Document:

ex10_2.htm

    
      

    

    Exhibit
10.2

    

    OPTION
AGREEMENT

    

    THIS
OPTION AGREEMENT, effective as of May 5, 2008, by and between LAPOLLA INDUSTRIES, INC. a
Delaware corporation (the “Company”) and DOUGLAS J. KRAMER (the
“Executive”).

    

    WHEREAS,
the Board of Directors of the Company previously authorized and approved the
Equity Incentive Plan, effective as of July 12, 2005 ("Plan"), which Plan was
amended effective as of January 16, 2007.  The Plan provides for the
grant of Options to employees, directors and consultants of the
Company.  Unless otherwise provided herein all defined terms shall
have the respective meanings ascribed to them under the Plan;

    

    WHEREAS,
Company and Executive previously entered into an Option Agreement dated July 12,
2005, which Agreement was amended as of July 28, 2005 (said Agreement and
amendment are collectively referred to as the “Prior Agreement”);

    

    WHEREAS,
Company and Executive have determined that it would be in the best interests of
Company and Executive to amend certain provisions of the Prior Agreement as they
relate to the options that were granted to Executive to acquire 2,000,000 shares
of the Company’s common stock, $.01 par value per share, at any exercise price
of $.67 per share (“Existing Options”); and

    

    WHEREAS,
the Company has determined that an option to acquire an additional 2,000,000
shares of Company common stock, $.01 par value per share should be granted to
Executive, effective May 5, 2008.

    

    NOW,
THEREFORE, in consideration of the respective agreements of the parties
contained herein, it is agreed as follows:

    

    A.           
Grant and Terms of New
Options.  Pursuant to authority granted to it under the Plan,
the Administrator of the Plan hereby grants to Executive in his capacity as an
employee of the Company (“Optionee”), effective as of May 5, 2008 ("Grant
Date"), 2,000,000 options. Subject to the provisions below, each Option permits
Optionee to purchase one share of LaPolla Industries, Inc. common stock, $.01
par value per share ("Shares").

    

    1.           
 Character of
Options.  Pursuant to the Plan, Options granted herein may be
Incentive Stock Options or Non-Qualified Stock Options, or both. To the extent
permitted under the Plan and by law, such Options shall first be considered
Incentive Stock Options.

    

    2.           
 Exercise
Price. The Exercise Price for each Non-Qualified Stock Option granted
herein is the per Share closing price on May 5, 2008.

    

    3.           
 Vesting.  The
Options granted hereunder vest upon satisfaction of the following
criteria:

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    3.1           250,000
Options on the earlier of: (i) June 30, 2008, provided the Company has net
pre-tax income for the fiscal quarter ending on that date, as indicated on its
Form 10-Q filed with the U.S. Securities and Exchange Commission (“Quarterly
Profit”); or (ii) the last day of the Company’s first fiscal quarter ending
after June 30, 2008 for which the Company has Quarterly Profit, subject in all
cases to continued satisfactory employment through the vesting
date;

    

    3.2           An
additional 250,000 options on the last day of each of the next seven fiscal
quarters for which Company has Quarterly Profit, subject to continued
satisfactory employment through the last day of each such fiscal
quarter.

    

    4.           
 Exercisability.  Once
vested, the options shall be exercisable, on a cumulative basis, in accordance
with the following schedule: eight and one-third percent (8 1/3%) of the vested
options shall be exercisable twelve (12) months from the date of vesting;
sixteen and two-third percent (16 2/3%) of the vested options shall be
exercisable twenty-four (24) months from the date of vesting; twenty-five
percent (25%) of the vested options shall be exercisable thirty-six (36) months
from the date of vesting; and one hundred percent (100%) of the vested options
shall be exercisable forty-eight (48) months from the date of
vesting.

    

    5.           
 Term of
Options.  All then existing and unexercised Options, whether or
not previously vested, shall expire on December 31, 2013.

    

    B.           Amendments to Existing
Options.  Company and Optionee amend Sections 4 and 5 of the
Prior Agreement to provide, in full, as follows:

    

    “4.         
 Vesting and
Exercisability.  All of the Options, whether or not previously
vested, shall be vested as of May 5, 2008.  Once vested, the options
shall be exercisable, on a cumulative basis, in accordance with the following
schedule: eight and one-third percent (8 1/3%) of the vested options shall be
exercisable twelve (12) months from the date of vesting; sixteen and two-third
percent (16 2/3%) of the vested options shall be exercisable twenty-four (24)
months from the date of vesting; twenty-five percent (25%) of the vested options
shall be exercisable thirty-six (36) months from the date of vesting; and one
hundred percent (100%) of the vested options shall be exercisable forty-eight
(48) months from the date of vesting.

