<PAGE>
                                                                   EXHIBIT 10.40


                                FEBRUARY 3, 2005


Joseph Gunnar & Co., LLC
30 Broad Street
New York, New York  10004

Gentlemen:

         The undersigned understands that Joseph Gunnar & Co., LLC (the
"Underwriter"), proposes to enter into an Underwriting Agreement (the
"Agreement") with Tarpon Industries, Inc., a Michigan corporation (the
"Company"), relating to an initial public offering (the "Offering") of common
shares, no par value (the "Common Shares"), of the Company registered under the
Securities Act of 1933.

         As required by the Agreement, the undersigned agrees that the
undersigned will not, directly or indirectly, offer, sell, announce an intention
to sell, contract to sell, pledge, hypothecate, grant any option to purchase, or
otherwise dispose of any Common Shares or any securities convertible into or
exchangeable or exercisable for Common Shares for a period of one year following
the closing of the Offering (the "Closing"), without the prior written consent
of the Underwriter, which consent may be granted by the Underwriter in its sole
discretion, except for Permitted Transfers.

         "Permitted Transfers" means (1) exercises of options and warrants, and
the issuance and sale by the Company to the undersigned of the related Common
Shares, (2) the use of Common Shares (whether outstanding or withheld by the
Company from outstanding options or warrants held by the undersigned) to pay the
exercise price of options and warrants to the Company, (3) transfers to the
undersigned's spouse or lineal descendants, natural or adopted (collectively,
"Relatives"), or to an inter vivos trust for the benefit of Relatives, provided
each transferee signs a counterpart of this letter agreement, (4) transfers upon
death of the undersigned pursuant to the laws of descent and distribution or
pursuant to wills, provided each transferee signs a counterpart of this letter
agreement, (5) gifts of Common Shares to a donee who agrees to be bound by this
letter agreement, provided each transferee signs a counterpart of this letter
agreement, (6) distributions of Common Shares by a partnership, trust, limited
liability company or corporation to its partners, beneficiaries, members or
shareholders, respectively, provided each transferee signs a counterpart of this
letter agreement, and (7) the sale of up to 5% of the remaining balance of the
undersigned's Common Shares during each 30 day-period after the six month
anniversary of the Offering, provided that the market price of such Common
Shares is below the initial public offering price for such Common Shares or is
$7.00 or more per share.

         The undersigned agrees that the provisions of this letter agreement
shall be binding upon the successors, assigns, heirs and personal
representatives of the undersigned. In furtherance of the foregoing, the
undersigned acknowledges and agrees that the Company and American Stock Transfer
& Trust Company, the transfer agent for the Common Shares, are hereby authorized
to decline to make any transfer of securities if such transfer would constitute
a breach of this letter agreement.

<PAGE>

         If requested by the Underwriter, each certificate representing any of
the shares covered or to be covered by this letter agreement shall be submitted
to the Company for the addition of the following legend:

         THE TRANSFER OR PLEDGE OR OTHER DISPOSITION OF THE SHARES REPRESENTED
         BY THIS CERTIFICATE IS RESTRICTED UNDER THE TERMS OF A LOCK-UP
         AGREEMENT DATED AS OF FEBRUARY 3, 2005, TO WHICH THE NAMED HOLDER IS A
         PARTY, A COPY OF WHICH CAN BE OBTAINED FROM THE SECRETARY OF TARPON
         INDUSTRIES, INC.

         It is understood that, if the Agreement terminates before issuance of
the Common Shares offered in the Offering or if the Closing does not occur on or
before March 31, 2005, the terms of this letter agreement shall automatically
become null and void and of no further force and effect.

                                                     Very truly yours,


                                                     ---------------------------
                                                     Print Name: