Attn: CEO Re: Restrictions on Share Transfers
__________,
2007
Rm.
00000, Xxxxxx Xxxxx, Xx. 0,
Fenghui
Road South
Gaoxin
District, Xian Province, P.R. China
| Attn: |
CEO
|
Dear
Sir:
Reference
is made to the Securities Purchase Agreement (the “Securities Purchase
Agreement”), dated as of February 26, 2007, between Skystar Bio-Pharmaceutical
Company (the “Company”) and each of the Buyers named therein. Capitalized terms
not otherwise defined herein shall have the meanings ascribed to them in the
Securities Purchase Agreement.
The
undersigned is a Principal (as that term is defined below) of the Company.
In
such capacity the undersigned Principal has had access to the terms of the
Securities Purchase Agreement and the other Transaction Agreements, including
but not limited to, the Registration Rights Agreement between the Company and
the Buyers.
The
term
“Principal” is a person who meets any one or more of the following criteria: (A)
the undersigned signatory identified as the “Company Principal”; (B) a spouse of
the Company Principal (a “Principal’s Spouse”) who, directly or indirectly,
holds any shares of Common Stock of the Company, (C) a parent, sibling or child
of the Company Principal who resides in the household of the Company Principal
or of a Principal’s Spouse (each, a “Principal’s Relative”) and who, directly or
indirectly, holds any shares of Common Stock, or (D) any other person or entity,
including, without limitation, any for profit or non-profit corporation,
partnership and trust, whose voting rights regarding Common Stock of the Company
is subject to the direction or control of any of the Company Principal, a
Principal’s Spouse, or a Principal’s Relative.
As
an
inducement to each Buyer’s execution, delivery and performance of the Securities
Purchase Agreement, the undersigned Principal hereby agrees as
follows:
1. Without
the prior written consent of a Majority in Interest of the Holders in each
instance, the undersigned Principal and any of its Transferees (as defined
below) will not, individually or collectively with any other Principal or any
Transferee, sell or otherwise transfer or offer to sell or otherwise transfer
any shares of Common Stock directly or indirectly held by such Principal at
any
time through and including the date which is the Principal’s Lock-up Date (as
defined below)1 .
The
foregoing provisions shall not apply, however, to any (x) sale of shares made
in
response to a Tender Offer (as defined below) or (y) sale of Excluded Shares
(as
defined below).
2. The
following terms shall have the meanings indicated:
(a) The
term
“Principal’s Lock-up Date” means the earlier of (i) the date on which the
aggregate principal amount of all outstanding Debentures is less than
twenty-five percent (25%) of the Aggregate Purchase Price of all Debentures
actually issued prior to such date or (ii) subject to the provisions hereof,
the
date which is the later of the Post Effective Lock-up Date (as defined below)
or
ninety (90) days after the last date hereafter on which the Company Principal
is
any one or more of the following: an officer, director or the holder (alone
or
together with all other Principals signatory to this Agreement) of Beneficial
Shares (as defined below) and Excluded Shares which aggregate at least five
percent (5%) of the outstanding shares of Common Stock of the Company; provided
that this clause (ii) shall only apply for as long thereafter as such Company
Principal or any other Principal signatory to this Agreement is not an officer,
director or holder (alone or together with the Company Principal and all other
Principals signatory to this Agreement) of Beneficial Shares and Excluded Shares
which aggregate at least five percent (5%) of the outstanding shares of Common
Stock of the Company.
(b) The
term
“Post Effective Lock-up Date” means the date which is one hundred eighty (180)
days after the Effective Date, but not counting for such purposes the days,
if
any, during which sale of Registrable Securities was suspended after the
Effective Date.2
_________________
1By
way of
clarification: no shares (with the exception of shares referred to in the
last
sentence of Section 1) are permitted to be sold by the Principal through
and
including the Principal’s Lock-up Date.
2By
way of
illustration: If the sale of Registrable Securities was suspended for ten
(10)
days in the interim, the applicable Post Effective Lock-up Date will be
one
hundred ninety (190) days after the Effective Date. If on the 185th day
after
the Effective Date, the sale of Registrable Securities was suspended again
for
five (5) days, the Post Effective Lock-up Date will be one hundred ninety-five
(195) days after the Effective Date.
