LOANOUT AGREEMENT

 
This LOANOUT AGREEMENT (this “Agreement”), dated as of May 5, 2008 by and
between Worldwide Officers, Inc. a California Corporation sole owned by Bennet
P. Tchaikovsky and having its principal location of 6571 Morningside Drive,
Huntington Beach, California 92648 (“Lender”), and Skystar Bio-Pharmaceutical
Company a Nevada corporation having its principal office at Room 10601, Jiezuo
Plaza, No. 4, Fenghui Road South, Gaoxin District, Xian Province, People’s
Republic of China (the “Company”), for the services of Lender’s employee, Bennet
P. Tchaikovsky (the "Executive")..
 
1. Employment, Duties and Acceptance.
 
1.1 Effective as of the date of this Agreement, the Company engages Lender and
Lender agrees to supply and make available to the Company, the services of the
Executive to serve as the Company’s Chief Financial Officer (“CFO”) during the
term of this Agreement, on the terms and conditions contained in this Agreement.
During the term of this Agreement, Executive shall make himself available to the
Company and to any of its subsidiaries or affiliates as directed to pursue the
business of the Company subject to the supervision and direction of the Board of
Directors of the Company (the “Board”).
 
1.2 The Board may assign Executive such general management and supervisory
responsibilities and executive duties for the Company as are appropriate and
commensurate with Executive’s position as Chief Financial Officer of the Company
(“CFO”) with the understanding that the CFO will be based where Lender’s
principal offices are located.
 
1.3 Lender and Executive agree that Executive shall devote up to ninety hours
per month of Executive’s business time, energies and attention to the
performance of his duties hereunder and as an executive officer of the Company.
Nothing herein shall be construed as precluding Executive from owning,
purchasing, selling, or otherwise dealing in any manner with any property or
engaging in any business whatsoever, including without limitation, providing
consulting services, acting as a director of another company, or starting a new
business, without notice to the Company, without participation of the Company,
and without liability to the Company; provided, however, that these activities
do not materially interfere with the performance of his duties hereunder or
violate the provisions of Section 4.4 hereof.
 
2. Compensation.
 
2.1 As compensation for all services to be rendered by Executive pursuant to
this Agreement, the Company shall pay to Lender a fee at an annual base rate of
$75,000 for the term hereof. During Executive’s employment, salary will be paid
not less frequently than every four weeks in arrear. Payment will be made to
Executive via wire transfer. Company shall be responsible for any applicable
wire transfer fees for the salary and/or expense reimbursement.
 
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2.2 Upon execution of this Agreement, Executive will have the right to receive
52,173 shares of the Company’s Common Stock, $0.001 par value, which shall vest
during the term of this Agreement, in the form of a restricted stock grant (the
“Restricted Stock”). The shares of the Restricted Stock shall vest in four (4)
equal installments of seventeen thousand three hundred ninety one (17,391)
shares every three calendar months, with the first installment to vest on August
5, 2008 (the “Vesting Schedule”). The Restricted Stock shall be “restricted” and
cannot be resold without their prior registration or compliance with the terms
of Rule 144 promulgated by the Act or an exemption from the Act.  In addition,
the Restricted Stock shall further be subject to the terms and conditions of a
certain Lock-Up Agreement, a copy of which is attached hereto as Exhibit A.
 
The number of shares of Restricted Stock referenced in this section is subject
to adjustment in the case of any stock split, reverse stock split, combination
or similar events.
 
Upon the filing of an election pursuant to Section 83(b) of the Internal Revenue
Code (the “Code”) with respect to such grant of Restricted Stock, the Company
will not reimburse you for any federal and state taxes due as a result of such
election.
 
During the term of this Agreement, Executive shall not, directly or indirectly,
(i) offer, pledge, 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, lend or otherwise transfer or dispose of, directly or
indirectly, any of the shares of the Restricted Stock or (ii) enter into any
swap or other arrangement that transfers to another, in whole or in part, any of
the economic consequences of ownership of any of the shares of Restricted Stock,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of shares of the Restricted Stock, in cash or otherwise.
 
In connection with the issuance of the Shares, Executive hereby represents and
warrants to the Company, as of the date hereof, that: 

A. The Shares will be acquired for investment for Executive’s own account, not
as a nominee or agent, and not with a view to the public resale or distribution
thereof within the meaning of the Securities Act of 1933, as amended (the
“Securities Act”), and the Executive has no present intention of selling,
granting any participation in or otherwise distributing the same.

