuant to Section 2(b), the
Company shall amend the applicable Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable),
or
both, so as to cover at least the Required Registration Amount as of the trading
day immediately preceding the date of the filing of such amendment or new
Registration Statement, in each case, as soon as practicable, but in any event
not later than fifteen (15) Business Days after the necessity therefor arises.
The Company shall use commercially reasonable efforts to cause such amendment
and/or new Registration Statement to become effective as soon as practicable
following the filing thereof. For purposes of the foregoing provision, the
number of shares available under a Registration Statement shall be deemed
“insufficient to cover all of the Registrable Securities” if at any time the
number of shares of Common Stock available for resale under the Registration
Statement is less than the product determined by multiplying (i) the Required
Registration Amount as of such time by (ii) 0.90. The calculation set forth
in
the foregoing sentence shall be made without regard to any limitations on the
conversion of the Notes, if any, and such calculation shall assume that the
Notes are then convertible for shares of Common Stock at the then prevailing
Conversion Price (as determined in accordance with the Notes).
3. Related
Obligations.
At
such
time as the Company is obligated to file a Registration Statement with the
SEC
pursuant to Section 2 the Company will use commercially resonable efforts to
effect the registration of the Registrable Securities in accordance with the
intended method of disposition thereof and, pursuant thereto, the Company shall
have the following obligations:
a. The
Company shall submit to the SEC, within five (5) Business Days after the Company
learns that no review of a particular Registration Statement will be made by
the
staff of the SEC or that the staff has no further comments on a particular
Registration Statement, as the case may be, a request for acceleration of
effectiveness of such Registration Statement to a time and date not later than
48 hours after the submission of such request. The Company shall keep each
Registration Statement effective pursuant to Rule 415 at all times until the
earlier of (i) the date as of which the Buyer may sell all of the Registrable
Securities covered by such Registration Statement without restriction pursuant
to Rule 144(k) (or any successor thereto) promulgated under the 1933 Act and
is
not otherwise prohibited by the SEC or any statute, rule, regulation or other
applicable law from selling any such Registrable Securities pursuant to such
Rule or (ii) the date on which the Buyer shall have sold all of the Registrable
Securities covered by such Registration Statement (the “Registration
Period”).
The
Company shall ensure that each 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 the case
of
prospectuses, in the light of the circumstances in which they were made) not
misleading, except for information provided by Buyer.
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b. The
Company shall prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to a Registration Statement and
the
prospectus used in connection with such Registration Statement, which prospectus
is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may
be
necessary to keep such Registration Statement 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 such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth
in
such Registration Statement. In the case of amendments and supplements to a
Registration Statement which are required to be filed pursuant to this Agreement
(including pursuant to this Section 3(b)) by reason of the Company filing a
report on Form 10-QSB, Form 10-KSB or any analogous report under the Securities
Exchange Act of 1934, as amended (the “1934
Act”),
the
Company shall have incorporated such report by reference into such Registration
Statement, if applicable, or shall file such amendments or supplements with
the
SEC on the same day on which the 1934 Act report is filed which created the
requirement for the Company to amend or supplement such Registration
Statement.
c. The
Company shall (A) permit Legal Counsel to review and comment upon (i) a
Registration Statement at least five (5) Business Days prior to its filing
with
the SEC and (ii) all amendments and supplements to all Registration Statements
(except for Annual Reports on Form 10-KSB, and Reports on Form 10-QSB and any
similar or successor reports) within a reasonable number of days prior to their
filing with the SEC, and (B) not file any Registration Statement or amendment
or
supplement thereto in a form to which Legal Counsel reasonably objects. The
Company shall not submit a request for acceleration of the effectiveness of
a
Registration Statement or any amendment or supplement thereto without the prior
approval of Legal Counsel, which consent shall not be unreasonably withheld.