(c) The
term
“Beneficial Shares” means the sum (i) the shares of Common Stock actually held
of record, directly or indirectly, by the undersigned, (ii) Fully Vested Shares
(as defined below), (iii) shares subject to any other then exercisable warrant,
right or option, and (iv) (to the extent such shares were not previously
included in any of the preceding provisions of clauses (i), (ii) or (iii) of
this paragraph (c), shares subsequently acquired upon the actual exercise of
any
warrant, right or option held by the undersigned or any other Principal;
provided, however, that Excluded Shares shall not be deemed to be Beneficial
Shares for purposes of this Agreement.
(d) The
term
“Fully Vested Shares” means fully vested shares of Common Stock to which a
Principal is then entitled pursuant to a stock option or similar plan (which
plan was in effect on the date hereof), even though such option or right has
not
then in fact been exercised.
(e) The
term
“Excluded Shares” means (i) shares acquired by the Principal in open market
transactions, (ii) shares acquired by the Principal directly or by way of
conversion of a convertible security or of exercise of a warrant, option or
other right, where such shares, convertible security or warrant, option or
other
right was acquired by the Principal in a financing transaction in which other
parties unaffiliated with the Company participated on essentially the same
terms
as those applicable to the Principal in such transaction, or (iii) shares
acquired by the Principal from any other Person who was not bound by a Company
Principal’s Agreement at the time of such acquisition by such
Principal.
(f) The
term
“Tender Offer” means an unsolicited tender offer made by one or more third
parties for the purchase of at least seventy-five percent (75%) of the Company’s
outstanding shares of the Company’s Common Stock.
3. The
Company may undertake such measures as it deems reasonable to enforce the
provisions of this Agreement and monitor compliance with its terms. The
undersigned Principal will cooperate with the Company in connection therewith,
including, but not limited to, providing prompt responses to Company inquiries
relating to such compliance.
4. The
undersigned understands that this agreement is being provided to the Company
for
the benefit of, and may be enforceable against the undersigned by, each of
the
Company and each Buyer. Each Buyer is a third party beneficiary of this
agreement.
5.
In
addition to any other damages or remedies that may be appropriate, this
agreement of the Principal shall be enforceable by injunction sought by the
Company and the Buyers or any one or more of them.
6. The
undersigned Company Principal represents to the Company and to each Buyer that
the signatories below represent all persons or entities which are Principals
on
the date hereof.
7. Notwithstanding
the foregoing restrictions, the undersigned may, without obtaining the consent
of any Buyer, effect a private transfer of all or part of the undersigned’s
Common Stock to a third party (each, a “Transferee”), provided the Transferee
agrees in writing (which shall be provided to the Company and by the Company
to
each Buyer) to be bound by all of the terms hereof as if such Transferee were
an
original signatory hereto (and the provisions of this agreement shall then
apply
to the undersigned, such Transferee and any other of the undersigned’s
Transferees jointly).
8.
This
agreement may be signed in one or more counterparts, each of which shall be
deemed an original and all of which shall constitute one and the same
agreement.
[Balance
of page intentionally left blank]
9.
A
photocopy of this agreement shall suffice as evidence of its terms and its
enforceability against the undersigned.
| COMPANY PRINCIPAL: | ||
| [Print Name of Company Principal] | ||
| |
|
|
| By: | ||
| [Signature] | ||
If
there are additional Principals, each should sign in one of the spaces
below.
Use
additional copies of this page if necessary.
| [Print Name of Principal] | [Print Name of Principal] | |||
| By: | By: | |||
| [Signature] | [Signature] | |||
| Its: | Its: | |||
| [Print Name of Principal] | [Print Name of Principal] | |||
| By: | By: | |||
| [Signature] | [Signature] | |||
| Its: | Its: | |||
| [Print Name of Principal] | [Print Name of Principal] | |||
| By: | By: | |||
| [Signature] | [Signature] | |||
| Its: | Its: | |||