    

    5.            
Term of
Options.  All then existing and unexercised Options, whether or
not then vested, shall expire on December 31, 2012.”

    

    Except as
provided in Sections 4 and 5 above, the terms of the Prior Agreement are the
same as they were immediately prior to the adoption of this
Amendment.  For ease of reference purposes, Sections 6 through and
including 13 of the Prior Agreement are restated in their entirety in Section C
below.

    

    C.           Terms
Applicable to the New and the Existing Options.

    

    1.           
 Payment of
Exercise Price.  Options represented hereby may be exercised in
whole or in part by delivering to the Company your payment of the Exercise Price
of the Option so exercised (i) in cash, by check or cash equivalent, (ii) by
tender to the Company of shares of Stock owned by the Participant having a Fair
Market Value not less than the exercise price; (iii) by tender to the Company of
a written consent to accept a reduction in the number of shares of Stock to
which the Option relates (“Reduced Number of Shares”),
which Reduced Number of Shares, when ascribed a value, shall be equal to the
exercise price of the balance of shares of Stock covered by the Option; (iv) by
delivery of a properly executed notice of exercise together with irrevocable
instructions to a broker providing for the assignment to the Company of the
proceeds of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the Option (including, without limitation, through
an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a "Cashless Exercise"), (v) by
such other consideration as may be approved by the Committee from time to time
to the extent permitted by applicable law, or (vi) by any combination thereof.
The Company reserves, at any and all times, the right, in the Company's sole and
absolute discretion, to establish, decline to approve or terminate any program
or procedures for the exercise of Options by means of a Cashless
Exercise.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    2.           
 Limits on
Transfer of Options.  The Option granted herein shall not be
transferable by you otherwise than by will or by the laws of descent and
distribution, except for gifts to family members subject to any specific
limitation concerning such gift by the Administrator in its discretion;
provided, however, that you may designate a beneficiary or beneficiaries to
exercise your rights and receive any Shares purchased with respect to any Option
upon your death.  Each Option shall be exercisable during your
lifetime only by you or, if permissible under applicable law, by your legal
representative.  No Option herein granted or Shares underlying any
Option shall be pledged, alienated, attached or otherwise encumbered, and any
purported pledge, alienation, attachment or encumbrance thereof shall be void
and unenforceable against the Company. Notwithstanding the foregoing, to the
extent permitted by the Administrator, in its discretion, an Option shall be
assignable or transferable subject to the applicable limitations, if any,
described in the General Instructions to Form S-8 Registration Statement under
the Securities Act of 1933, as amended.

    

    3.           
 Termination of
Employment.  If your employment is terminated with the Company,
the Option and any unexercised portion shall be subject to the provisions
below:

    

    (a)           Upon
the termination of your employment with the Company, to the extent not
theretofore exercised, your vested Option shall continue to be valid; provided,
however, that:

    

    (i)           
If the Participant shall die while in the employ of the Company or during the
one (1) year period, whichever is applicable, specified in clause (ii) below and
at a time when such Participant was entitled to exercise an Option as herein
provided, the legal representative of such Participant, or such Person who
acquired such Option by bequest or inheritance or by reason of the death of the
Participant, may, not later than fifteen (15) months from the date of death,
exercise such Option, to the extent not theretofore exercised, in respect of any
or all of such number of Shares specified by the Administrator in such Option;
and

    

    (ii)           If
the employment of any Participant to whom such Option shall have been granted
shall terminate by reason of the Participant's retirement (at such age upon such
conditions as shall be specified by the Board of Directors), disability (as
described in Section 22(e) of the Code), resignation by Participant for good
reason (as defined below), or dismissal by the Company other than for cause (as
defined below), and while such Participant is entitled to exercise such Option
as herein provided, such Participant shall have the right to exercise such
Option so granted, to the extent not theretofore exercised, in respect of any or
all of such number of Shares as specified by the Administrator in such Option,
at any time up to one (1) year from the date of termination of the Optionee's
employment by reason of retirement, resignation by Participant for good reason,
or dismissal other than for cause or disability, provided, that if the Optionee
dies within such twelve (12) month period, subclause (i) above shall
apply.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (b)           If
you voluntarily terminate your employment without good reason or are discharged
for cause, any Options granted hereunder shall forthwith terminate with respect
to any unexercised portion thereof, whether vested or unvested.