B. Executive understands that the acquisition of the Shares involves substantial
risk. Executive has experience as an investor in securities of companies and
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of its investment
and protecting its own interests in connection with this investment.

C. Executive is an "accredited investor" within the meaning of Regulation D of
the Securities Act.

D. Executive understands that (i) the Shares are characterized as "restricted
securities" under the Securities Act, inasmuch as it are being acquired from the
Company in a transaction not involving a public offering, and (ii) under the
Securities Act and applicable rules and regulations thereunder, such securities
may be resold without registration under the Securities Act only in certain
limited circumstances. Executive is familiar with Rule 144 under the Securities
Act, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.

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2.3 During the term of this Agreement, the Company shall include Executive as
insured under a directors and officers insurance policy (the “D&O Insurance”)
with initial coverage of $1,000,000 from an insurance carrier that has a minimum
rating of XII A as defined by the A.M. Best Company. If any member of the Board
enters into an indemnification agreement with the Company as part of the D&O
Insurance, Executive shall be entitled to enter into an agreement of like tenor
with the Company. Additionally, if the Board decides to increase the coverage of
the D&O Insurance, Executive shall be covered by such policy.
 
2.4 The Company shall reimburse Executive for all reasonable business expenses
incurred by Executive during Executive’s employment hereunder to the extent in
compliance with the Company’s business expense reimbursement policies in effect
from time to time and upon presentation by Executive of such documentation and
records as the Company shall from time to time require, provided that any
expense in excess of $500.00 shall require the prior written approval of the
Company. When Executive is required to travel on behalf of the Company’s
business, the cost of a business class ticket for any flight that is in excess
of two hours and an economic class ticket shall be included hereunder as a
reimbursable business expense.
 
3. Term and Termination.
 
3.1 The term of this Agreement commences as of the consummation of the Agreement
and shall continue for one (1) years unless sooner terminated as herein
provided.
 
3.2 If Executive dies during the term of this Agreement, this Agreement shall
thereupon terminate, except that the Company shall pay to Lender any accrued and
unpaid fee due Lender pursuant to Section 2.1 hereof as well as a pro rata
allocation of the shares of the Restricted Stock under Section 2.2 based on the
days of service prior to the death in conjunction with the Vesting Schedule, and
all previously accrued but unpaid expense reimbursements at the time of
termination, including for.
 
3.3 The Company reserves the right to terminate this Agreement upon ten (10)
days written notice if, for a continuous or accumulated period of forty-five
(45) days during the one year term of this Agreement, Executive is prevented
from discharging his duties under this Agreement due to any physical or mental
disability. With the exception of the covenants included in Section 4 below,
upon such termination, the obligations of Executive and Company under this
Agreement shall immediately cease. In the event of a termination pursuant to
this section, Executive shall be entitled to receive any accrued and unpaid
amounts earned pursuant to Section 2.1 hereof as well as a pro rata allocation
of the shares of the Restricted Stock under Section 2.2 based on the days of
service prior to the cessation of Executive’s services in conjunction with the
Vesting Schedule, and all previously accrued but unpaid expense reimbursements.

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3.4 The Company reserves the right to declare Executive in default of this
Agreement if Executive willfully breaches or habitually neglects the duties
which he is required to perform under the terms of this Agreement, or if
Executive commits such acts of dishonesty, fraud, misrepresentation, gross
negligence or willful misconduct as would prevent the effective performance of
his duties or which results in material harm to the Company or its business. The
Company may terminate this Agreement for cause by giving written notice of
termination to Executive. With the exception of the covenants included in
Section 4 below, upon the date of delivery of the written notice of such
termination, the obligations of Executive and the Company under this Agreement
shall immediately cease. Such termination shall be without prejudice to any
other remedy to which the Company may be entitled either at law, in equity, or
under this Agreement. In the event of a termination pursuant to this section,
Executive shall be entitled to receive any accrued and unpaid amounts earned
pursuant to Section 2.1 hereof. The Company shall also pay to Executive all
previously accrued but unpaid expense reimbursements at the time of
termination.  
 
