UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
DEFINITIVE
SCHEDULE 14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
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the Registrant
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Preliminary Proxy
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Definitive Proxy
Statement
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Definitive Additional
Materials
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Soliciting Material Pursuant to
§240.14a-12
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SKYSTAR
BIO-PHARMACEUTICAL COMPANY
(Name
of Registrant as Specified in Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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Room
10601, Jiezuo Plaza
No.4,
Fenghui Road South, Gaoxin District
Xi’an,
Shaanxi Province
People’s
Republic of China
December
11, 2009
Dear
Shareholders:
You are
cordially invited to attend the annual meeting of shareholders of Skystar
Bio-Pharmaceutical Company (the “Company”) to be held at the Company’s principal
executive offices located at Room 10601, Jiezuo Plaza, No.4, Fenghui Road South,
Gaoxin District, Xi’an, Shaanxi Province, People’s Republic of China on December
31, 2009 at 9:00 a.m. (local time).
At the
meeting, shareholders will be asked to vote on the re-election of seven
directors, the ratification of the appointment of Moore Stephens Wurth Frazer
and Torbet, LLP as the Company’s independent registered public accounting firm
for the Company’s 2009 fiscal year, and the ratification of the 2010 Stock
Incentive Plan.
The
Notice of Annual Meeting of Shareholders and Proxy Statement accompanying this
letter provide detailed information concerning matters to be considered at the
meeting.
Your vote
is important. I urge you to vote as soon as possible, whether or not
you plan to attend the annual meeting.
Thank you
for your continued support of Skystar Bio-Pharmaceutical Company.
Sincerely,
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/s/
Weibing Lu
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Weibing
Lu
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Chairman
of the Board and Chief Executive
Officer
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Room
10601, Jiezuo Plaza
No.4,
Fenghui Road South, Gaoxin District
Xi’an,
Shaanxi Province
People’s
Republic of China
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
December
11, 2009
TO THE
SHAREHOLDERS OF SKYSTAR BIO-PHARMACEUTICAL COMPANY:
The
annual meeting of the shareholders of Skystar Bio-Pharmaceutical Company, a
Nevada corporation, (the “Company”), will be held on December 31, 2009, at 9:00
a.m. (local time), at the Company’s principal executive offices located at Room
10601, Jiezuo Plaza, No.4, Fenghui Road South, Gaoxin District, Xi’an, Shaanxi
Province, People’s Republic of China, for the following purposes:
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1.
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To re-elect seven directors to
serve until the 2010 annual meeting of
shareholders.
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2.
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To ratify the appointment of
Moore Stephens Wurth Frazer and Torbet, LLP as the Company's independent
registered public accounting firm for the 2009 fiscal
year.
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3.
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To ratify the Company’s 2010
Stock Incentive Plan.
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4.
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To
transact such other business as may properly come before the
meeting.
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The Board
of Directors has fixed the close of business on December 10, 2009 as the record
date for the determination of shareholders entitled to notice of and to vote at
the annual meeting. We hope that you will attend the meeting, but if you cannot
do so, please complete, date, and sign the enclosed proxy card and return it in
the accompanying envelope as promptly as possible. Your proxy card or broker may
also provide instructions on voting electronically. Returning the enclosed proxy
card (or voting electronically) will not affect your right to vote in person if
you attend the meeting.
By
Order of the Board of Directors
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Weibing
Lu
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Chairman
of the Board and Chief Executive
Officer
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Xi’an,
People’s Republic of China
Room
10601, Jiezuo Plaza
No.4,
Fenghui Road South, Gaoxin District
People’s
Republic of China
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
TO BE
HELD DECEMBER 31, 2009
December
11, 2009
GENERAL
The
enclosed proxy is solicited on behalf of the Board of Directors of Skystar
Bio-Pharmaceutical Company, a Nevada corporation (the “Company”), for use at the
annual meeting of shareholders to be held on December 31, 2009, at 9:00 a.m.
(local time), or at any adjournment or postponement of the meeting, for the
purposes set forth in this proxy statement and in the accompanying Notice of
Annual Meeting. The annual meeting will be held at the Company’s principal
executive offices located at Room 10601, Jiezuo Plaza, No.4, Fenghui Road South,
Gaoxin District, Xi’an, Shaanxi Province, People’s Republic of China. The
Company intends to commence mailing this proxy statement and accompanying proxy
card on or about December 14, 2009 to all shareholders entitled to vote at the
annual meeting.
ABOUT
THE MEETING
Why
did I receive this proxy statement?
You
received this proxy statement because you held shares of the Company’s common
stock on December 10, 2009 (the “Record Date”) and are entitled to vote at the
annual meeting. The Board of Directors is soliciting your proxy to vote at the
meeting.
What
am I voting on?
You are
being asked to vote on three items:
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1.
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The election of seven directors
(see page 4).
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2.
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The ratification of Moore
Stephens Wurth Frazer and Torbet, LLP as the Company's independent
registered public accounting firm for the 2009 fiscal year (see page
6).
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3.
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The
ratification of the Company’s 2010 Stock Incentive Plan (see page
7).
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How
do I vote?
Shareholders of
Record
If you
are a shareholder of record, there are three ways to vote:
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1.
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By completing and returning your
proxy card in the postage-paid envelope provided by the
Company;
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2.
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By following the instructions for
electronic voting using the Internet or telephone, which are printed on
your proxy card; or
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3.
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By voting in person at the
meeting.
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Street Name
Holders
Shares
that are held in a brokerage account in the name of the broker are said to be
held in “street name.”
If your
shares are held in street name, you should follow the voting instructions
provided by your broker. You may complete and return a voting instruction card
to your broker, or, in many cases, your broker may also allow you to vote via
the telephone or internet. Check your proxy card for more information. If you
hold your shares in street name and wish to vote at the meeting, you must obtain
a legal proxy from your broker and bring that proxy to the meeting.
Regardless
of how your shares are registered, if you complete and properly sign the
accompanying proxy card and return it to the address indicated, it will be voted
as you direct.
What
are the voting recommendations of the Board of Directors?
The Board
of Directors recommends that you vote in the following manner:
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1.
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FOR each of the persons nominated
by the Board of Directors to serve as
directors.
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2.
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FOR the ratification of the
appointment of Moore Stephens Wurth Frazer and Torbet, LLP as the
Company's independent registered public accounting firm for the 2009
fiscal year.
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3.
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FOR
the ratification of the Company’s 2010 Stock Incentive
Plan.
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Unless
you give contrary instructions on your proxy card, the persons named as proxies
will vote your shares in accordance with the recommendations of the Board of
Directors.
Will
any other matters be voted on?
We do not
know of any other matters that will be brought before the shareholders for a
vote at the annual meeting. If any other matter is properly brought before the
meeting, your signed proxy card would authorize Mr. Weibing Lu to vote on such
matters in his discretion.
Who
is entitled to vote at the meeting?
Only
shareholders of record at the close of business on the Record Date are entitled
to receive notice of and to vote at the annual meeting. If you were a
shareholder of record on that date, you will be entitled to vote all of the
shares that you held on that date at the meeting, or any postponement or
adjournment of the meeting.
How
many votes do I have?
For
holders of common stock, you will have one vote for each share of the Company’s
common stock that you owned on the Record Date.
How
many votes can be cast by all shareholders?
