LOCK-UP AGREEMENT
THIS
LOCK-UP AGREEMENT (the "Agreement")
is
made and entered into on December 24, 2007 between Mr. Yinshing Xxxxx To (the
"Holder"),
Mr.
Xxx Xx (the “Successor”)
and
Discovery
Technologies, Inc., a Nevada corporation
(the
"Company").
Capitalized terms used and not otherwise defined herein that are defined in
the
Purchase Agreement will have the meanings given such terms in the Purchase
Agreement.
RECITALS
A. The
Company has determined that it is advisable and in its best interest to enter
into that certain Securities Purchase Agreement, dated December 24, 2007 (the
"Purchase
Agreement")
with
the Investors named therein (the "Investors")
and
certain other parties named therein, pursuant to which the Company will issue
and sell in a private offering securities of the Company (the "Offering").
B. In
connection with the Offering, the Company has agreed to provide the Investors
certain registration rights, and in furtherance thereof has agreed to file
a
registration statement to enable the Investors to resell certain of the
securities subject of the Offering.
C. It
is a
condition to the Investors' respective obligations to close under the Purchase
Agreement and provide the financing contemplating by the Offering that the
Holder and the Successor execute and deliver to the Company this Agreement.
D. Upon
the
Closing, the Holder will beneficially own 6,535,676 shares of common stock
of
the Company and simultaneously with the entry into this Agreement, the Holder
is
to enter into a Call Option Agreement with the Successor, pursuant to which
the
Holder is to sell all of his shares he is to receive from the Company on the
same date of the closing of the Offering in installments upon certain conditions
are satisfied and the Successor hereby acknowledges and agrees that any and
all
of his shares of the Company he is to receive from the Holder are subject to
the
terms and conditions of this Agreement.
E. In
contemplation of, and as a material inducement for the Investors to enter into,
the Purchase Agreement, the Holder, the Successor and the Company have each
agreed to execute and deliver this Agreement.
NOW,
THEREFORE, for and in consideration of the mutual covenants and agreements
set
forth herein, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
1. Effectiveness
of Agreement.
This
Agreement shall become null and void if the Purchase Agreement is terminated
prior to its Closing as to all Investors.
Each
of
the Holder and the Successor has independently evaluated the merits of its
decision to enter into and deliver this Agreement, and such Holder and the
Successor confirm that it has not relied on the advice of the Company or any
other person.
2. Representations
and Warranties.
Each of
the parties hereto, by their respective execution and delivery of this
Agreement, hereby represents and warrants to the others and to all third party
beneficiaries of this Agreement that (a) such party has the full right, capacity
and authority to enter into, deliver and perform its respective obligations
under this Agreement, (b) this Agreement has been duly executed and delivered
by
such party and is the binding and enforceable obligation of such party,
enforceable against such party in accordance with the terms of this Agreement
and (c) the execution, delivery and performance of such party’s obligations
under this Agreement will not conflict with or breach the terms of any other
agreement, contract, commitment or understanding to which such party is a party
or to which the assets or securities of such party are bound.
3. Beneficial
Ownership.
Holder
hereby represents and warrants that as of the Closing it will not beneficially
own (as determined in accordance with Section 13(d) of the Exchange Act of
1934,
as amended, and the rules and regulations promulgated thereunder) any shares
of
Common Stock, or any economic interest therein or derivative therefrom, other
than those shares of Common Stock specified on its signature page to this
Agreement. For purposes of this Agreement the shares of Common Stock to be
beneficially owned by such Holder and the Successor and specified on their
signature page to this Agreement are collectively referred to as the
“Shares.”
4. Lockup.
From
and after the date of this Agreement and through and including the one year
anniversary of the earlier of (i) the Effective Date of the Registration
Statement resulting in not less than seventy-five (75%) percent of all the
Registrable Securities being registered for resale in accordance with the terms
and conditions of the Registration Rights Agreement (plus one additional day
for
each Trading Day following the Effective Date of any Registration Statement
during which either (1) the Registration Statement is not effective or (2)
the
prospectus forming a portion of the Registration Statement is not available
for
the resale of all Registrable Securities (as defined in the Registration Rights
Agreement) required to be covered thereby) or (ii) the date on which all of
the
Registrable Securities can be sold without volume restrictions under Rule 144
(the "Lockup
Period"),
the
Holder irrevocably agrees it will not offer, pledge, encumber, sell, contract
to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase or otherwise transfer
or
dispose of, directly or indirectly, or announce the offering of, any of its
Shares (including any securities convertible into, or exchangeable for, or
representing the rights to receive, Shares), except for the sale of the Holder’s
Shares to the Successor pursuant to the Call Option Agreement dated the date
hereof, which is subject to the provisions set forth below on transfers. In
furtherance thereof, the Company will (x) place a stop order with the Transfer
Agent on all Shares, including those which are covered by a registration
statement, (y) notify the Transfer Agent in writing of the stop order and the
restrictions on such Shares under this Agreement and direct the Transfer Agent
not to process any attempts by the Holder to resell or transfer any Shares
under
any registration statements, rule 144, or otherwise in violation of this
Agreement. Notwithstanding the foregoing, or anything to the contrary contained
herein, subject to the provisions set forth in the following sentence, the
Successor may transfer Shares to his wife or children (a “Permitted Holder”).