3.5 Executive’s employment may be terminated at any time by Executive upon not
less than ninety (90) days written notice by Executive to the Board. With the
exception of the covenants included in section 4 below, upon such termination
the obligations of Executive and the Company under this Agreement shall
immediately cease. In the event of a termination pursuant to this section,
Executive shall be entitled to receive any accrued and unpaid amounts earned
pursuant to Section 2.1 hereof. The Company shall also pay to Executive all
previously accrued but unpaid expense reimbursements at the time of
termination. 
 
3.6 Company may terminate Executive’s employment upon not less than thirty (30)
days written notice by Company to Executive. With the exception of the covenants
included in section 4 below, upon such termination the obligations of Executive
and the Company under this Agreement shall immediately cease. In the event of a
termination pursuant to this section, Executive shall be entitled to receive any
accrued and unpaid amounts earned pursuant to Section 2.1 hereof as well as a
pro rata allocation of the shares of Restricted Stock under Section 2.2 based on
the days of service prior to the termination in conjunction with the Vesting
Schedule, and all previously accrued but unpaid expense reimbursements at the
time of termination.
 
4. Protection of Confidential Information; Non-Competition, Corporate
Opportunities.
 
4.1 Lender and Executive acknowledge that:
 
(a) As a result of his association with the Company pursuant to this Agreement,
Executive will obtain secret and confidential information concerning the
business of the Company and its subsidiaries and affiliates (referred to
collectively in this Article 4 as the “Group”), including, without limitation,
trade secrets and any information concerning products, processes, formulas,
designs, inventions (whether or not patentable or registrable under copyright or
similar laws, and whether or not reduced to practice), discoveries, concepts,
ideas, improvements, techniques, methods, research, development and test
results, specifications, data, know-how, software, formats, marketing plans, and
analyses, business plans and analyses, strategies, forecasts, customer and
supplier identities, characteristics and agreement (“Confidential Information”).
In addition, Executive may become aware of business opportunities that may be
beneficial to the Group including, but not limited, opportunities to acquire or
purchase, or, except for Permitted Competitive Investments, otherwise make
equity or debt investments in, companies primarily involved in a Competitive
Business (“Corporate Opportunities”), during the term of this Agreement, whether
in the course of his employment or otherwise, and that such Corporate
Opportunities shall considered to be business opportunities of the Group.
 
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(b) The Group will suffer substantial damage which will be difficult to compute
if, during the term of this Agreement or thereafter, Lender and/or Executive
should enter a business competitive with the Group or divulge Confidential
Information.
 
(c) The provisions of this Agreement are reasonable and necessary for the
protection of the business of the Group.
 
4.2 Executive agrees that he will not at any time, either during the term of
this Agreement or thereafter, divulge to any person or entity any Confidential
Information obtained or learned by him as a result of his employment with the
Group, except (i) in the course of performing his duties hereunder, (ii) to the
extent that any such information is in the public domain other than as a result
of Executive’s breach of any of his obligations hereunder, (iii) where required
to be disclosed by court order, subpoena or other government process, or (iv) if
such disclosure is made without Executive’s knowing intent to cause material
harm to the Group. If Executive shall be required to make disclosure pursuant to
the provisions of clause (iii) of the preceding sentence, Executive promptly,
but in no event more than 24 hours after learning of such subpoena, court order,
or other government process, shall notify, by personal delivery or by electronic
means, confirmed by mail, the Company and, at the Company’s expense, Executive
shall: (a) take reasonably necessary and lawful steps required by the Group to
defend against the enforcement of such subpoena, court order or other government
process, and (b) permit the Group to intervene and participate with counsel of
its choice in any proceeding relating to the enforcement thereof.
 
4.3 Upon termination of this Agreement, Executive will promptly deliver to the
Group all memoranda, correspondence, notes, records, reports, manuals, drawings,
blue-prints and other documents (and all copies thereof) relating to the
business of the Group and all property associated therewith, which he may then
possess or have under his control whether prepared by Executive or others.
 
