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LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (“
Agreement ”)
is made and entered into as of January 31, 2008, by and among China
Sky One Medical, Inc., a Nevada 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 Securities Purchase
Agreement (as defined below) unless otherwise defined
herein.
WHEREAS ,
the Stockholders are the holders of an aggregate of 6,063,502
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 shares of Common Stock and attached warrants to purchase
shares of Common Stock in accordance with that certain Securities
Purchase Agreement, dated as of even date herewith (the
“
Securities Purchase Agreement ”),
by and among the Company and the investors signatory thereto (the
“
Investors ”);
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.
WHEREAS, as
an inducement to the Investors to enter into the Securities
Purchase Agreement, the CSKI Shareholder has agreed to place an
aggregate of 3,000,000 of the Shares (the “
Escrow Shares ”)
into escrow for the benefit of the Investors in the event that the
Company fails to satisfy the “FY07 Performance
Threshold” and/or “FY08 Performance Threshold,”
pursuant to the terms and conditions of a Make Good Agreement,
dated as of even date herewith (the “
Make Good Agreement ”),
by and among Pope Asset Management, LLC (as the authorized agent of
the Investors), the Company and the CSKI Shareholder;
and
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
until twelve (12) months from the effective date of the
initial Registration Statement (the “
Lock-Up Period ”).
Anything to the contrary notwithstanding, the Stockholders shall be
entitled to sell, in the aggregate, 136,000 of the Shares pursuant
to Rule 144, as amended, under the 1933 Act.
(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, 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.
(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 Lock-up Agreement.
(e)
If
any of the Escrow Shares are released to “Eligible
Investors” (“
Released Shares ”),
pursuant to the terms and conditions of the Make Good Agreement,
the Lock-Up Period shall be deemed to have automatically and
permanently terminated with respect to such Released
Shares.
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
execu
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