The
Company had 6,982,420 outstanding shares of common stock on the Record Date, and
each of these shares is entitled to one vote.
How many votes must be present to
hold the meeting?
The
holders of at least a majority of the Company’s common stock outstanding on the
Record Date must be present at the meeting in person or by proxy in order to
fulfill the quorum requirement necessary to hold the meeting. This means at
least 3,491,211 common shares must be present in person or by
proxy.
If you
vote, your shares will be part of the quorum. Abstentions and broker non-votes
will also be counted in determining the quorum. A broker non-vote occurs when a
bank or broker holding shares in street name submits a proxy that states that
the broker does not vote for some or all of the proposals because the broker has
not received instructions from the beneficial owners on how to vote on the
proposals and does not have discretionary authority to vote in the absence of
instructions.
We urge
you to vote by proxy even if you plan to attend the meeting so that we will know
as soon as possible that a quorum has been achieved.
What
vote is required to approve each proposal?
The seven
nominees for directors who receive the most votes will be elected.
The
required vote to approve (i) the ratification of the appointment of Moore
Stephens Wurth Frazer and Torbet, LLP as the Company’s independent registered
public accounting firm for the 2009 fiscal year and (ii) the ratification of the
Company’s 2010 Stock Incentive Plan is the affirmative vote of a majority of the
votes cast, excluding abstentions.
An
abstention with respect to these proposals will be counted for the purposes of
determining the number of shares entitled to vote that are present in person or
by proxy. Accordingly, an abstention will have the effect of a negative
vote.
If a
broker indicates on the proxy that it does not have discretionary authority to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to the matter.
Can
I change my vote?
Yes. You
may change your vote by sending in a new proxy card with a later date, or, if
you are a shareholder of record, sending written notice of revocation to the
Company’s Secretary at the address on the cover of this proxy statement. Also,
if you attend the meeting and wish to vote in person, you may request that your
previously submitted proxy not be used.
Who
can attend the annual meeting?
Any
person who was a shareholder of the Company on December 10, 2009 may attend the
meeting. If you own shares in street name, you should ask your broker or bank
for a legal proxy to bring with you to the meeting. If you do not receive the
legal proxy in time, bring your most recent brokerage statement so that we can
verify your ownership of our stock and admit you to the meeting. You will not,
however, be able to vote your shares at the meeting without a legal
proxy.
What
happens if I sign and return the proxy card but do not indicate how to vote on
an issue?
If you
return a proxy card without indicating your vote, your shares will be voted as
follows:
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·
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FOR each of the nominees for
director named in this proxy statement;
and
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·
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FOR ratification of the
appointment of Moore Stephens Wurth Frazer and Torbet, LLP as the
Company's independent registered public accounting firm for the 2009
fiscal year.
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·
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FOR
ratification of the Company’s 2010 Stock Incentive
Plan.
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PROPOSAL
1 - ELECTION OF DIRECTORS
Under the
Company’s bylaws, the number of directors of the Company is fixed by the Board
of Directors and may be increased or decreased by resolution of the Board of
Directors. Currently, the Board has fixed the number of directors at seven
persons. Seven directors are to be elected to our Board of Directors at the
annual meeting. The Board recommends that Weibing Lu, Wei Wen, Mark D. Chen, R.
Scott Cramer, Fan Qiang, Chengtun Qu and Shouguo Zhao to serve as directors. All
of the nominees currently serve on our Board of Directors.
Nominees
for Director
Weibing
Lu,
Chairman of the
Board, Chief Executive Officer, and President
, received his Bachelor’s
degree in science from Wuhan University of Mapping Science and Technology (now
known as Wuhan University) in 1985. In 1986, he was a teacher of College of Xian
Geology. Mr. Lu attended Xian Jiao Tong University in 1999 where he received a
Master’s degree in Business Administration in 2002. Mr. Lu has vast experience
in the biotechnology field and in enterprise management. In 1992, he founded the
Xian Xingji Electronic Engineering Company and served as its Chairman and
President until 1997. In 2002, he was awarded as the title of “Outstanding
Enterpriser of Xian Feed Industry” and appointed as a director of Xian Institute
of Feed Industry. In July 1997, he founded Xian Tianxing Science and Technology
Development Co., Ltd. In December 2003, Xian Tianxing Science and Technology
Development Co., Ltd., was reorganized and became Xian Tianxing
Bio-Pharmaceutical Co., Ltd. Since December 2003, Mr. Lu has served as Chairman
of the Board and General Manager of Xian Tianxing Bio-Pharmaceutical Co.,
Ltd..
Wei Wen, Director
and Secretary
, graduated from Xian University of Science and Industry
(also known as Xian University of Technology) in 1989. From 1990 to 1994, Mr.
Wen was the manager of Sales Department of Xian Zhongtian Science and Technology
Development Co., Ltd. Then, from 1994 to 1997, Mr. Wen served as Vice General
Manager and Manager of Sales Department of Xian Xingji Electronic Engineering
Company. In 1997, Mr. Wen was appointed as the Vice General Manager of Xian
Tianxing Science and Technology Development Co., Ltd. which he served until
December 2003. After the reorganization of the company in December 2003, Mr. Wen
was appointed and continues to serve as Vice General Manager and a Director of
Xian Tianxing Bio-Pharmaceutical Co., Ltd. (including as secretary of the Board
of Directors).
Mark D. Chen,
Director
, also serves as chairman of the audit committee and member of
the compensation committee. Mr. Chen is the chairman and chief executive officer
of Pantheon China Acquisition Corp., a U. S. publicly traded acquisition company
he founded in 2006 focusing on pre-IPO Chinese companies. Since 1998, Mr. Chen
has been a founding general partner and has served in various positions,
including managing director and currently a venture partner, with Easton Capital
Investment Group and its various affiliated funds, a New York based private
equity investment firm. Mr. Chen has also worked extensively in China and was a
founder and senior executive of SureData Inc., a marketing and distribution
company in China in 1997. Mr. Chen received a B.S. from the Shanghai Jiao Tong
University in Shanghai, China, an M.S. from Pennsylvania State University and an
M.B.A. from the Columbia Business School at Columbia University.
R. Scott Cramer,
Director
, was previously the Chairman from November 2001 to November
2005, Chief Executive Officer from March 2002 to November 2005, and Chief
Financial Officer from April 2003 to November 2005, of The Cyber Group. He is
currently a member of our Board of Directors. Mr. Cramer is the founder and
President of Cramer & Associates, a firm specializing in retirement
management, estate planning and investments. He has been a Registered Investment
Advisor since August 2001, a Securities Selling Representative since May 1999,
and a General Securities Representative (Registered Representative) since July
2002. Mr. Cramer is a graduate of Seminole Community College with an Associate
in Arts degree. He received certification as a Chartered Retirement Planning
Counselor from the College of Financial Planning in 2001, as a Certified Estate
Planning Professional from the Abts Institute for Estate Preservation in 2001,
and as a Certified Senior Advisor from the Society of Senior Advisors in
2002.
Qiang Fan,
Director
, also serves as chairman of the compensation committee and
member of the audit committee. Mr. Fan is the President and Founder of MIC
Consulting Group, U.S.A., which he established in 1992 to provide operational
and financial related problem solving services to privately owned companies.
