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PUT
AGREEMENT
THIS
PUT AGREEMENT
(this
“Agreement”)
is
made and entered into this 31st day of January, 2008, by and between China
Sky
One Medical, Inc., a corporation organized and existing under the laws of the
State of Nevada, with an address at Room 1706, No. 30 Di Wang Building, Gan
Shui
Road, Nandang District, Harbin, People’s Republic of China 150001 (the
“Company”)
and
the Investors set forth on the signature pages affixed hereto (each an
“Investor”
and
collectively the “Investors”).
RECITALS:
WHEREAS,
the
Company has offered for sale (the “Offering”)
certain shares (the “Shares”)
of
common stock of the Company, $.001 par value per share (“Common
Stock”)
and
attached warrants (the “Warrants”)
to
purchase shares of Common Stock in accordance with that certain Securities
Purchase Agreement by and among the Company and the Investors, dated as of
even
date herewith (the “Securities
Purchase Agreement”);
and
WHEREAS,
the
Company has represented to the Investors that the Adjusted EPS (as defined
below) of the Company for the fiscal year ending December 31, 2007, will be
greater than or equal to $1.05 per share (the “FY07
Performance
Threshold”),
as
set forth in audited financial statements of the Company for the period ending
December 31, 2007 (the “FY07
Financial Statements”)
(For
the purposes hereof, “Adjusted
EPS”
means
the net income (or loss) of the Company and its subsidiaries for such period,
determined on a consolidated basis divided by 13,907,696 shares; provided,
however,
that
(i) the Adjusted EPS for such period will be increased by any cash charges
related to the Offering and non-cash charges incurred as a result of the
Offering (due to non-cash amortization on warrants charged to the Company’s
results of operation, if any), and (ii) if the Offering does not close on or
before January 7, 2008 (the “Closing
Deadline”),
the
FY07 Performance Threshold will be decreased in an amount equal to 2% for each
7-day period, or pro rata for any portion thereof, following the Closing
Deadline, until such time as the Offering is consummated); and
WHEREAS,
as an
inducement to the Investors to enter into the Securities Purchase Agreement,
a
certain shareholder of the Company (the “CSKI
Shareholder”)
has
agreed to place an aggregate of 3,000,000 shares of Common Stock of the Company
(the “Escrow
Shares”)
into
escrow for the benefit of the Investors in the event that the Company fails
to
satisfy the FY07 Performance Threshold, pursuant to the terms and conditions
of
a Make Good Agreement by and among Pope Asset Management LLC, as the authorized
agent of the Investors, the Company
and the
CSKI
Shareholder,
dated
as of even date herewith (the “Make
Good Agreement”);
and
WHEREAS,
the
parties hereto desire to set forth the circumstances under which the
Investors shall have the right, but not the obligation, to require the Company
to repurchase the Shares.
NOW,
THEREFORE,
in
consideration of the foregoing recitals, the premises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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1
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1. Put
Right.
(a) Grant
of Put Right.
Subject
to the terms and conditions hereof, each Investor shall have the right (the
“Put
Right”),
but
not the obligation, to cause the Company to repurchase the Shares such Investor
purchased in the Offering (the “Purchased
Shares”).
(b) Put
Repurchase Price.
In the
event an Investor exercises his, her or its Put Right, the repurchase price
for
the Purchased Shares shall be $10.00 per share (the “Repurchase
Price”).
(c) Exercise
of Put Right.
(i) An
Investor shall exercise his, her or its Put Right by giving written notice
of
its exercise of the Put Right to the Company (“Put
Exercise Notice”),
in
accordance with the provisions of Section 6 hereof.
(ii) Each
Investor may only exercise his, her or its Put Right as to all, but not less
than all, of such Investor’s Purchased Shares.
(iii) Upon
exercise of the Put Right by an Investor, the repurchase of such Investor’s
Purchased Shares by the Company shall be consummated within sixty (60) days
following the date of the Put Exercise Notice (the “Repurchase
Deadline”).
In
the event the Company does not pay the Repurchase Price to an Investor on or
prior to the Repurchase Deadline, interest shall be payable on the Repurchase
Amount at the rate of ten (10%) percent per annum until the Repurchase Amount,
and any accrued and unpaid interest thereon, is paid in full.
(iv) Concurrently
with the Company’s payment of the Repurchase Price to an exercising Investor,
such Investor shall deliver to the Company (A) the original stock certificate
representing his, her or its Purchased Shares and (B) the original warrant
certificate representing Warrants such Investor purchased in the Offering (the
“Purchased
Warrants”).
(v)
After
exercise of the Put Right, and upon delivery by the Company to the Investor
of
the applicable Repurchase Price, such Investor shall no longer be deemed to
be
the owner of the Purchased Shares and Purchased Warrants. The Purchased Shares
shall be returned to the Company’s treasury and the Purchased Warrants shall be
cancelled on the books of the Company.
(d) Conditions
to Exercise of Put Right.
The
Investors may only exercise their Put Right in the event that
either:
(i) the
Adjusted EPS of the Company for the fiscal year ending December 31, 2007 is
less than $0.80 per share, as set forth in the FY07 Financial Statements; or
(ii) the
Company’s accounts receivable exceeds $12,000,000 at the end of fiscal 2007, as
set forth in the FY07 Financial Statements (each of 1(d)(i) and (ii), a
“Put
Right Trigger”).
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(e)
