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, Xianfu Han and Weili 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&
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