The
Company shall furnish to Legal Counsel, without charge, (i) copies of any
correspondence from the SEC or the staff of the SEC to the Company or its
representatives relating to any Registration Statement, (ii) promptly after
the
same is prepared and filed with the SEC, one copy of any Registration Statement
and any amendment(s) thereto, including financial statements and schedules,
all
documents incorporated therein by reference, if requested by the Buyer, and
all
exhibits and (iii) upon the effectiveness of any Registration Statement, one
copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto, if requested by the Buyer. The Company
shall
reasonably cooperate with Legal Counsel in performing the Company's obligations
pursuant to this Section 3.
d. The
Company shall furnish to the Buyer, without charge, (i) promptly after the
same
is prepared and filed with the SEC and if requested by the Buyer, at least
one
copy of such Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by the Buyer, all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Registration Statement, ten
(10)
copies of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as the Buyer
may reasonably request) and (iii) such other documents, including copies of
any
preliminary or final prospectus, as the Buyer may reasonably request from time
to time in order to facilitate the disposition of the Registrable Securities
owned by the Buyer.
e. The
Company shall use commercially reasonable efforts to (i) register and qualify,
unless an exemption from registration and qualification applies, the resale
by
Buyer of the Registrable Securities covered by a Registration Statement under
such other securities or “blue sky” laws of all applicable jurisdictions in the
United States, (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 (x) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(e), (y) subject itself to general taxation in any such jurisdiction,
or (z) file a general consent to service of process in any such jurisdiction.
The Company shall promptly notify Legal Counsel and Buyer of the receipt by
the
Company of any notification with respect to the suspension of the registration
or qualification of any of the Registrable Securities for sale under the
securities or “blue sky” laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threatening of any proceeding
for
such purpose.
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f. The
Company shall notify Legal Counsel and Buyer in writing of the happening of
any
event, as promptly as practicable after becoming aware of such event, as a
result of which the prospectus included in a 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, in the light of the circumstances under which they were made, not
misleading (provided that in no event shall such notice contain any material,
nonpublic information), and, subject to Section 3(r), promptly prepare a
supplement or amendment to such Registration Statement to correct such untrue
statement or omission, and deliver ten (10) copies of such supplement or
amendment to Legal Counsel and Buyer (or such other number of copies as Legal
Counsel or Buyer may reasonably request). The Company shall also promptly notify
Legal Counsel and Buyer in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and when a Registration
Statement or any post-effective amendment has become effective (notification
of
such effectiveness shall be delivered to Legal Counsel and Buyer by facsimile
on
the same day of such effectiveness and by overnight mail), (ii) of any request
by the SEC for amendments or supplements to a Registration Statement or related
prospectus or related information, and (iii) of the Company's reasonable
determination that a post-effective amendment to a Registration Statement would
be appropriate.
g. The
Company shall use commercially reasonable efforts to prevent the issuance of
any
stop order or other suspension of effectiveness of a Registration Statement,
or
the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify Legal Counsel and Buyer of the issuance of such order
and
the resolution thereof or its receipt of actual notice of the initiation or
threat of any proceeding for such purpose.
h. The
Company shall use its commercially reasonable efforts to (i) cause all of the
Registrable Securities covered by a Registration Statement to be listed on
each
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) if,
despite the Company's efforts to satisfy, the preceding clause (i), to use
commercially reasonable efforts 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. The Company shall pay all
fees
and expenses in connection with satisfying its obligation under this Section
3(i).
i. The
Company shall cooperate with the Buyer and, to the extent applicable, facilitate
the timely preparation and delivery of certificates (not bearing any restrictive
legend) representing the 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 Buyers may reasonably request and
registered in such names as the Buyers may request.
j. If
requested by the Buyer, the Company shall (i) as soon as practicable incorporate
in a prospectus supplement or post-effective amendment such information as
the
Buyer reasonably requests to be included therein relating to the sale and
distribution of Registrable Securities, including, without limitation,
information with respect to the number of Registrable Securities being offered
or sold, the purchase price being paid therefor and any other terms of the
offering of the Registrable Securities to be sold in such offering; (ii) as
soon
as practicable make all required filings of such prospectus supplement or
post-effective amendment after being notified of the matters to be incorporated
in such prospectus supplement or post-effective amendment; and (iii) as soon
as
practicable, supplement or make amendments to any Registration Statement if
reasonably requested by an Buyer holding any Registrable
Securities.
k. The
Company shall otherwise use commercially reasonable efforts to comply with
all
applicable rules and regulations of the SEC in connection with any registration
hereunder.
