EMPLOYMENT AGREEMENT

 

 

This EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of May 5, 2013 by and
between Weibing Lu, residing at Suite F2-1002, Maple New City, Gaoxin District,
Xi’an, Shaanxi Province, China (“ Executive ”), and Skystar Bio-Pharmaceutical
Company a Nevada corporation having its principal office at 4/F Building B
Chuangye Square, No. 48 Keji Road, Gaoxin District, Xi’an, Shaanxi Province,
People’s Republic of China (the “ Company ”).

 

WHEREAS, the Company believes that Executive provides unique advisory and
management services for the Company and wishes to retain the continued services
of Executive as its Chief Executive Officer; and

 

WHEREAS, the Company and Executive have reached an understanding with respect to
Executive’s continuing employment with the Company for a [five year period]
commencing as of the date of this Agreement; and

 

WHEREAS, the Company and Executive desire to evidence their agreement in writing
and to provide for the employment of Executive by the Company on the terms set
forth herein.

 

NOW, THEREFORE, IN CONSIDERATION of the foregoing facts, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
parties hereby agree as follows:

 

1.    Employment, Duties and Acceptance .

 

1.1    Effective as of the date of this Agreement, the Company hereby agrees to
the continued employment of Executive as its Chief Executive Officer, and
Executive hereby accepts such employment 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 ” or “ Board of
Directors ”).

 

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 Executive Officer of the Company
(“ CEO ”).

 

1.3    Executive accepts such employment and agrees to devote substantially all
of his business time, energies and attention to the performance of his duties
hereunder and as an executive officer or director of subsidiaries of the
Company. Nothing herein shall be construed as preventing Executive from making
and supervising investments on a personal or family basis (including trusts,
funds and investment entities in which Executive or members of his family have
an interest); 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 and Benefits .

 

2.1    The Company shall pay to Executive a salary at an annual base rate of not
less than $150,000 for the term hereof, subject to increases of 5% of the prior
year’s base annual salary each year beginning January 1, 2014. During
Executive’s employment, salary will be paid not less frequently than every two
weeks without the prior written consent of Executive. Executive’s annual base
rate will be reviewed by the Compensation Committee during December 2014, for
purposes of determining whether the new base salary should be augmented to
reflect prevailing market conditions.

 

2.2    The Company shall issue to Executive an aggregate 50,000 shares of its
common stock in four equal quarterly installments, 12,500 shares of which shall
be issuable on each three-month anniversary hereof.

 

2.3    The Company shall also pay to Executive such bonuses as may be determined
from time to time by the Compensation Committee. The amount of annual bonus
payable to Executive may vary at the discretion of the Compensation Authority;
provided, however, that the total bonus shall not exceed 100% of Executive’s
annual base rate under Section  2.1 as of the date the bonus is awarded. In
determining the annual bonus to be paid to Executive, the Compensation Committee
may, among other factors they believe to be appropriate, consider, and give
varying degrees of importance to, Executive’s contribution to the following:

 

(a)    achievement by the Company of specific identified targets selected by the
Committee from time to time;

 

(b)    the attraction and retention of key executive personnel by the Company;

 

(c)    satisfaction of the Company’s capital requirements;

 

(d)    the establishment of strategic direction and significant Company goals;

 

(e)    growth in the Company’s per share value; and

 

(f)    such other criteria as the Compensation Committee deems to be relevant.

 

2.4    Executive shall be entitled to such insurance and other benefits
including, among others, medical and disability coverage and life insurance
comparable to chief executive officers of companies similar to the Company,
subject to applicable waiting periods and other conditions which may be
generally applicable.

 

2.5    Executive shall be entitled to four weeks of vacation in each calendar
year.

 

2.6    The Company will pay or reimburse Executive for all reasonable or
otherwise duly authorized transportation, hotel and other expenses incurred by
Executive on business trips (including business or first class air travel on
scheduled flights of more than five (5) consecutive hours) and for all other
ordinary and reasonable out-of-pocket expenses actually incurred by him in the
conduct of the business of the Company against itemized vouchers submitted with
respect to any such expenses.

 

 

 

 

3.    Term and Termination .

 

3.1    The term of this Agreement commences as of the consummation of the
Agreement and shall continue for five (5) 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 the legal
representative of Executive’s estate the base salary due Executive pursuant to
Section 2.1 hereof through the first anniversary after Executive’s death (or the
scheduled expiration under Section 3.1, if earlier than the first anniversary
date) as well as a pro rata allocation of bonus payments under Section 2.2 based
on the days of service during the year of death, and all amounts owing to
Executive at the time of termination, including for previously accrued but
unpaid bonuses, expense reimbursements and accrued but unused vacation pay.