Since 2007, Mr. Fan is the exclusive representative of North America operation
for China Venture Capital Research Institute, and the head analyst at Power
Partner Institute focusing on IT trends since 2001. From 2006 to 2007, Mr. Fan
was a Vice-president of Operation at Kantan Inc., a privately-held boutique
technology company focused on wireless solutions for device manufacturers. From
2005 to 2006, he was a Vice-president at Third Wave Ventures, which provides
corporate venturing-related advisory, consulting and management services. From
1998 to 2000, Mr. Fan was the exclusive representative in China for PowerQuest,
a Utah based international software company that focused on computer data
storage management, as well as for ChipCoolers, a U.S. CPU cooler manufacturer.
Mr. Fan received his B.A. degree from the Business School of California State
University at San Francisco.
Chengtun Qu,
Director
, is the Vice Dean of the College of Chemistry and Chemical
Engineering at Xi’an Shi You University, where he also teaches and heads the
environmental engineering department. Dr. Qu is a board member of both the
Shaanxi Province Environmental Protection Association and the Shaanxi Province
Chemical Engineering Association. As a principal researcher, Dr. Qu has
participated in various projects at both national and provincial levels,
including ones sponsored by the Chinese Ministry of Science and Technology, and
is the recipient of numerous accolades from the Shaanxi provincial government in
recognition of his contributions. Dr. Qu has three patents issued by the Chinese
State Intellectual Property Office. He has also been extensively published in
various scientific journals both in China and abroad. Dr. Qu has a B.S. degree
in chemistry from Northwest University in Xi’an, a master’s degree from
Southwest Petroleum University and a doctorate degree from Xi’an Jiaotong
University.
Shouguo Zhao,
Director
, also serves as member of both the audit and the compensation
committees. Dr. Zhao is an independent director of Shaanxi International Trust
& Investment Corp., Ltd., a listed company on the Shenzhen Stock Exchange
(SZSE: SZ000563), chairing its Remuneration and Assessment Committee and serving
on its Strategy Committee. Dr. Zhao is also an independent non-executive
director of Sungreen International Holdings Limited, a listed company on the
Hong Kong Exchange (HKEX: HK8306), serving as a member of its audit committee.
He is additionally an independent director of Tian Di Yuan Co., Ltd., a listed
company on the Shenzhen Stock Exchange (SZSE: SH600665), chairing its Nominating
Committee and serving on its Strategy Committee. From June 2005 to June 2008,
Dr. Zhao was an independent director of IRICO Group Corporation, a listed
company on the Shenzhen Stock Exchange (SZSE: SH600707), chairing its
Remuneration and Assessment Committee and serving on its Strategy Committee. Dr.
Zhao is the Vice Dean of the School of Economics and Management at Northwest
University, where he also serves as a guide professor to doctorate candidates in
finance and national economics. He has led and participated in 18 research
programs sponsored by governments and the private sectors in areas of financial
investment, modern enterprise systems and development strategies, and regional
economic development strategies, and has more than 30 publications in various
academic journals. Dr. Zhao is a member of Shaanxi Provincial Decision-making
Consultative Committee, a member of the Executive Committee of the Tenth Session
of Shaanxi Provincial Industrial and Commercial Association, the chairman of the
Negotiable Securities Research Society of Shaanxi Province, and a consultant
with the Listed Companies Association of Shaanxi Province. Dr. Zhao received his
doctorate degree in economics from Northwest University.
The
Board recommends a vote “FOR” each nominee.
PROPOSAL
2 - RATIFICATION OF INDEPENDENT ACCOUNTANTS
The
Board’s Audit Committee recommends Moore Stephens Wurth Frazer and Torbet, LLP
(“Moore Stephens”) as the Company’s independent registered public accountants
for the fiscal year ended December 31, 2009. Moore Stephens was the Company’s
independent registered public accountants for the fiscal year ended December 31,
2008. The Board requests that shareholders ratify its selection of Moore
Stephens as the independent auditor for the fiscal year ending December 31,
2009. If the shareholders do not ratify the selection of Moore Stephens, the
Board of Directors will select another firm of accountants.
Representatives
of Moore Stephens are not expected to be present at the 2009 annual meeting,
either in person or by teleconference.
The
Board recommends a vote “FOR” the ratification of the appointment of Moore
Stephens Wurth Frazer and Torbet, LLP as the Company’s independent registered
public accounting firm.
Principal
Accountant Fees and Services
Moore
Stephens served as our independent registered public accounting firm for our
fiscal years ended December 31, 2008 and 2007. The following table
shows the fees that were billed for audit and other services provided by this
firm during the fiscal years indicated:
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Fiscal Year Ended
December
31,
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2008
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2007
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Audit
Fees (1)
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$
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185,000
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$
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160,000
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Audit-Related
Fees (2)
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―
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―
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Tax
Fees (3)
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7,000
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5,000
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All
Other Fees (4)
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―
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―
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Total
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$
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192,000
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$
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165,000
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(1)
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Audit
Fees
– This category
includes the audit of our annual financial statements, review of financial
statements included in our Quarterly Reports on Form 10-Q, and services
that are normally provided by independent auditors in connection with the
engagement for fiscal years. This category also includes advice
on audit and accounting matters that arose during, or as a result of, the
audit or the review of interim financial
statements.
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(2)
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Audit-Related
Fees
– This category
consists of assurance and related services by our independent auditors
that are reasonably related to the performance of the audit or review of
our financial statements and are not reported above under "Audit
Fees." The services for the fees disclosed under this category
include consultation regarding our correspondence with the
SEC.
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(3)
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Tax
Fees
– This category
consists of professional services rendered by our independent auditors for
tax compliance and tax advice. The services for the fees
disclosed under this category include tax return preparation and technical
tax advice.
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(4)
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All Other
Fees
– This category
consists of fees for other miscellaneous
items.
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Pre-Approval
Policies and Procedures of the Audit Committee
Our Audit
Committee approves the engagement of our independent auditors and is also
required to pre-approve all audit and non-audit expenses. During the
fiscal year ended December 31, 2008, 0%, 0%, and 0% of our Audit-Related Fees,
Tax Fees, and All Other Fees, respectively, were pre-approved by the Audit
Committee. Prior to engaging its accountants to perform particular
services, our board of directors obtains an estimate for the service to be
performed. All of the services described above were approved by the board of
directors in accordance with its procedure.
PROPOSAL 3 -
RATIFICATION OF THE 2010 STOCK
INCENTIVE PLAN
On
December 8, 2009, our board of directors approved the 2010 Stock Incentive Plan
(the “Plan”). All of our employees, officers, and directors, and those of our
consultants and advisors who (i) are natural persons and (ii) provide bona fide
services to the Company not connected to a capital raising transaction or the
promotion or creation of a market for our securities are eligible to be granted
options or restricted stock awards (each, an “Award”) under the Plan. The Plan
is administered by our Board, and the Board establishes certain terms of option
awards, including the exercise price and duration, in the applicable option
agreement. Awards may be made under the Plan for up to 700,000 shares of our
common stock, and the maximum number of shares of common stock with respect to
which Awards may be granted to any participant under the Plan is 233,333 shares
of common stock. The Plan allows for adjustments for changes in common stock and
certain other events, including, but not limited to, any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off, any distribution to holders of common
stock other than a normal cash dividend, and liquidation or
dissolution.
Amendment and
Termination
The Board
may at any time, and from time to time, suspend or terminate the Plan in whole
or in part or amend it from time to time.
