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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:
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
Statem
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