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4.4 During the term of this Agreement and terminating three years after
termination of employment, Executive, without the prior written permission of
the Company, shall not for any reason whatsoever, (i) enter into the employ of
or render any services to any person, firm or corporation engaged in any
business which is in competition with the Group’s principal existing business at
the time of termination (“Competitive Business”); (ii) engage in any Competitive
Business as an individual, partner, shareholder, creditor, director, officer,
principal, agent, employee, trustee consultant, advisor or in any other
relationship or capacity; (iii) employ, or have or cause any other person or
entity to employ, any person who was employed by the Group at the time of
termination of Executive’s employment by the Company; or (iv) solicit, interfere
with, or endeavor to entice away from the Group, for the benefit of a
Competitive Business, any of its customers. Notwithstanding the foregoing, (i)
Executive shall not be precluded from investing and managing the investment of,
his or his family’s assets in the securities of any corporation or other
business entity which is engaged in a Competitive Business if such securities
are traded on a national stock exchange or in the over-the-counter market and if
such investment does not result in his beneficially owning, at any time, more
than 2% of any class of the publicly-traded equity securities of such
Competitive Business (“Permitted Competitive Investment”); and (ii) during the
term of this Agreement and terminating one year after termination of Executive’s
employment (except for investments in a class of securities trading on public
markets), Executive: (a) shall be prohibited from taking for himself personally
any Corporate Opportunities, and (b) shall refer to the Company for
consideration (before any other party) any and all Corporate Opportunities that
arise during the term of this Agreement or for a period of one year thereafter.
If the Company determines not to exploit any Corporate Opportunity, the Company
shall determine what, if anything, should be done with such opportunity.
Executive shall not be entitled to any compensation, as a finder or otherwise,
if either the Company or Executive introduces such opportunity to other persons,
it being understood that any such compensation shall be paid to the Company.
 
4.5 If Executive commits a breach of any of the provisions of Sections 4.2 or
4.4, the Company shall have the right:
 
(a) to have the provisions of this Agreement specifically enforced by any court
having equity jurisdiction, it being acknowledged and agreed by Executive that
the services being rendered hereunder to the Company are of a special, unique
and extraordinary character and that any breach or threatened breach will cause
irreparable injury to the Group and that money damages will not provide an
adequate remedy to the Group; and
 
(b) to require Executive to account for and pay over to the Company all monetary
damages determined by a non-appealable decision by a court of law to have been
suffered by the Group as the result of any actions constituting a breach of any
of the provisions of Section 4.2 or 4.4, and Executive hereby agrees to account
for and pay over such damages to the Company.
 
(c) to not perform any obligation owed to Executive under this Agreement, to the
fullest extent permitted by law. Company shall also have the right, to the
fullest extent permitted by law, to adjust any amount due and owing or to be due
and owing to Executive, whether under this Agreement or any other agreement
between Company and Executive in order to satisfy any losses to the Group as a
result of Executive’s breach.
 
4.6 If Executive shall violate any covenant contained in Section 4.4, the
duration of such covenant so violated shall be automatically extended for a
period of time equal to the period of such violation.
 
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5. Lender Representations. Lender represents that it is a validly existing
corporation and has the sole and exclusive right and authority to provide the
services of Executive to the Company as contemplated by this Agreement, and that
the entering into and performance of this Agreement by Lender and the provision
of services hereunder by Executive and the acceptance thereof by the Company
will not violate any law, rule, regulation, order, contract or agreement to
which either Lender or Executive is a party or is bound or affected.
 
6. Miscellaneous Provisions.
 
6.1 The parties acknowledge and agree that the relationship between the Company
and the Lender is that of independent contractors and not that of employer and
employee. Nothing in this Agreement is intended to create or will be deemed to
create or constitute a joint venture or partnership between the Company and
Lender.
 
6.2 Lender will be responsible for the payment of all withholding, payroll and
other taxes payable in respect of the payments received by Lender under this
Agreement and hereby agrees to indemnify and hold the Company harmless from any
obligation or penalty arising from the failure to pay such taxes.
 
6.3 All notices provided for in this Agreement shall be in writing, and shall be
deemed to have been duly given when delivered personally to the party to receive
the same, when delivered via overnight courier providing for next day delivery
service (“Overnight Courier”), when transmitted by facsimile (electronic receipt
confirmed), or when mailed first class postage prepaid, by certified mail,
return receipt requested, addressed to the party to receive the same at his or
its address set forth below, or such other address as the party to receive the
same shall have specified by written notice given in the manner provided for in
this Section 5.1. All notices shall be deemed to have been given: (a) as of the
date of personal delivery, (b) the first business day after delivery via
Overnight Courier, (c) on the electronically confirmed date of receipt during
business hours of the facsimile transmittal (or the following business day if
the facsimile is received after 5:30 p.m. PDT), or (d) three calendar days after
the date of deposit (postage pre-paid) with the U.S. Postal Service if delivered
via first class or certified mail.
 

