LOCK-UP AGREEMENT
THIS
LOCK-UP AGREEMENT (“Agreement”)
is
made and entered into as of June 11, 2008, by and among China Advanced
Construction Materials Group, Inc., a Delaware corporation (the “Company”),
and
the individuals listed on Schedule
A
attached
hereto and made a part hereof (the “Stockholders”).
(The
Company and the Stockholders may sometimes be referred to herein singularly
as a
“party,” or collectively as, the “parties.”). Capitalized terms used herein have
the respective meanings ascribed thereto in the Subscription Agreement (as
defined below) unless otherwise defined herein.
WHEREAS,
the
Stockholders are the holders of an aggregate of 8,809,583 shares (the
“Shares”)
of the
Company’s common stock, $0.001 par value per share (“Common
Stock”),
as
further set forth on Schedule
A
attached
hereto and made a part hereof; and
WHEREAS,
the
Company has offered for sale (the “Offering”)
certain investment units, each consisting of one share of the Company’s Series A
Convertible Preferred Stock, $0.001 par value per share (the “Series
A Preferred”),
each
share of which will be convertible into four (4) shares of Common Stock, and
one
Warrant to purchase two (2) shares of Common Stock, in accordance with a
Subscription Agreement (the “Subscription
Agreement”)
between the Company and each Subscriber named therein (collectively, the
“Investors”)
and as
further described in the Company’s Private Placement Memorandum (“PPM”)
dated
March 17, 2008, as amended on April 11, 2008, May 21, 2008 and May 28, 2008
and
in the Consent to Modification and Amendment Agreement to the PPM dated as
of
the date hereof; and
WHEREAS,
it is a
condition to the Offering that the Stockholders agree to “lock-up” the Shares,
pursuant to the terms and conditions of this Agreement; and
WHEREAS,
as an
inducement to the Investors to enter into the Subscription Agreements, Xxxxxx
Xxx and Xxxxx He (collectively, the “Management
Stockholders”)
have
agreed to place an aggregate of (i) 3,500,000 of the Shares (the “Make
Good Escrow Shares”)
into
escrow for the benefit of the Investors in the event that the Company fails
to
satisfy the “Performance Thresholds”, pursuant to the terms and conditions of a
Securities Escrow Agreement, dated as of even date herewith (the “Make
Good Agreement”),
by
and among the Investors party thereto, Professional
Traders Management, LLC
(as
representative of the Investors), American Stock Transfer & Trust Company
(as escrow agent), the Company and the Management Stockholders and (ii)
1,500,000 of the Shares (together with the Make Good Escrow Shares, the
“Escrow
Shares”)
into
escrow for the benefit of the Investors pledged by the Stockholders(the
“Pledge
Agreement”).
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements contained herein, and
other
good and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Agreement
to Retain the Shares.
(a) The
Stockholders hereby agree not to sell, assign, transfer, pledge, hypothecate,
or
otherwise dispose of any of the Shares during the period beginning on and
including the date of the final closing of the Offering through and including
the earlier of (i) two (2) years after the final closing of the Offering, (ii)
the voluntary conversion of all outstanding shares of Preferred Stock, (iii)
the
mandatory conversion of all outstanding shares of Preferred Stock, or (iv)
the
sale of the Company (the “Lock-Up
Period”).
(b) The
foregoing restrictions are expressly agreed to and preclude the Stockholders
from engaging in any hedging or other transactions which may lead to or result
in a sale of any of the Shares during the Lock-Up Period other than the Escrow
Shares, even if such Shares would be sold by someone other than a Stockholder.
Such prohibited hedging or other transactions would include without limitation
any short sale (whether or not against the box), any pledge or any purchase,
sale or grant of any right (including without limitation any put or call option)
with respect to any of the Shares, without the prior written consent of the
Investors.
(c) The
Stockholders agree and consent to the entry of stop transfer instructions with
the Company’s transfer agent for the Company’s Common Stock against transfers of
the Shares, if any, by a Stockholder in contravention of the restrictions set
forth herein. The Stockholders understand that the Company will rely upon the
representations set forth in this Agreement in proceeding in connection with
the
Offering. The Stockholders understand that their agreement is irrevocable and
shall be binding upon their heirs, legal representatives, successors and
assigns.
(d) Notwithstanding
the foregoing, any Stockholder (for the purposes of this Section 1(d), the
“Transferring
Holder”)
may,
as applicable, transfer any or all of the Transferring Holder’s Shares, either
during the Transferring Holder’s lifetime, or on the Transferring Holder’s
death, by will or intestacy to the Transferring Holder’s “immediate family,” as
defined in Rule 16a-1 of the General Rules and Regulations of the Securities
Exchange Act of 1934, as amended, or to a trust or other entity, the
beneficiaries of which are exclusively such Transferring Holder and/or a member
or members of the Transferring Holder’s “immediate family”; provided,
however,
that in
any such case it shall be a condition to the transfer that the transferee
execute an agreement stating that the transferee is receiving and holding such
Shares subject to the provisions of this Agreement, and there shall be no
further transfer of such Shares except in accordance with this Agreement.