Exercise
Price
If
applicable, the Board shall establish the exercise price of options at the
time each option is granted and specify it in the applicable option agreement.
Payment of the option price on exercise of stock options may be made in cash, by
check, shares of common stock of the company, payment by such other lawful
consideration as the Board may determine, or a combination of the
above.
Federal Tax
Consequences
The
following brief summary of the effect of federal income taxation upon the
recipients and us with respect to the shares under the Plan does not purport to
be complete, and does not discuss the tax consequences of a recipient's death or
the income tax laws of any state or foreign country in which the recipient may
reside.
Tax
Treatment to the Recipients
The
common stock is not qualified under Section 401(a) of the Internal Revenue Code.
The recipients therefore, will be required for federal income tax purposes to
recognize compensation during the taxable year of issuance unless the shares are
subject to a substantial risk of forfeiture. Accordingly, absent a specific
contractual provision to the contrary, the recipients will receive compensation
taxable at ordinary rates equal to the fair market value of the shares on the
date of receipt since there will be no substantial risk of forfeiture or other
restrictions on transfer. If, however, the recipients receive shares of common
stock pursuant to the exercise of an option or options at an exercise price
below the fair market value of the shares on the date of exercise, the
difference between the exercise price and the fair market value of the stock on
the date of exercise will be deemed compensation for federal income tax
purposes. The recipients are urged to consult each of their tax advisors on this
matter. Further, if any recipient is an "affiliate," Section 16(b) of the
Exchange Act is applicable and will affect the issue of taxation.
Tax
Treatment to the Company
The
amount of income recognized by any recipient hereunder in accordance with the
foregoing discussion will be a tax-deductible expense by the Company for federal
income tax purposes in the taxable year of the Company during which the
recipient recognizes income.
Incorporation
by Reference
.
The
foregoing is only a summary of the Plan and is qualified in its entirety by
reference to its full text, a copy of which is attached hereto as Appendix
A.
Plan
Benefits
As of
December 10, 2009, we had not issued any shares of common stock pursuant to the
Plan.
The
Board recommends a vote “FOR” the ratification of the 2010 Stock Incentive
Plan.
THE
BOARD OF DIRECTORS AND ITS COMMITTEES
Our board
of directors (the “Board”) currently consists of seven members. Our bylaws
provide that our directors will hold office until the annual meeting of
shareholders or until their successors have been elected and qualified. Our
Board of Directors is responsible for the business and affairs of the Company
and considers various matters that require its approval. During the fiscal year
ended December 31, 2008, the Board met and/or took action by unanimous written
consent 7 times.
There are
two committees of the Board — the Audit Committee and the Compensation
Committee. The Board created the two committees and adopted charters for these
committees on July 14, 2008. Committee assignments are re-evaluated annually.
The Board has determined that, in its judgment as of the date of this proxy
statement, Mr. Chen, Mr. Fan, Mr. Qu and Mr. Zhao are independent directors
within the meaning of Nasdaq Equity Rule 5605(a)(2). Accordingly, all of the
members of the Audit Committee are independent within the meaning of Nasdaq
Equity Rule 5605(a)(2). The Board also adopted nomination procedures on July 14,
2008.
Attendance
of Directors at Shareholder Meetings
All of
the Company’s directors are expected to attend the 2009 annual
shareholder meeting, either in person or by teleconference.
Audit
Committee
The Audit
Committee was established in accordance with Section 3(a)(58)(A) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Audit
Committee assists Board oversight of (i) the integrity of the Company’s
financial statements, (ii) the Company’s compliance with legal and regulatory
requirements, (iii) the independent auditor’s qualifications and independence,
and (iv) the performance of the Company’s internal audit function and
independent auditor, and prepares the report that the Securities and Exchange
Commission requires to be included in the Company’s annual proxy statement. The
current members of the Audit Committee are Mark D. Chen, Qiang Fan and Shouguo
Zhao, and Mr. Chen serves as the Chairman. The Audit Committee met and/or took
action by unanimous written consent zero times during the fiscal year ended
December 31, 2008. The Board has determined that Mr. Chen is an “audit committee
financial expert” within the meaning of Item 407(d)(5)(ii) and (iii) of
Regulation S-K promulgated under the Exchange Act.
Compensation
Committee
The
Compensation Committee is responsible for overseeing and, as appropriate, making
recommendations to the Board regarding the annual salaries and other
compensation of the Company’s executive officers and general employees and other
policies, and for providing assistance and recommendations with respect to the
compensation policies and practices of the Company. The current members of the
Compensation Committee are Mark D. Chen, Qiang Fan and Shouguo Zhao, and Mr. Fan
serves as the Chairman. The Compensation Committee met and/or took action by
unanimous written consent zero times during the fiscal year ended December 31,
2008.
The
Compensation Committee:
|
·
|
on an annual basis, without the
participation of the Chief Executive Officer, (i) reviews and approves the
corporate goals and objectives with respect to compensation for the Chief
Executive Officer, (ii) evaluates the Chief Executive Officer's
performance in light of the established goals and objectives, and (iii)
sets the Chief Executive Officer's annual compensation, including salary,
bonus, incentive, and equity
compensation.
|
|
·
|
on an annual basis, reviews and
approves (i) the evaluation process and compensation structure for the
Company’s other senior executives, (ii) the Chief Executive Officer’s
evaluation of the performance and his recommendations concerning the
annual compensation, including salary, bonus, incentive, and equity
compensation, of other company executive officers, (iii) the recruitment,
retention, and severance programs for the Company’s senior executives, and
(iv) the compensation structure for the Board of
Directors.
|
|
·
|
as appropriate, makes
recommendations to the Board with respect to executive
incentive-compensation plans and equity-based plans and administer any
incentive plans and bonus plans that include senior officers. Stock option
grants are made by the Options Committee, for non-senior officers, but are
ratified by the Compensation Committee in its compensation
review.
|
The
Compensation Committee shall have the authority to obtain advice and seek
assistance from internal and external legal, accounting, and other advisors such
as consultants and shall determine the extent of funding necessary for the
payment of compensation to such persons.
Nominating
Procedure
Pursuant
to the nominating procedures adopted by our Board, our independent directors
identify and evaluate candidates for election to the Board. The independent
directors select director-candidates who, in their view and based on all
available information and relevant considerations, are most suited for
membership on the Board. The process for identifying and evaluating nominees for
director is as follows:
|
·
|
The
independent directors first determine the incumbent directors whose terms
expire at the upcoming meeting and who wish to continue their service on
the Board.
|
|
·
|
The
independent directors evaluate the qualifications and performance of the
incumbent directors who desire to continue their service. In
particular, as to each such incumbent director, the independent directors
(i) consider if the director continues to satisfy the minimum
qualifications for director candidates adopted by the independent
directors; (ii) review the performance of the director during the
preceding term; and (iii) determine whether there exists any special,
countervailing considerations against re-nomination of the
director.
|
|
·
|
If
the independent directors determines that an incumbent director consenting
to re-nomination continues to be qualified and has satisfactorily
performed his or her duties as director during the preceding term (and in
the event such incumbent director is an independent director, such
determination shall be made by the remaining independent directors), and
there exist no reasons, including considerations relating to the
composition and functional needs of the Board as a whole, why in the
independent directors’ view the incumbent should not be re-nominated, the
independent directors, absent special circumstances, propose the incumbent
director for re-election.
|
|
·
|
The
independent directors identify and evaluate new candidates for election to
the Board where there is no qualified and available incumbent, including
for the purpose of filling vacancies arising by reason of the resignation,
retirement, removal, death, or disability of an incumbent director or a
decision of the directors to expand the size of the
Board.
|
|
·
|
The
independent directors solicit recommendations for nominees from persons
that they believe are likely to be familiar with qualified candidates.