    

    (c)           If
any Options granted hereunder shall be exercised by your legal representative if
you should die or become disabled, or by any person who acquired any Options
granted hereunder by bequest or inheritance or by reason of death of any such
person written notice of such exercise shall be accompanied by a certified copy
of letters testamentary or equivalent proof of the right of such legal
representative or other person to exercise such Options.

    

    (d)           For
all purposes of this Agreement, the term "for cause" shall mean "Cause" as
defined in Executive’s Employment Agreement with the Company.

    

    (e)           For
all purposes of this Agreement, the term “good reason” shall mean “Good Reason”
as defined in Executive’s Employment Agreement with the Company.

    

    4.            
Restriction;
Securities Exchange Listing. All certificates for shares delivered upon
the exercise of Options granted herein shall be subject to such stop transfer
orders and other restrictions as the Administrator may deem advisable under the
Plan or the rules, regulations and other requirements of the Securities and
Exchange Commission and any applicable federal or state securities laws, and the
Administrator may cause a legend or legends to be placed on such certificates to
make appropriate reference to such restrictions. If the Shares or other
securities are traded on a national securities exchange, the Company shall not
be required to deliver any Shares covered by an Option unless and until such
Shares have been admitted for trading on such securities exchange.

    

    5.          
  Adjustments. If there
is any change in the capitalization of the Company affecting in any manner the
number or kind of outstanding shares of Common Stock of the Company, whether by
stock dividend, stock split, reclassification or recapitalization of such stock,
or because the Company has merged or consolidated with one or more other
corporations (and provided the Option does not thereby terminate in connection
therewith), then the number and kind of shares then subject to the Option and
the price to be paid therefor shall be appropriately adjusted by the Board of
Directors; provided, however, that in no event shall any such adjustment result
in the Company's being required to sell or issue any fractional shares. Any such
adjustment shall be made without change in the aggregate purchase price
applicable to the unexercised portion of the option, but with an appropriate
adjustment to the price of each Share or other unit of security covered by this
Option.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    6.           
 Change in
Control.  In the event of a Change in Control (as defined in
the Plan), the surviving, continuing, successor, or purchasing entity or parent
thereof, as the case may be (the "Acquiror"), may, without the
consent of the Executive, either assume the Company's rights and obligations
under outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiror's stock.  In the event of such
assumption or substitution, the Committee shall provide that any then
unexercised and/or unvested portions of outstanding Options shall be immediately
exercisable and vested in full, effective as of the time of consummation of the
Change in Control.  In the event the Acquiror elects not to assume or
substitute for outstanding Options in connection with a Change in Control, the
Committee shall provide that any unexercised and/or unvested portions of
outstanding Options shall be immediately exercisable and vested in full as of
the date thirty (30) days prior to the date of the Change in Control. The
exercise and/or vesting of any Option that was permissible solely by reason of
this Section 6 shall be conditioned upon the consummation of the Change in
Control.  Any Options which are not assumed by the Acquiror in
connection with the Change in Control nor exercised by the Executive as of the
time of consummation of the Change in Control shall terminate and cease to be
outstanding effective as of the time of consummation of the Change in
Control.

    

    7.           
  Amendment
to Options Herein Granted.  The Options granted herein may not
be amended without your consent.

    

    8.           
 Withholding
Taxes.  As provided in the Plan, the Company may withhold from
sums due or to become due to Optionee from the Company an amount necessary to
satisfy its obligation to withhold taxes incurred by reason of the disposition
of the Shares acquired by exercise of the Options in a disqualifying disposition
(within the meaning of Section 421(b) of the Code), or may require you to
reimburse the Company in such amount.

    

    
      	 	
              LAPOLLA
      INDUSTRIES, INC.

            
	 	 
      	 
      	 	 
      
	 	 
      	 
      	 	 
      
	 	
              By:

            	
                /s/  Richard J.
      Kurtz

            	 	
              5/5/2008

            
	 	 
      	
              Richard
      J. Kurtz,

            	 	
              Date

            
	 	 
      	
              Chairman
      of the Board

            	 	 
      
	 	 
      	 
      	 	 
      
	 	 
      	 
      	 	 
      
	 	
              /s/  Douglas J.
      Kramer

            	 	
              5/6/2008

            
	 	
              DOUGLAS
      J. KRAMER

            	 	
              Date

            

    

    

     

    5LOANOUT
      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.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    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.

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    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. 

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    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. 

     

    
      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

    

     

    (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.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    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.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    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:
                  

              

            

    

    

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

    

     

    
      	
            	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.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    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]

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    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

            	 	 	 	 

    

     

    
      
        
        

      

      
        10

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