(e) If
any of
the Escrow Shares are released to the Investors (“Released
Shares”),
pursuant to the terms and conditions of the Make Good Agreement or the Pledge
Agreement, the Lock-Up Period shall be deemed to have automatically and
permanently terminated with respect to such Released Shares.
(f) This
Agreement shall terminate at the earlier of (i) the expiration of the Lock-Up
Period; or (ii) the termination of the Subscription Agreements.
2. Representations,
Warranties and Covenants of the Company.
The
Company represents, warrants and covenants to the Stockholders that this
Agreement (a) has been authorized by all necessary corporate action on the
part
of the Company and has been duly executed by a duly authorized officer of the
Company, and (b) constitutes the legal, valid and binding obligation of the
Company. Neither the execution of this Agreement by the Company nor the
consummation of the transactions contemplated hereby will result in a breach
or
violation of the terms of any agreement by which the Company is bound, or of
any
decree, judgment, order, law or regulation now in effect of any court or other
governmental body applicable to the Company.
-2-
3. Additional
Documents.
The
Stockholders and the Company hereby covenant and agree to execute and deliver
any additional documents necessary or desirable, in the reasonable opinion
of
the Company’s legal counsel to carry out the intent of this
Agreement.
4. Consent
and Waiver.
The
Stockholders hereby give any consents or waivers that are reasonably required
for the consummation of the Offering under the terms of any agreement to which
a
Stockholder is a party, or pursuant to any rights a Stockholder may
have.
5. Miscellaneous.
(a) Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, void or unenforceable, the remainder
of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
(b) Binding
Effect and Assignment.
This
Agreement and all of the provisions hereof shall be binding upon and inure
to
the benefit of the parties hereto and their respective successors and permitted
assigns, but, except as otherwise specifically provided herein, neither this
Agreement nor any of the rights, interests or obligations of the parties hereto
may be assigned by any of the parties without the prior written consent of
the
other.
(c) Amendments
and Modifications.
This
Agreement may not be modified, amended, altered or supplemented except upon
the
execution and delivery of a written agreement executed by the parties
hereto.
(d) Specific
Performance; Injunctive Relief.
The
parties hereto acknowledge that the Company will be irreparably harmed and
that
there will be no adequate remedy at law for a violation of any of the covenants
or agreements of the Stockholders set forth herein. Therefore, it is agreed
that, in addition to any other remedies which may be available to the Company
upon such violation, the Company shall have the right to enforce such covenants
and agreements by specific performance, injunctive relief or by any other means
available to it at law or in equity.
(e) Notices.
All
notices, requests, claims, demands and other communications hereunder shall
be
in writing and sufficient if delivered in person, by commercial overnight
courier service, by confirmed telecopy, or sent by mail (registered or certified
mail, postage prepaid, return receipt requested) to the respective parties
as
follows:
-3-
if
to the
Company, to:
Xxxxx
Xxxxx, 0 Xxxxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxx
Xxxxxxxx, Xxxxxxx 100080
Attention:
Xxxxxx Xxx, Chief Executive Officer
with
a
copy to:
Xxxxxx
& Jaclin, LLP
000
Xxxxx
0 Xxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Attn:
Xxxxxxx X. Xxxxxx, Esq.
Fax:
(000) 000-0000
if
to the
Stockholders:
to
the
addresses set forth below their names on Schedule
A,
attached hereto,
or
to
such other address as either party may have furnished to the other in writing
in
accordance herewith, except that notices of change of address shall only be
effective upon receipt.
(f) Governing
Law.
This
Agreement shall be governed by, construed and enforced in accordance with the
laws of New York without giving effect to principles of conflicts of
law.
(g) Entire
Agreement.
This
Agreement contains the entire understanding of the parties in respect of the
subject matter hereof, and supersedes all prior negotiations and understandings
between the parties with respect to such subject matter.
(h) Counterparts.
This
Agreement may be executed in counterparts, each of which shall be an original,
but all of which together shall constitute one and the same
agreement.
(i)
Effect
of Headings.
The
section headings herein are for convenience only and shall not affect the
construction or interpretation of this Agreement.
(j) Third-Party
Beneficiaries.
The
Investors shall be intended third party beneficiaries of this Agreement to
the
same extent as if they were parties hereto, and shall be entitled to enforce
the
provisions hereof.
-4-
IN
WITNESS WHEREOF,
the
parties herein have executed this Agreement as of the date first set forth
above.
COMPANY:
|
/s/
Xxxxxx Xxx
|
||
|
Title:
Chief Executive Officer
|
STOCKHOLDERS:
|
/s/
Xxxxxx Xxx
|
|
Xxxxxx
Xxx, in his individual capacity
|
|
/s/
Weili He
|
|
Weili
He, in his individual capacity
|
Schedule
A
The
Stockholders
|
Name
and Address
|
Total
Shares
|
Shares Subject
to
Lock-Up
|
|||||
|
Xxxxxx
Xxx
|
5,285,750
|
5,285,750
|
|||||
|
Weili
He
|
3,523,833
|
3,523,833
|
|||||
|
TOTAL:
|
8,809,583
|
8,809,583
|
|||||