5
l. Within
five (5) Business Days after a Registration Statement which covers Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and
shall
cause legal counsel for the Company to deliver, to the transfer agent for such
Registrable Securities (with copies to the Buyers whose Registrable Securities
are included in such Registration Statement) confirmation that such Registration
Statement has been declared effective by the SEC in the form attached hereto
as
Exhibit
A
or such
other form suitable for notification
m. Notwithstanding
anything to the contrary herein, at any time after the Effective Date, the
Company may delay the filing of or suspend the effectiveness pending such
disclosure of material, non-public information concerning the Company the
disclosure of which at the time is not, in the good faith opinion of the Board
of Directors of the Company and its counsel, in the best interest of the Company
and, in the opinion of counsel to the Company, otherwise required (a
“Grace
Period”);
provided, that the Company shall promptly (i) notify the Buyer in writing of
the
existence of material, non-public information giving rise to a Grace Period
(provided that in each notice the Company will not disclose the content of
such
material, non-public information to the Buyer) and the date on which the Grace
Period will begin, and (ii) notify the Buyer in writing of the date on which
the
Grace Period ends; and, provided further, that no Grace Period shall exceed
thirty (30) consecutive days and during any three hundred sixty five (365)
day
period such Grace Periods shall not exceed an aggregate of ninety (90) days
and
the first day of any Grace Period must be at least five (5) trading days after
the last day of any prior Grace Period (each, an “Allowable
Grace Period”).
For
purposes of determining the length of a Grace Period above, the Grace Period
shall begin on and include the date the Buyer receive the notice referred to
in
clause (i) and shall end on and include the later of the date the Buyer receive
the notice referred to in clause (ii) and the date referred to in such notice.
The provisions of Section 3(g) hereof shall not be applicable during the period
of any Allowable Grace Period. Upon expiration of the Grace Period, the Company
shall again be bound by the first sentence of Section 3(f) with respect to
the
information giving rise thereto unless such material, non-public information
is
no longer applicable. Notwithstanding anything to the contrary, the Company
shall cause its transfer agent to deliver unlegended shares of Common Stock
to a
transferee of the Buyer in accordance with the terms of the Investment Agreement
in connection with any sale of Registrable Securities with respect to which
the
Buyer has entered into a contract for sale, and delivered a copy of the
prospectus included as part of the applicable Registration Statement (unless
an
exemption from such prospectus delivery requirements exists), prior to the
Buyer's receipt of the notice of a Grace Period and for which the Buyer has
not
yet settled.
n. The
Company shall, upon reasonable notice and during normal business hours, make
available for inspection by any seller of Registrable Securities, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter (but not more than one firm of counsel to each of such
sellers and underwriters) all financial and other records, pertinent corporate
documents and properties of the Company, in each case, reasonably required
to
conduct due diligence or otherwise in connection with an underwritten offering,
and use its commercially reasonable efforts to cause the Company’s officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant
or
agent in connection with such registration statement; provided, however, that
information that the Company advises any such person is confidential shall
not
be disclosed unless such person signs a confidentiality agreement reasonably
satisfactory to the Company.
o. From
and
after the date of this Agreement until the termination of this Agreement, the
Company shall not, without the prior written consent of the Required Holders,
enter into any agreement with any holder or prospective holder of any securities
of the Company giving such holder or prospective holder any registration rights,
the terms of which are more favorable than the registration rights granted
to
the Buyers hereunder without also giving the Buyers such greater
rights.
4. Obligations
of the Buyer.
a. At
least
five (5) Business Days prior to the first anticipated filing date of a
Registration Statement, the Company shall notify the Buyer in writing of the
information the Company requires from such Buyer if such Buyer elects to have
any of such Buyer's Registrable Securities included in such Registration
Statement. 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 the Buyer that such Buyer shall furnish to the Company
such information regarding itself, the Registrable Securities held by it and
the
intended method of disposition of the Registrable Securities held by it as
shall
be reasonably required to effect the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with
such
registration as the Company may reasonably request.