These persons may include members of the Board, including the independent
directors, and management of the Company. The independent directors may
also determine to engage a professional search firm to assist in
identifying qualified candidates; where such a search firm is engaged, the
independent directors shall set its fees and scope of
engagement.
|
|
·
|
As
to each recommended candidate that the independent directors believe
merits consideration, the independent directors (i) cause to be assembled
information concerning the background and qualifications of the candidate,
including information concerning the candidate required to be disclosed in
the Company’s proxy statement under the rules of the SEC and any
relationship between the candidate and the person or persons recommending
the candidate; (ii) determine if the candidate satisfies the minimum
qualifications required by the independent directors of candidates for
election as director; (iii) determine if the candidate possesses any of
the specific qualities or skills that as determined by the independent
directors must be possessed by one or more members of the Board; (iv)
consider the contribution that the candidate can be expected to make to
the overall functioning of the Board; and (v) consider the extent to which
the membership of the candidate on the Board will promote diversity among
the directors.
|
|
·
|
The
independent directors may, in their discretion, solicit the views of our
chief executive officer, other members of the Company’s senior management,
and other members of the Board regarding the qualifications and
suitability of candidates to be nominated as
directors.
|
|
·
|
In
their discretion, the independent directors may designate one or more of
them (or all of them) to interview any proposed
candidate.
|
In making
their selection, the independent directors will consider director candidates
recommended by shareholders. In addition to the criteria for evaluation of other
candidates to the Board (as listed above), the independent directors may
consider the size and duration of the interest of the recommending shareholder
or shareholder group in the equity of the Company. The independent directors may
also consider the extent to which the recommending shareholder intends to
continue holding its interest in the Company, including, in the case of nominees
recommended for election at an annual meeting of shareholders, whether the
recommending shareholder intends to continue holding its interest at least
through the time of such annual meeting.
Any
shareholder filing a written notice of nomination for director must describe
various matters regarding the nominee and the shareholder, including such
information as name, address, occupation, and shares held. For further
details on submitting shareholder proposals for director candidates, see
“Shareholder Proposals” below.
Shareholder
Communications with Non-Management Members of the Board
Our Board
has not adopted a formal process for shareholders to send communications to the
independent members of the Board. Shareholders may, however, communicate with
the non-management members of the Board by sending correspondence addressed to a
non-management member to Skystar Bio-Pharmaceutical Company, Room 10601, Jiezuo
Plaza, No.4, Fenghui Road South, Gaoxin District, Xi’an, Shaanxi Province,
People’s Republic of China.
DIRECTORS
AND EXECUTIVE OFFICERS
The
following table identifies our current executive officers and directors, their
respective offices and positions, and their respective dates of election or
appointment:
Name
|
|
Positions
Held:
|
|
Date
of Election or Appointment
|
Weibing
Lu
|
|
Chief
Executive Officer, President, and Chairman of the Board of
Directors
|
|
November
2005
|
Bennet
P. Tchaikovsky
|
|
Chief
Financial Officer
|
|
May
2008
|
Wei
Wen
|
|
Director
and Secretary
|
|
November
2005
|
Mark
D. Chen
|
|
Director
|
|
May
2009
|
R.
Scott Cramer
|
|
Director
|
|
July
2008
|
Qiang
Fan
|
|
Director
|
|
July
2008
|
Chengtun
Qu
|
|
Director
|
|
July
2008
|
Shaoguo
Zhao
|
|
Director
|
|
July
2008
|
Arrangements
Involving Directors or Executive Officers
There is
no arrangement or understanding between any of our directors or executive
officers and any other person pursuant to which any director or officer was or
is to be selected as a director or officer, and there is no arrangement, plan,
or understanding as to whether non-management shareholders will exercise their
voting rights to continue to elect the current board of directors. There are
also no arrangements, agreements, or understandings to our knowledge between
non-management shareholders that may directly or indirectly participate in or
influence the management of our affairs.
Family
Relationships
There are
no family relationships among our directors and executive officers.
Business
Experience
The
business experience of the Company’s directors, including all executive officers
serving as directors, is provided above. The experience of the Company’s
executive officers who are not also directors is described
below.
Bennet P. Tchaikovsky, Chief
Financial Officer,
is presently also the chief financial officer of China
Jo-Jo Drugstores, Inc., which he performs on a part-time basis. He served on the
board of directors of Ever-Glory International Group, Inc., as chairman of
the audit committee and member of the compensation committee, from March 2008 to
November 2009, and on the board of directors of Sino Clean Energy, Inc., as
chairman of the audit committee and member of the compensation and nominating
committees, from December 2008 to November 2009. From July 2004 through October
2007, Mr. Tchaikovsky served as the chief financial officer of Innovative Card
Technologies, Inc., and acted as a consultant that company from November
2007 until July 2008. Mr. Tchaikovsky is a licensed Certified Public Accountant
and an inactive member of the California State Bar. He received a B.A. in
Business Economics from the University of California at Santa Barbara, and a
J.D. from Southwestern University School of Law.
Legal
Proceedings
None of
our directors or executive officers has, during the past five
years:
|
·
|
had
any petition under the federal bankruptcy laws or any state insolvency law
filed by or against, or had a receiver, fiscal agent, or similar officer
appointed by a court for the business or property of such person, or any
partnership in which he was a general partner at or within two years
before the time of such filing, or any corporation or business association
of which he was an executive officer at or within two years before the
time of such filing;
|
|
·
|
been
convicted in a criminal proceeding or a named subject of a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
|
|
·
|
been
the subject of any order, judgment, or decree, not subsequently reversed,
suspended, or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining him from, or otherwise limiting, the following
activities:
|
|
(i)
|
acting as a futures commission
merchant, introducing broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction merchant, any other person
regulated by the Commodity Futures Trading Commission, or an associated
person of any of the foregoing, or as an investment adviser, underwriter,
broker or dealer in securities, or as an affiliated person, director or
employee of any investment company, bank, savings and loan association or
insurance company, or engaging in or continuing any conduct or practice in
connection with such
activity;
|
|
(ii)
|
engaging in any type of business
practice; or
|
|
(iii)
|
engaging in any activity in
connection with the purchase or sale of any security or commodity or in
connection with any violation of federal or state securities laws or
federal commodities
laws;
|
|
·
|
been
the subject of any order, judgment, or decree, not subsequently reversed,
suspended, or vacated, of any federal or state authority barring,
suspending, or otherwise limiting for more than 60 days the right of such
person to engage in any activity described in (i) above, or to be
associated with persons engaged in any such
activity;
|
|
·
|
been
found by a court of competent jurisdiction in a civil action or by the SEC
to have violated any federal or state securities law, where the judgment
in such civil action or finding by the SEC has not been subsequently
reversed, suspended, or vacated;
or
|
|
·
|
been
found by a court of competent jurisdiction in a civil action or by the
Commodity Futures Trading Commission to have violated any federal
commodities law, where the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended, or vacated.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our executive officers, directors, and
persons who beneficially own more than 10% of a registered class of our equity
securities to file with the SEC initial statements of beneficial ownership,
reports of changes in ownership, and annual reports concerning their ownership
of our common shares and other equity securities on Forms 3, 4, and 5
respectively. Executive officers, directors, and greater than 10%
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) reports they file. Based on a review of the copies of
such forms received by us, and to the best of our knowledge, all executive
officers, directors, and greater than 10% stockholders filed the required
reports during the fiscal year ended December 31, 2008 in a timely manner,
except that (i) one report was untimely filed and one transaction was untimely
reported for Mr. Tchaikovsky, (ii) one report was untimely filed for Mr. Fan,
(iii) one report was untimely filed for Mr. Qu, and (iv) one report was untimely
filed for Mr. Zhao.