Any transfer of Shares permitted hereunder shall be subject to the following:
(a) the transferor shall give prior notice of such intended transfer to each
of
the Transfer Agent and the Company, (b) such transfer is subject to the prior
undertaking by each of Successor and each Permitted Holder (as applicable)
with
the Company, Transfer Agent and Investors that such transferred Shares are
subject in all respects to the obligations and restrictions on Shares under
this
Agreement in place of the relevant transferor (including the placing on such
Shares of a restrictive legend) and (c) such transferor shall remain liable
for
any breach by such Permitted Holder or, in the case of a transfer pursuant
to
the Call Option, the Successor, of any provision hereunder.
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5. Third-Party
Beneficiaries.
The
Holder, the Successor and the Company acknowledge and agree that this Agreement
is entered into for the benefit of and is enforceable by the Investors and
their
successors and assigns. The Holder, Successor and the Company understand and
agree that this Agreement is a material inducement to the willingness of the
Investors to enter into the Purchase agreement and the transactions contemplated
thereunder, and that each of the Company, Successor and the Holder receive
benefits as a result of the investment into the Company by the
Investors.
6. No
Additional Fees/Payment.
Other
than the consideration specifically referenced herein, the parties hereto agree
that no fee, payment or additional consideration in any form has been or will
be
paid to the Holder or the Successor in connection with this
Agreement.
7. Enumeration
and Headings.
The
enumeration and headings contained in this Agreement are for convenience of
reference only and shall not control or affect the meaning or construction
of
any of the provisions of this Agreement.
8. Counterparts.
This
Agreement may be executed in facsimile and in any number of counterparts, each
of which when so executed and delivered shall be deemed an original, but all
of
which shall together constitute one and the same agreement.
9. Successors
and Assigns; Third Party Beneficiaries.
This
Agreement and the terms, covenants, provisions and conditions hereof shall
be
binding upon, and shall inure to the benefit of, the respective heirs,
successors and assigns of the parties hereto, provided that the Investors shall
be intended third party beneficiaries of this Agreement.
10. Severability.
If any
provision of this Agreement is held to be invalid or unenforceable for any
reason, such provision will be conformed to prevailing law rather than voided,
if possible, in order to achieve the intent of the parties and, in any event,
the remaining provisions of this Agreement shall remain in full force and effect
and shall be binding upon the parties hereto.
11. Amendment.
This
Agreement may not be amended or modified in any manner except by a written
agreement executed by each of the parties hereto if and only if such
modification or amendment is consented to in writing by the Investors holding
a
majority in interest of the Common Stock issued or issuable under the Purchase
Agreement.
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12. Further
Assurances.
The
Company, Successor and Holder shall each 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 Investor
or the Transfer Agent or, in the case of the Holder or Successor, the Company,
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.
13. No
Strict Construction.
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.
14. Remedies.
The
Company and the Investors shall have the right to specifically enforce all
of
the obligations of the Holder under this Agreement (without posting a bond
or
other security), in addition to recovering damages by reason of any breach
of
any provision of this Agreement and to exercise all other rights granted by
law.
Furthermore, each of the Company, Holder and Successor recognize that if it
fails to perform, observe, or discharge any of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the Company or
the Investors. Therefore, the Holder agrees that each of the Company and the
Investors shall be entitled to seek temporary and permanent injunctive relief
in
any such case without the necessity of proving actual damages and without
posting a bond or other security.
15. Governing
Law.
The
terms and provisions of this Agreement shall be construed in accordance with
the
laws of the State of New York and the federal laws of the United States of
America applicable therein. Each party agrees for its benefit and the benefit
of
the Investors (who are third party beneficiaries to the obligations of the
Company,
Holder and Successor
contained in this Agreement and this Section) as follows: (a) All Proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by this Agreement shall be commenced exclusively in the New York
Courts. Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts 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 Proceeding, any claim that it is not personally subject to the jurisdiction
of any such New York Court, or that such Proceeding has been commenced in an
improper or inconvenient forum. (b) Each of the Company and the Holder hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for 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. (c) Each of the Company and
the
Holder hereby irrevocably waive, to the fullest extent permitted by applicable
law, any and all right to trial by jury in any legal proceeding arising out
of
or relating to this Agreement or the transactions contemplated hereby. (d)
If
any party or any Investor shall commence a Proceeding to enforce any provisions
of this Agreement, then the prevailing party in such Proceeding shall be
reimbursed by the other party (and in the case of an Investor bringing such
a
Proceeding, the Company, Holder and Successor shall jointly and severally
reimburse the Investor) for its reasonable attorneys’ fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
Proceeding.
[Remainder
of Page Intentionally Left Blank]
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IN
WITNESS WHEREOF, each of the parties hereto has caused this Lockup Agreement
to
be executed as of the day and year first above written.
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/s/
Yinshing Xxxxx To
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Yinshing Xxxxx To |
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Number
of Shares of Common Stock Beneficially
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Owned
at Closing: 6,535,676
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/s/
Xxx Xx
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Xxx Xx |
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DISCOVERY
TECHNOLOGIES, INC.
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| By: | /s/ Xxx Xx | |
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Name: Xxx Xx |
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Title:
Chairman of the Board,
President
and Chief Executive Officer
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