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b. The
Buyer, by such Buyer'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 any Registration Statement hereunder, unless
such Buyer has notified the Company in writing of such Buyer's election to
exclude all of such Buyer's Registrable Securities from such Registration
Statement.
c. In
the
event there is any delay the provision of information reasonably requested
by
the Company in connection with the preparation and filing of any Registration
Statement hereunder, the Effectiveness Deadline shall be extended by a number
of
days equal to the duration of such delay.
d. The
Buyer
agrees that, upon receipt of any notice from the Company of the happening of
any
event of the kind described in Section 3(g) or the first sentence of 3(f),
such
Buyer will immediately discontinue disposition of Registrable Securities
pursuant to any Registration Statement(s) covering such Registrable Securities
until such Buyer's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(g) or the first sentence of 3(f) or receipt
of notice that no supplement or amendment is required. Notwithstanding anything
to the contrary, the Company shall cause its transfer agent to deliver
unlegended shares of Common Stock to a transferee of the Buyer in accordance
with the terms of the Investment Agreement in connection with any sale of
Registrable Securities with respect to which the Buyer has entered into a
contract for sale prior to the Buyer's receipt of a notice from the Company
of
the happening of any event of the kind described in Section 3(g) or the first
sentence of 3(f) and for which the Buyer has not yet settled.
e. The
Buyer covenants and agrees that it will comply with the prospectus delivery
requirements of the 1933 Act as applicable to it or an exemption therefrom
in
connection with sales of Registrable
Securities pursuant to the Registration Statement.
5. Expenses
of Registration.
All
reasonable expenses, incurred by the Company in connection with registrations,
filings or qualifications pursuant to Sections 2 and 3, including, without
limitation, all registration, listing and qualifications fees, printers and
accounting fees, and fees and disbursements of counsel for the Company shall
be
paid by the Company.
6. Indemnification
and Contribution.
a. In
the
event of a registration of any Registrable Securities under the Securities
Act
pursuant to this Agreement, the Company will indemnify and hold harmless, to
the
full extent permitted by law, Buyer, the directors, officers, managers, members,
partners, employees, agents, representatives of, and each Person, if any, who
controls the Buyer within the meaning of the 1933 Act or the 1934 Act (each,
a
“Buyer
Indemnitee”),
with
respect to any registration, qualification, listing or compliance effected
pursuant to this Agreement against any losses, claims, damages, liabilities
and
expenses, joint or several, to which Buyer may become subject under the
Securities Act, the 1934 Act, or other federal and state laws or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such Registrable Securities were registered under the Securities Act
pursuant to this Agreement, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereof, or arise out of
or
are based upon the omission or alleged omission to state therein 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
will
pay or reimburse each Buyer Indemnitee for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Company (i) will not be liable in any such case if and to the extent that (A)
any such loss, claim, damage liability or expense arises out of or is based
upon
an untrue statement or alleged untrue statement or omission or alleged omission
so made in conformity with information furnished by any Buyer Indemnitee or
any
other shareholder holding Registrable Securities for use in such registration
statement, prospectus, amendment or supplement, or (B) in respect to such untrue
statement or alleged untrue statement or omission or alleged omission with
respect to which such loss, claim, damage, liability or expense directly
relates, the final prospectus for such registration statement corrected in
all
material respects such untrue statement or alleged untrue statement or omission
or alleged omission and notice regarding the public availability of such final
prospectus was sent or given to or on behalf of any Buyer Indemnitee (or
otherwise delivered in accordance with applicable law or regulation) at or
prior
to the confirmation of the sale of Registrable Securities of such Shareholder,
and (ii) will not be liable for amounts paid in settlement of any such loss,
claim, damage, liability, expense or action if such settlement is effected
without the consent of the Company, such consent not to be unreasonably withheld
or delayed.
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b. In
the
event of a registration of any Registrable Securities under the 1933 Act
pursuant to this Agreement, each Buyer Indemnitee will indemnify and hold
harmless the Company, each person, if any, who controls the Company, any
underwriter retained by the Company and their respective directors, officers,
employees, advisors, agents and affiliates against all losses, claims, damages,
liabilities and expenses, joint or several, to which the Company or such other
person may become subject under the 1933 Act, the 1934 Act or other federal
or
state laws or otherwise, but only insofar as such losses, claims, damages or
liabilities (or actions in respect thereof), arise out of or are based upon
an
untrue statement or alleged untrue statement or omission or alleged omission
to
state therein a material fact required to be stated therein or necessary to
make
the statements therein not misleading, made in reliance upon and in conformity
with information pertaining to such Buyer Indemnitee furnished to the Company
by
such Shareholder for use in such registration statement under which such
Registrable Securities were registered under the 1933 Act pursuant to this
Agreement, or in any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, and will pay or reimburse
the
Company and each such other person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that (i) the liability
of
such Buyer Indemnitee hereunder shall be limited to the greater of (a) the
proportion of any such loss, claim, damage, liability or expense which is equal
to the proportion that the public offering price of the shares of Registrable
Securities sold by such Buyer Indemnitee under such registration statement
bears
to the total public offering price of all securities sold thereunder and (b)
the
amount of gross proceeds received by such Buyer Indemnitee in the offering
giving rise to such liability, and (ii) such Buyer Indemnitee shall not be
liable for amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of such Buyer
Indemnitee, such consent not to be unreasonably withheld or
delayed.