Director
Independence
Our Board
has determined that it currently has 4 members who qualify as
"independent" as the term is used in Item 407 of Regulation S-K as promulgated
by the SEC and Nasdaq Equity Rule 5605(a)(2). The independent
directors are Mark D. Chen, Qiang Fan, Chengtun Qu and Shaoguo
Zhao. All of the members of our Audit Committee and Compensation
Committee qualify as independent.
Code
of Ethics
We have
adopted a code of ethics that applies to all directors, officers, and employees,
including our chief executive officer and chief financial officer, and members
of the Board. We will provide to any person, without charge and upon request, a
copy of the code of ethics. Any such request must be made in writing to the
Company, Attn: Corporate Secretary, Room 10601, Jiezuo Plaza, No.4, Fenghui Road
South, Gaoxin District, Xi’an, Shaanxi Province, People’s Republic of
China.
Indemnification
Section
78.7502 of the Nevada Revised Statutes permits a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or in the right
of the corporation, by reason of the fact that he is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise, against
expenses, including attorneys’ fees, judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if he:
|
(a)
|
is
not liable pursuant to Nevada Revised Statute 78.138,
or
|
|
|
|
(b)
|
acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
|
In
addition, Section 78.7502 permits a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against
expenses, including amounts paid in settlement and attorneys’ fees actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he:
|
(a)
|
is
not liable pursuant to Nevada Revised Statute 78.138;
or
|
|
(b)
|
acted
in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the
corporation.
|
To the
extent that a director, officer, employee, or agent of a corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to above, or in defense of any claim, issue or matter, the
corporation is required to indemnify him against expenses, including attorneys’
fees, actually and reasonably incurred by him in connection with the
defense.
Section
78.752 of the Nevada Revised Statutes allows a corporation to purchase and
maintain insurance or make other financial arrangements on behalf of any person
who is or was a director, officer, employee, or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise for any liability asserted against him and liability and
expenses incurred by him in his capacity as a director, officer, employee, or
agent, or arising out of his status as such, whether or not the corporation has
the authority to indemnify him against such liability and expenses.
Other
financial arrangements made by the corporation pursuant to Section 78.752 may
include the following:
|
(a)
|
the
creation of a trust fund;
|
|
(b)
|
the
establishment of a program of
self-insurance;
|
|
(c)
|
the
securing of its obligation of indemnification by granting a security
interest or other lien on any assets of the corporation;
and
|
|
(d)
|
the
establishment of a letter of credit, guaranty or
surety
|
No
financial arrangement made pursuant to Section 78.752 may provide protection for
a person adjudged by a court of competent jurisdiction, after exhaustion of all
appeals, to be liable for intentional misconduct, fraud, or a knowing violation
of law, except with respect to the advancement of expenses or indemnification
ordered by a court.
Any
discretionary indemnification pursuant to NRS 78.7502, unless ordered by a court
or advanced pursuant to an undertaking to repay the amount if it is determined
by a court that the indemnified party is not entitled to be indemnified by the
corporation, may be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee, or agent is proper in the circumstances. The determination must be
made:
|
(b)
|
by
the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or
proceeding;
|
|
(c)
|
if
a majority vote of a quorum consisting of directors who were not parties
to the action, suit or proceeding so orders, by independent legal counsel
in a written opinion, or
|
|
(d)
|
if
a quorum consisting of directors who were not parties to the action, suit
or proceeding cannot be obtained, by independent legal counsel in a
written opinion.
|
Our
bylaws also include indemnification provisions. Pursuant to the provisions of
the State of Nevada’s Revised Business Statutes, we have adopted the following
indemnification provisions in our bylaws for our directors and
officers:
“Section
8.1. Indemnification. No officer or director shall be personally liable for any
obligations arising out of any acts or conduct of said officer or director
performed for or on behalf of the Corporation. The Corporation shall and does
hereby indemnify and hold harmless each person and his heirs and administrators
who shall serve at any time hereafter as a director or officer of the
Corporation from and against any and all claims, judgments and liabilities to
which such persons shall become subject by reason of any action alleged to have
been heretofore or hereafter taken or omitted to have been taken by him as such
director or officer, and shall reimburse each such person for all legal and
other expenses reasonably incurred by him in connection with any such claim of
liability; including power to defend such person from all suits as provided for
under the provisions of the Nevada Corporation Laws; provided, however that no
such person shall be indemnified against, or be reimbursed for, any expense
incurred in connection with any claim or liability arising out of his own gross
negligence or willful misconduct. The rights accruing to any person under the
foregoing provisions of this section shall not exclude any other right to which
he may lawfully be entitled, nor shall anything herein contained restrict the
right of the Corporation to indemnify or reimburse such person in any proper
case, even though not specifically herein provided for. The Corporation, its
directors, officers, employees and agents shall be fully protected in taking any
action or making any payment or in refusing so to do in reliance upon the advice
of counsel.
Section
8.2. Other Indemnification. The indemnification herein provided shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any bylaw, agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer or employee and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
Section
8.3. Insurance. The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer or employee of the Corporation, or
is or was serving at the request of the Corporation in such capacity for another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any capacity, or arising
out of his status as such, whether or not the Corporation would have the power
to indemnify him against liability under the provisions of this Article VIII or
the laws of the State of Nevada.
Section
8.4. Settlement by Corporation. The right of any person to be indemnified shall
be subject always to the right of the Corporation by its Board of Directors, in
lieu of such indemnity, to settle any such claim, action, suit or proceeding at
the expense of the Corporation by the payment of the amount of such settlement
and the costs and expenses incurred in connection therewith.”
EXECUTIVE
AND DIRECTOR COMPENSATION
Summary
of Compensation
The
following summary compensation table indicates the cash and non-cash
compensation earned during the fiscal years ended December 31, 2008 and 2007 by
the chief executive officer and each of our other two highest paid executives
whose total compensation exceeded $100,000 during the fiscal years ended
December 31, 2008 and 2007 (if any).
SUMMARY COMPENSATION
TABLE
Name and
Principal Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weibing
Lu,
|
|
2008
|
|
|
66,028
|
(2)
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
66,028
|
|
current CEO
(1)
|
|
2007
|
|
|
8,400
|
(3)
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
8,400
|
(3)
|
(1)
|
Mr.
Lu received no other form of compensation in the years shown, other than
the salary set forth in this table.
|
(2)
|
On
May 5, 2008, we entered into an employment agreement with Mr. Lu pursuant
to which he is entitled to an initial annual compensation of $100,000 as
our Chief Executive Officer.
|
(3)
|
Mr.