 

3.3    If Executive shall be rendered incapable by an incapacitating illness or
disability (either physical or mental) of complying with the terms, provisions
and conditions hereof on his part to be performed for a period in excess of 180
consecutive days during any consecutive twelve (12) month period, then the
Company, at its option, may terminate this Agreement by written notice to
Executive (the “ Disability Notice ”) delivered prior to the date Executive
resumes the rendering of services hereunder; provided, however, if requested by
Executive (or a representative thereof) such termination shall not occur until
after examination of Executive by a medical doctor (retained by the Company with
the consent of Executive which consent shall not be unreasonably withheld) who
certifies in a written report to the Board with a copy of such report delivered
simultaneously to Executive that Executive is and shall be incapable of
performing his duties for in excess of two additional months because of the
continuing existence of such incapacitating illness or disability.
Notwithstanding such termination, the Company (a) shall make a payment to
Executive of a pro rata allocation of payments under Section 2.2 based on the
days of service during the year in which the Disability Notice is delivered and
(b) shall pay to Executive the base salary due Executive pursuant to Section 2.1
hereof through the second anniversary of the date of such notice (the “
Disability Period ”), less any amount Executive receives for such period from
any Company-sponsored or Company-paid for source of insurance, disability
compensation or governmental program. The Company shall also pay to Executive
all amounts owing to Executive at the time of termination, including for
previously accrued but unpaid bonuses, expense reimbursements and accrued but
unused vacation pay.

 

3.4    The Company, by notice to Executive, may terminate this Agreement for
Cause. As used herein, “ Cause ” means (a) the refusal in bad faith by Executive
to carry out specific written directions of the Board, (b) intentional fraud or
dishonest action by Executive in his relations with the Company, (“dishonest”
for these purposes shall mean Executive’s knowingly making of a material
misstatement to the Board for the purpose of obtaining direct personal benefit);
(c) the conviction of Executive of any crime involving an act of significant
moral turpitude after appeal or the period for appeal has elapsed without an
appeal being filed by Executive (d) any act (or failure to act), knowingly
committed by Executive, that is in violation of written Company policies, this
Agreement or the Company’s written agreements with third parties and that is
materially damaging to the business or reputation of the Company as determined
in good faith by the independent members of the Board. Notwithstanding the
foregoing, no Cause for termination shall be deemed to exist with respect to
Executive’s acts described in clause (a) or (b) or (d) above, unless the Board
shall have given written notice to Executive (after five (5) days advance
written notice to Executive and a reasonable opportunity to Executive to present
his views with respect to the existence of Cause), specifying the Cause with
particularity and, within twenty (20) business days after such notice, Executive
shall not have disputed the Board’s determination or in reasonably good faith
taken action to cure or eliminate prospectively the problem or thing giving rise
to such Cause, provided, however, that a repeated breach after notice and cure,
of any provision of clause (a), (b) or (d) above, involving the same or
substantially similar actions or conduct, shall be grounds for termination for
cause upon not less than five (5) days additional notice from the Company.

 

 

 

 

3.5    Executive, by notice to the Company, may terminate this Agreement if a
Good Reason exists. For purposes of this Agreement, “ Good Reason ” means the
occurrence of any of the following circumstances without Executive’s prior
express written consent: (a) a material adverse change in the nature of
Executive’s title, duties or responsibilities with the Company that represents a
demotion from his title, duties or responsibilities as in effect immediately
prior to such change; (b) a material breach of this Agreement by the Company;
(c) a failure by the Company to make any payment to Executive when due, unless
the payment is not material and is being contested by the Company, in good
faith; (d) any person or entity other than shareholders of the Company and/or
any officers or directors of the Company as of the date of this Agreement
acquires securities of the Company other than from Executive or his affiliates
(in one or more transactions) having 51% or more of the total voting power of
all the Company’s securities then outstanding.

 

Notwithstanding the foregoing, no Good Reason shall be deemed to exist with
respect to the Company’s acts described in clauses (a), (b) or (c) above, unless
Executive shall have given written notice to the Company specifying the Good
Reason with reasonable particularity and, within twenty (20) business days after
such notice, the Company shall not have cured or eliminated the problem or thing
giving rise to such Good Reason; provided, however, that a repeated breach after
notice and cure of any provision of clauses (a), (b) or (c) above involving the
same or substantially similar actions or conduct, shall be grounds for
termination for Good Reason without any additional notice from Executive.