c. Promptly
after receipt by an indemnified party hereunder of written notice of any claim
or the commencement of any action or proceeding, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party
hereunder, notify the indemnifying party in writing thereof, but the failure
to
so notify the indemnifying party shall not relieve it from any liability which
it may have to such indemnified party other than under this Section 6 and shall
only relieve it from any liability which it may have to such indemnified party
under this Section 6 if and to the extent the indemnifying party is materially
prejudiced by such omission. In case any such action shall be brought against
any indemnified party and the indemnified party shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled
to
participate in and, to the extent it shall wish, to assume and undertake the
defense thereof with counsel reasonably satisfactory to such indemnified party,
and, after notice from the indemnifying party to such indemnified party of
its
election so to assume and undertake the defense thereof, the indemnifying party
shall not be liable to such indemnified party under this Section 6 for any
legal
or other professional expenses subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable costs of
investigation and of liaison with counsel so selected; provided, however, that
if the defendants in any such action include both the indemnified party and
the
indemnifying party, and the indemnified party shall have been advised by counsel
in writing that there are reasonable defenses available to it which are
different from or additional to those available to the indemnifying party,
the
indemnified party shall have the right to select a separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the reasonable fees and expenses of such separate counsel and
other
expenses related to such participation to be reimbursed by the indemnifying
party; provided, further, that in no event shall the indemnifying party be
responsible for the fees and expenses of more than one such separate counsel.
No
indemnifying party, in the defense of any such claim or litigation against
an
indemnified party, shall consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation, unless such indemnified party
shall otherwise consent in writing, which consent shall not be unreasonably
withheld or delayed. An indemnifying party who is not entitled to, or elects
not
to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, except as expressly provided
above.
8
d. If
the
indemnification provided for in this Section 6 is for any reason held by a
court
of competent jurisdiction to be unavailable to an indemnified party in respect
of any claims referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such claims (i) in
such
proportion as is appropriate to reflect the relative benefits received by the
indemnifying party and the indemnified party, or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion
as is
appropriate to reflect not only the relative benefits referred to in clause
(i)
above but also the relative fault of the indemnifying party and the indemnified
party in connection with the action or inaction which resulted in such claims,
as well as any other relevant equitable considerations. In connection with
any
registration of the Company’s securities, the relative benefits received by the
indemnifying party and the indemnified party shall be deemed to be in the same
respective proportions that the net proceeds from the offering (before deducting
expenses) received by the indemnifying party and the indemnified party, in
each
case as set forth in the table on the cover page of the applicable prospectus,
bear to the aggregate public offering price of the securities so offered. The
relative fault of the indemnifying party and the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state
a material fact relates to information supplied by the indemnifying party or
the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission.
e. The
indemnity agreements contained herein shall be in addition to (i) any cause
of
action or similar right of the indemnified party against the indemnifying party
or others, and (ii) any liabilities the indemnifying party may be subject to
pursuant to the law.
7. Reports
Under the 1934 Act.
With
a
view to making available to the Buyer 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 Buyers 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 the Buyer so long as Buyer owns Registrable Securities, promptly upon
request, (i) a written statement by the Company, if true, 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 Buyers to sell such
securities pursuant to Rule 144 without registration.
8. Assignment
of Registration Rights.
The
rights under this Agreement shall be automatically assignable by the Buyer
to
any transferee of all or any portion of such Buyer's Registrable Securities
if:
(i) the Buyer 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; (ii) 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, and (b) the securities with
respect to which such registration rights are being transferred or assigned;
(iii) immediately 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; (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence the
transferee or assignee agrees in writing with the Company to be bound by all
of
the provisions contained herein; and (v) such transfer shall have been made
in
accordance with the applicable requirements of the Investment
Agreement.