Lu’s compensation for 2007 was paid in Chinese RMB which, for reporting
purposes, has been converted to U.S. dollars at the conversion rate of 7.6
RMB to one U.S. dollar.
|
Outstanding
Equity Awards at Fiscal Year-End
With the
exception of Mr. Bennet P. Tchaikovsky, there were no unexercised options,
unvested stock awards or equity incentive plan awards for any of our executive
officers outstanding as of December 31, 2008. Pursuant to the terms of his
employment under the Loanout Agreement (which terms are described below under
the heading “Loanout Agreement for the Services of Bennet P. Tchaikovsky”), Mr.
Tchaikovsky was granted 5,219 (post 10-for-1 reverse stock split effected on May
12, 2009) shares of our restricted common stock for his service period from May
5, 2008 through May 4, 2009, which shares were not issued pursuant to any equity
incentive plans in effect. As of December 31, 2008, Mr. Tchaikovsky received
2,609 shares, and the balance of 2,610 shares vested during the remainder of his
vesting period from January 1, 2009 through May 4, 2009.
Employment
Agreements, Termination of Employment and Change-in-Control
Arrangements
Except as
described below, we currently have no employment agreements with any of our
executive officers, nor any compensatory plans or arrangements resulting from
the resignation, retirement or any other termination of any of our executive
officers, from a change-in-control, or from a change in any executive officer’s
responsibilities following a change-in-control.
Employment
Agreement with Weibing Lu
On May 5,
2008, we entered into an Employment Agreement with Mr. Weibing Lu. Under the
terms of the Employment Agreement, we agreed to the continued employment of Mr.
Lu as our chief executive officer for a term of 5 years. Mr. Lu is to receive an
initial annual salary of $100,000, with an annual 5% increase of the prior
year’s salary thereafter during the term. Additionally, at the discretion of our
board of directors’ compensation committee, Mr. Lu may be eligible for an annual
bonus which amount, if any, and payment will be determined by the compensation
committee. Mr. Lu is entitled to medical, disability and life insurance, as well
as 4 weeks of vacation annually and reimbursement of all reasonable or
authorized business expenses.
During
its term, the Employment Agreement terminates upon Mr. Lu’s death, in which
event we are obligated to pay Mr. Lu’s estate his base salary amount through the
first anniversary of his death (or the expiration of the Employment Agreement if
earlier than the anniversary date), as well as pro rata allocation of any bonus
based on the days of service during the year of death, and all amounts owing to
Mr. Lu at the time of termination, including for previously accrued but unpaid
bonuses, expense reimbursements and accrued but unused vacation
pay.
If Mr. Lu
is unable to perform his obligations under the Employment Agreement for over 180
consecutive days during any consecutive 12 months period, we may terminate the
Employment Agreement by written notice to Mr. Lu delivered prior to the date
that he resumes his duties. Upon receipt of such written notice, Mr. Lu may
request a medical examination under which if he is certified to be incapable of
performing his obligations for over 2 additional months, the Employment
Agreement is terminated. We are obligated to pay Mr. Lu his base salary through
the second anniversary of our notice to him of his termination, less any amount
Mr. Lu may receive for such period from any Company-sponsored or Company-paid
for source of insurance, disability compensation or governmental program. We
will also pay Mr. Lu pro rata allocation of any bonus based on the days of
service during the year our notice is issued, and all amounts owing to Mr. Lu at
the time of termination, including for previously accrued but unpaid bonuses,
expense reimbursements and accrued but unused vacation pay.
We may
also terminate the Employment Agreement for cause, upon notice if at any time
Mr. Lu: (a) refuses in bad faith to carry out specific written directions of our
board of directors; (b) intentionally takes fraudulent or dishonest action in
his relations with us; (c) is convicted of a crime involving an act of
significant moral turpitude; or (d) knowingly commits an act or omits to act in
violation of our written policies, the Employment Agreement or any agreements
that we may have with third parties and that is materially damaging to our
business or reputation. However, termination for the cause described in (a), (b)
or (d) is predicated first on Mr. Lu receiving a 5-day written notice and a
reasonable opportunity to present his positions, then a subsequent written
notice of the termination, with the termination to take effect 20 business days
thereafter if Mr. Lu does not dispute the cause for the termination or fails to
take corrective actions in good faith. Thereafter, if Mr. Lu takes corrective
actions, he may be terminated for the same misconduct upon a 5-day written
notice.
On the
other hand, Mr. Lu may terminate the Employment Agreement upon written notice
if: (w) there is a material adverse change in the nature of his title, duties or
obligations; (x) we materially breach the Employment Agreement; (y) we fail to
make any payment to Mr. Lu (excepting any payment which is not material and
which we are contesting in good faith); or (z) there is a change of control of
the Company. However, termination for cause described in (w), (x) or (y) is
predicated on our receiving a written notice from Mr. Lu specifying the cause,
with the termination to take effect if we fail to take corrective action within
20 business days thereafter. If Mr. Lu terminates the Employment Agreement for
any one of these reasons, or if we terminate the Employment Agreement without
cause, we are obligated to pay to Mr. Lu (or in the case of his/her death, his
estate), his base salary and any bonus, without any offset, as well as all
amounts owing to Mr. Lu at the time of termination, including for previously
accrued but unpaid bonuses, expense reimbursements and accrued but unused
vacation pay.
The
Employment Agreement also contains restrictive covenants: (i) preventing the use
and/or disclosure of confidential information during or at any time after
termination; (ii) preventing competition with Skystar during his employment and
for a period of 3 years after termination (including contact with or
solicitation of Skystar’s customers, employees or suppliers), provided that Mr.
Lu may make investments of up to 2% in the publicly-traded equity securities of
any competitor of Skystar; (iii) requiring Mr. Lu to refer any business
opportunities to Skystar during his employment and for a period of 1 year after
termination. However, Mr. Lu shall have no further obligations with respect to
competition and business opportunities if his employment is terminated without
cause or if he terminates his employment for cause.
Lastly,
we are obligated under the Employment Agreement to indemnify Mr. Lu for any
claims made against him in his capacity as our chief executive officer and, in
connection to that obligation, we are required to include him under any director
and officer insurance policy that is in effect during his employment as our
officer, director or consultant.
Loanout
Agreement for the Services of Bennet P. Tchaikovsky
On May 5,
2008, we entered into a Loanout Agreement with Worldwide Officers, Inc., a
California corporation (“WOI”), pursuant to which we have retained the services
of Bennet P. Tchaikovsky to serve as our chief financial officer for a term of
one year. Under the terms of the Loanout Agreement, Mr. Tchaikovsky will perform
his duties from the United States on a part-time basis (90 hours per month), and
we agreed to pay an annual fee of $75,000 for Mr. Tchaikovsky’s services.
Additionally, Mr. Tchaikovsky will have the right to receive 52,173 (pre
10-for-1 reverse stock split effected on May 12, 2009) shares of our restricted
Common Stock, to vest in four installments every 3 calendar months, including
three installments of 13,043 shares and one installment of 13,044 shares. The
final installment vested on May 4, 2009.
The
Loanout Agreement terminates upon Mr. Tchaikovsky’s death. If Mr. Tchaikovsky is
unable to perform his obligations under the Loanout Agreement for over 45
consecutive days during the term of the Loanout Agreement, we may terminate the
Loanout Agreement by 10-day written notice to Mr. Tchaikovsky thereafter. We may
also terminate the Loanout Agreement for cause, upon notice if at any time Mr.