 

3.6    In the event that Executive terminates this Agreement for Good Reason,
pursuant to the provisions of paragraph 3.5, or the Company terminates this
Agreement without Cause, as defined in paragraph 3.4, the Company shall continue
to pay to Executive (or in the case of his/her death, the legal representative
of Executive’s estate or such other person or persons as Executive shall have
designated by written notice to the Company), all payments, compensation and
benefits required under paragraph 2 hereof through the earlier of (y) two (2)
years from the date of termination or (z) through the term of this Agreement;
provided, however, that Executive’s insurance coverage shall terminate upon
Executive becoming covered under a similar program by reason of employment
elsewhere. If Executive’s employment is terminated for Good Reason or without
Cause, Executive shall have no duty to mitigate awards paid or payable to him
pursuant to this subsection, and any compensation paid or payable to Executive
from sources other than the Company will not offset or terminate the Company’s
obligation to pay to Executive the full amounts pursuant to this subsection 3.6.

 

 

 

 

4.    Protection of Confidential Information; Non-Competition, Corporate
Opportunities .

 

4.1    Executive acknowledges that:

 

(a)    As a result of his current employment with the Company, 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 (“ Company ”), including, without limitation, financial
information, designs and other proprietary rights, trade secrets and know-how,
customers and sources (“ Confidential Information ”), and that the business
opportunities of which Executive becomes aware to undertake or participate in
municipal and infrastructure planning projects and related development
investments, including BT or BOT investments and financing opportunities related
thereto, and to acquire or purchase, or, except for Permitted Competitive
Investments, otherwise make equity or debt investments in, companies primarily
involved in a Competitive Business if such opportunities become known to
Executive while he is an employee of Company, whether in the course of his
employment, his Approved Academic and Civic Activities or otherwise, are
considered to be business opportunities of the Company (“ Corporate
Opportunities”) .

 

(b)    The Company will suffer substantial damage which will be difficult to
compute if, during the period of his employment with the Company or thereafter,
Executive should enter a business competitive with the Company or divulge
Confidential Information.

 

(c)    The provisions of this Agreement are reasonable and necessary for the
protection of the business of the Company.

 

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
Company, 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 Company. 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 72 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 Company to defend against the enforcement of such subpoena,
court order or other government process, and (b) permit the Company to intervene
and participate with counsel of its choice in any proceeding relating to the
enforcement thereof.

 

4.3    Upon termination of his employment with the Company, Executive will
promptly deliver to the Company all memoranda, notes, records, reports, manuals,
drawings, blue-prints and other documents (and all copies thereof) relating to
the business of the Company and all property associated therewith, which he may
then possess or have under his control; provided, however, that Executive shall
be entitled to retain one copy of such documents for his personal use and
records.

 

 

 

 

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, anywhere in the People’s
Republic of China, (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 Company’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 Company at the time of termination of Executive’s
employment by the Company (other than Executive’s personal secretary and
assistant); or (iv) solicit, interfere with, or endeavor to entice away from the
Company, 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 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. Notwithstanding the foregoing, in the event the
Company terminates this Agreement without cause or if Executive terminates this
Agreement for Good Reason under Section 3.5 hereof, Executive’s obligations
under this Section 4.4 shall terminate immediately upon such event.

 

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 Company and that money damages will not provide
an adequate remedy to the Company; 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 Company 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 (up to the
maximum of all payments made under the Agreement).

 

 

 

 

(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 Company 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.

 

4.7    If any provision of Sections 4.2 or 4.4 is held to be unenforceable
because of the scope, duration or area of its applicability, the tribunal making
such determination shall not have the power to modify such scope, duration, or
area, or all of them and such provision or provisions shall be void ab initio.

 

5.    Miscellaneous Provisions .

 

5.1    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 transmitted by electronic means, or when mailed first
class postage prepared, 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 as of the date of personal delivery, transmittal or
mailing thereof.

 

  If to Executive: Weibing Lu    

4/F Building B Chuangye Square

No. 48 Keji Road, Gaoxin District

Xi’an, Shaanxi Province, P.R. China

    Fax:         If to the Company: Skystar Bio-Pharmaceutical Company    

4/F Building B Chuangye Square

No. 48 Keji Road, Gaoxin District

Xi’an, Shaanxi Province, P.R. China

    Fax:

 

5.2    In the event of any claims, litigation or other proceedings arising under
this Agreement (including, among others, arbitration under Section 3.4),
Executive shall be reimbursed by the Company within thirty (30) 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.

 

 

 

 

5.3    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 director 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.

 

5.4    The provision 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.

 

5.5    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 a 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.

 

5.6    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 British Virgin Islands applicable to agreements
made and to be performed entirely in the British Virgin Islands.

 

5.7    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.

 

5.8    Should any provision of this Agreement become legally unenforceable, no
other provision of this Agreement shall be affected, and this Agreement shall
continue as if the Agreement had been executed absent the unenforceable
provision.

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Employment Agreement as of
the date first above written.

 

“COMPANY”   “EXECUTIVE”           SKYSTAR BIO-PHARMACEUTICAL COMPANY   WEIBING
LU           By:    WEIBING LU   By:    WEIBING LU           Title: Chairman of
the Board of Directors