9
9. 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 the written consent of the Company and the Required
Holders. Any amendment or waiver effected in accordance with this Section 10
shall be binding upon the Buyer and the Company. No such amendment shall be
effective to the extent that it applies to less than all of the holders of
the
Registrable Securities. No consideration shall be offered or paid to any Person
to amend or consent to a waiver or modification of any provision of any of
this
Agreement unless the same consideration also is offered to all of the parties
to
this Agreement.
10. Miscellaneous.
a. A
Person
is deemed to be a holder of Registrable Securities whenever such Person owns
or
is deemed to own of record such Registrable Securities. If the Company receives
conflicting instructions, notices or elections from two or more Persons with
respect to the same Registrable Securities, the Company shall act upon the
basis
of instructions, notice or election received from the such record owner of
such
Registrable Securities.
b. Any
notices, consents, waivers or other communications required or permitted to
be
given under the terms of this Agreement must be in writing and will be deemed
to
have been delivered: (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of transmission is
mechanically or electronically generated and kept on file by the sending party);
or (iii) one Business Day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall
be:
If
to
Company (prior to consummation of the transactions contemplated by the Exchange
Agreement):
No.
999
Ningqiao Road
Jinqiao
Export Processing Zone
Pudong,
Shanghai 201206
People’s
Republic of China
Telephone: (00
00)
0000 0000
Facsimile: (00-00)
0000 0000
Attention:
Song
Jinan
with
a
copy to:
Xxxxxxxxxxx
& Xxxxxxxx Xxxxxxx Xxxxx Xxxxx, LLP
000
Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
Xxxxxxxxxx 00000
Telephone:
(000)
000-0000
Facsimile:
(000)
000-0000
Attention:
Xxxx
Xxxxxxxx
If
to the
Buyer:
10
Xxxx
Investments LLC
0000
Xxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx,
Xxxxxxxxx 00000
Telephone: (000)
000-0000
Facsimile: (000)
000-0000
Attention: Xxxxxxx
X. Xxxxx, Manager
with
a
copy to:
Wells,
Moore, Xxxxxxx & Xxxxxxx, PLLC
Xxxxxxxx
Xxxxx Xxxxx, Xxxxx 000
0000
Xxx
Xxxxxx Xxxx
Xxxxxxx,
Xxxxxxxxxxx 00000
Telephone:
(000)
000-0000
Facsimile:
(000)
000-0000
Attention:
X.
Xxxx
Xxxxxxx, Esq.
Written
confirmation of receipt (A) given by the recipient of such notice, consent,
waiver or other communication, (B) mechanically or electronically generated
by
the sender's facsimile machine containing the time, date, recipient facsimile
number and an image of the first page of such transmission or (C) provided
by a
courier or overnight courier service shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.
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. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision
or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State
of
New York. Each party hereby irrevocably submits to the exclusive jurisdiction
of
the state and federal courts sitting in the State of Delaware for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that
the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to
such
party at the address for such notices to it under this Agreement and agrees
that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. 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 in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
EACH
PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
e. This
Agreement, the other Transaction Documents (as defined in the Investment
Agreement) and the instruments referenced herein and therein 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, the other Transaction Documents and the instruments referenced herein
and therein supersede all prior agreements and understandings among the parties
hereto with respect to the subject matter hereof and thereof.
11
f. Subject
to the requirements of Section 8, this Agreement shall inure to the benefit
of
and be binding upon the permitted successors and assigns of each of the parties
hereto.
g. The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
h. This
Agreement may be executed in identical 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 facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.
i. 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 any 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.
j. All
consents and other determinations required to be made by the Buyer pursuant
to
this Agreement shall be made, unless otherwise specified in this Agreement,
by
the Required Holders.
k. 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.
l. This
Agreement is intended for the benefit of the parties hereto and their respective
permitted successors and assigns, and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person.
m. (i)
The
Company agrees that any document may be effectively served on it in connection
with any action, suit or proceeding in the United States by service on its
registered agent in the State of Delaware.