If to Lender:
Worldwide Officers, Inc.
6571 Morningside Drive 
Huntington Beach, CA 92648
Fax:

 

If to Executive:
Bennet P. Tchaikovsky
c/o Worldwide Officers, Inc.
6571 Morningside Drive 
Huntington Beach, CA 92648
Fax:

 

If to the Company:
Skystar Bio-Pharmaceutical Company
Room 10601, Jiezuo Plaza
No. 4, Fenghui Road South
Gaoxin District, Xian Province, PRC
Attn: Weibing Lu
Fax:

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With a copy to:
Richardson & Patel, LLP
Murdock Plaza
10900 Wilshire Boulevard, Suite 500
Los Angeles, CA 90024
Attn: Kevin K. Leung, Esq.
Fax: (310) 208-1154

 
6.4 In the event of any claims, litigation or other proceedings arising under
this Agreement, Executive shall be reimbursed by the Company within sixty (60)
days after delivery to the Company of statements for the costs incurred by
Executive in connection with the analysis, defense and prosecution thereof,
including reasonable attorneys’ fees and expenses; provided, however, that
Executive shall reimburse the Company for all such costs if it is determined by
a non-appealable final decision of a court of law that Executive shall have
acted in bad faith with the intent to cause material damage to the Company in
connection with any such claim, litigation or proceeding.
 
6.5 The Company, shall to the fullest extent permitted by law, indemnify
Executive for any liability, damages, losses, costs and expenses arising out of
alleged or actual claims (collectively, “Claims”) made against Executive for any
actions or omissions as an officer and/or director of the Company or its
subsidiary. To the extent that the Company obtains directors and officers
insurance coverage for any period in which Executive was an officer, director or
consultant to the Company, Executive shall be a named insured and shall be
entitled to coverage thereunder.
 
6.6 The provisions of Article 4, Sections 5.2 and 5.3 and any provisions
relating to payments owed to Executive after termination of employment shall
survive termination of this Agreement for any reason.
 
6.7 This Agreement sets forth the entire agreement of the parties relating to
the employment of Executive and is intended to supersede all prior negotiations,
understandings and agreements. No provisions of this Agreement may be waived or
changed except by writing by the party against whom such waiver or change is
sought to be enforced. The failure of any party to require performance of any
provision hereof or thereof shall in no manner affect the right at a later time
to enforce such provision.
 
6.8 All questions with respect to the construction of this Agreement, and the
rights and obligations of the parties hereunder, shall be determined in
accordance with the law of the State of Nevada applicable to agreements made and
to be performed entirely in the State of Nevada. Any disputes, claims or causes
of action by one party against the other arising out of, in related to or
concerning this Agreement shall be commenced and maintained in any state or
federal court located in Clark County of the State of Nevada, and Executive
hereby submits to the jurisdiction and venue of any such court.
 
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6.9 This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of the Company. This Agreement shall not be assignable by
Executive, but shall inure to the benefit of and be binding upon Executive’s
heirs and legal representatives.
 
6.10 It is the desire and intent of the parties that the terms, provisions,
covenants and remedies contained in this Agreement shall be enforceable to the
fullest extent permitted by law. If any such term, provision, covenant or remedy
of this Agreement or the application thereof to any person or circumstances
shall, to any extent, be construed to be invalid or unenforceable in whole or in
part, then such term, provision, covenant or remedy shall be construed in a
manner so as to permit its enforceability under the applicable law, to the
fullest extent permitted by law. In any case, the remaining provisions of the
Agreement and the application thereof to any person or circumstance other than
those to which they have been held invalid or unenforceable, shall remain valid
and in full force and effect.
 
 
 
[Remainder of Page Intentionally Blank]

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of
the date first above written.
 
“COMPANY”
 
“EXECUTIVE”
             
SKYSTAR BIO-PHARMACEUTICAL COMPANY
 
BENNET P. TCHAIKOVSKY
              By:  
/s/ Weibing Lu
  By:  
Bennet P. Tchaikovsky
              Title:  
Chief Executive Officer
       

 
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