(ii)
Any
document shall be deemed to have been duly served if marked for the attention
of
the agent at its address as set forth in this Section 10(m) or such other
address in the United States as may be notified to the party wishing to serve
the document and (a) left at the specified address if its receipt is
acknowledged in writing; or (b) sent to the specified address by post,
registered mail return receipt requested. In the case of (a), the document
will
be deemed to have been duly served when it is left and signed for. In the case
of (b), the document shall be deemed to have been duly served when received
and
acknowledged.
(iii)
If
the Company's agent at any time ceases for any reason to act as such, the
Company shall promptly appoint a replacement agent having an address for service
in the United States and shall promptly notify Buyer at such time of the name
and address of the replacement agent. Failing such appointment and notification,
the holders of a majority of the Common Shares (as defined in the Investment
Agreement) at such time shall be entitled by notice to such the Company's to
appoint a replacement agent to act on the Company's behalf. The provisions
of
this Section 10(m) applying to service on an agent apply equally to service
on a
replacement agent.
n. Currency.
As used
herein, “Dollar”, “US Dollar” and “$” each mean the lawful money of the United
States.
[Signature
Page Follows]
12
IN
WITNESS WHEREOF,
the
Buyer and the Company have caused their respective signature page to this
Registration Rights Agreement to be duly executed as of the date first written
above.
|
COMPANY:
|
||
| |
|
|
| By: | /s/ Song Jinan | |
|
Name: Song Jinan |
||
|
Title: Chief
Executive Officer
|
||
13
IN
WITNESS WHEREOF,
each
Buyer and the Company have caused their respective signature page to this
Registration Rights Agreement to be duly executed as of the date first written
above.
|
BUYER:
|
||
|
XXXX
INVESTMENT II, LLC
By:
Xxxx Asset Management, LLC
Its:
Manager
|
||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxx | |
|
Name: Xxxxxxx X. Xxxxx |
||
|
Title: Manager
|
||
14
EXHIBIT
A
FORM
OF NOTICE OF EFFECTIVENESS
OF
REGISTRATION STATEMENT
Computershare
Trust Company, Inc.
000
Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxx 00000
Attention:
Re: China-Biotics,
Inc.
Ladies
and Gentlemen:
[We
are][I am] counsel to China-Biotics, Inc., a Delaware corporation (the
“Company”),
and
have represented the Company in connection with that certain Investment
Agreement (the “Investment
Agreement”)
entered into by and among the Company and the Buyer named therein (the
“Holder”)
pursuant to which the Company issued to the Holder promissory notes of the
Company (“Notes”) convertible into shares of the Company's common stock, par
value $0.001 per share (the “Common
Stock”).
Pursuant to the Investment Agreement, the Company also has entered into a
Registration Rights Agreement with the Holder (the “Registration
Rights Agreement”)
pursuant to which the Company agreed, among other things, to register the
Registrable Securities (as defined in the Registration Rights Agreement),
including the shares of Common Stock issuable upon any one or more conversions
of the Notes, under the Securities Act of 1933, as amended (the “1933
Act”).
In
connection with the Company's obligations under the Registration Rights
Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
on Form SB-2 (File No. 333-_____________) (the “Registration
Statement”)
with
the Securities and Exchange Commission (the “SEC”)
relating to the Registrable Securities which names the Holder as a selling
stockholder thereunder.
In
connection with the foregoing, [we][I] advise you that a member of the SEC's
staff has advised [us][me] by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at
[ENTER
TIME OF EFFECTIVENESS]
on
[ENTER
DATE OF EFFECTIVENESS]
and
[we][I] have no knowledge, after telephonic inquiry of a member of the SEC's
staff, that any stop order suspending its effectiveness has been issued or
that
any proceedings for that purpose are pending before, or threatened by, the
SEC
and the Registrable Securities are available for resale under the 1933 Act
pursuant to the Registration Statement.
This
letter shall serve as our standing instruction to you that the shares of Common
Stock are freely transferable by the Holder pursuant to the Registration
Statement. You need not require further letters from us to effect any future
legend-free issuance or reissuance of shares of Common Stock to the Holders
as
contemplated by the Company's Irrevocable Transfer Agent Instructions dated
____________________________2007.
| Very truly yours, | ||
| [ISSUER'S COUNSEL] | ||
| |
|
|
| By: | ||
| CC: [LIST NAMES OF HOLDERS] | ||
15