Tchaikovsky: (a) willfully breaches or habitually neglects his duties; or (b)
commits acts of dishonesty, fraud, misrepresentation, gross negligence or
willful misconduct that would prevent the effective performance of his duties or
would result in material harm to us or our business. Lastly, we may terminate
the Loanout Agreement without cause upon a 30-day written notice to Mr.
Tchaikovsky.
On the
other hand, Mr. Tchaikovsky may terminate the Loanout Agreement upon 90-day
written notice to Skystar.
The
Loanout Agreement also contains restrictive covenants: (i) preventing the use
and/or disclosure of confidential information during or at any time after
termination; (ii) preventing competition with Skystar during the term of the
Loanout Agreement and for a period of 3 years after termination (including
contact with or solicitation of Skystar’s customers, employees or suppliers),
provided that Mr. Tchaikovsky may make investments of up to 2% in the
publicly-traded equity securities of any competitor of Skystar; (iii) requiring
Mr. Tchaikovsky to refer any business opportunities to Skystar during the term
of the Loanout Agreement and for a period of 1 year after termination. However,
Mr. Tchaikovsky shall have no further obligations with respect to competition
and business opportunities if his employment is terminated without cause or if
he terminates his employment for cause.
Lastly,
we are obligated under the Loanout Agreement to indemnify Mr. Tchaikovsky for
any claims made against him in his capacity as our Chief Financial Officer and,
in connection to that obligation, we are required to include him under any
director and officer insurance policy that is in effect during the term of the
Loanout Agreement.
Amendment
to Loanout Agreement
Although
Mr. Tchaikovsky’s term under the Loanout Agreement expired on May 4, 2009, he
continued to act as our Chief Financial Officer at our request. On May 26, 2009,
we entered into an Amendment to Loanout Agreement (the “Amendment”) with WOI
pursuant to which we have continued our engagement of Mr. Tchaikovsky as our
Chief Financial Officer under the Loanout Agreement, subject to certain
modification of terms. The Amendment amends the Loanout Agreement by renewing
Mr. Tchaikovsky’s term for an additional 1-year period, beginning on May 5,
2009. Additionally, we will pay an annual fee of $75,000 for Mr. Tchaikovsky’s
services, in twelve monthly installments of $6,250 payable at the beginning of
each month. Mr. Tchaikovsky is entitled to receive 7,220 (pre 2-for-1 forward
stock split effected on November 16, 2009) restricted shares of the Company’s
common stock which will vest in four equal installments of 1,805 shares every
three calendar months, with the first installment to vest on August 5,
2009.
Compensation
of Directors
The
following table provides compensation information for our directors during the
fiscal year ended December 31, 2008:
Director
Compensation Table
Name
|
|
Year
|
|
Fees
Earned
or Paid in Cash
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All Other
Compensation
($)
|
|
Total
($)
|
Weibing
Lu
(1)
|
|
|
2008
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Erna
Gao
(1)(2)
|
|
|
2008
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Wei
Wen
(1)
|
|
|
2008
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Xinya
Zhang
(1)(2)
|
|
|
2008
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
R.
Scott Cramer
(3)
|
|
|
2008
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
99,900
|
|
|
|
99,900
|
|
Qiang
Fan
(4)
|
|
|
2008
|
|
|
|
14,055
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
14,055
|
|
Chengtun
Qu
(5)(8)
|
|
|
2008
|
|
|
|
1,368
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
1,368
|
|
Winston
Yen
(6)
|
|
|
2008
|
|
|
|
18,271
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
18,271
|
|
Shouguo
Zhao
(7)(8)
|
|
|
2008
|
|
|
|
3,420
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
3,420
|
|
(1)
|
We
do not have any compensation arrangements with these
directors.
|
(2)
|
Ms.
Erna Gao and Mr. Xinya Zhang resigned from our Board effective July 14,
2008.
|
(3)
|
The
compensation received by Mr. Cramer during fiscal 2008 was for services
unrelated to his duties as a director. The compensation was paid in the
form of 90,000 (pre 10-for-1 reverse stock split effected on May 12, 2009)
shares of the Company’s restricted common stock, authorized for issuance
on February 12, 2008 and which were not issued pursuant to any equity
incentive plans in effect. The fair market value of our common stock on
February 12, 2008 was $1.11 per
share.
|
(4)
|
Mr.
Qiang Fan was appointed to our board of directors effective July 14, 2008,
and is entitled to receive annual compensation of $30,000 for his services
rendered as a director, as well as chairman of the compensation and member
of the audit committee.
|
(5)
|
Dr.
Chengtun Qu was appointed to our board of directors effective July 14,
2008, and is entitled to receive annual compensation of RMB 20,000 for his
services rendered as a director.
|
(6)
|
Mr.
Winston Yen was appointed to our board of directors effective July 14,
2008, and is entitled to receive annual compensation of $39,000 for his
services rendered as a director, as well as chairman of the audit
committee and member of the compensation committee. Mr. Yen resigned from
our board of directors on May 26,
2009.
|
(7)
|
Dr.
Shouguo Zhao was appointed to our board of directors effective July 14,
2008, and is entitled to an annual compensation of RMB 50,000 for his
services rendered as a director, as well as a member of both the audit
committee and the compensation
committee.
|
(8)
|
For
reporting purposes in this table, compensations in RMB have been converted
to U.S. Dollars at the conversion rate of 6.85 RMB to one U.S.
Dollar.
|
Agreements
with Our Current Directors
Under our
agreement with Mr. Fan, he is entitled to receive annual compensation of $30,000
for his services rendered as a member of the Board, as well as the chairman of
the compensation committee and member of the audit committee. Mr. Fan’s annual
compensation is payable in cash, although at the discretion of the Board, up to
$8,000 of his annual compensation may be paid in the form of a number of shares
of the Company’s common stock under the Company’s Stock Incentive Plan #2 (the
“Plan”). During his term as a director, we agree to include Mr. Fan as an
insured under an officers and directors insurance policy which we will obtain
within a reasonable time (the “D&O Insurance”). In addition, we agree to
reimburse Mr. Fan for reasonable expenses incurred in connection with the
performance of duties as a director of the Company, including travel
expenses.
Under our
agreement with Dr. Qu, he is entitled to receive annual compensation of RMB
20,000 for his services rendered as a member of the Board. In addition, we agree
to reimburse Mr. Qu for reasonable expenses incurred in connection with the
performance of duties as a director of the Company, including travel
expenses.
Under our
agreement with Dr. Zhao, he is entitled to receive annual compensation of RMB
50,000 for his services rendered as a member of the Board, as well as a member
of both the audit committee and the compensation committee. In addition, we
agree to reimburse Mr. Zhao for reasonable expenses incurred in connection with
the performance of duties as a director of the Company, including travel
expenses.
Under our
agreement with Mr. Chen, he is entitled to receive annual compensation of
$14,000 for his services rendered as a member of the Board, as well as the
chairman of the audit committee and member of the compensation committee.
Additionally, Mr. Chen has the right to receive 2,778 (pre 2-for-1 forward stock
split effected on November 16, 2009) shares of our restricted common stock at
the beginning of each term of his directorship. We also agree to include Mr.
Chen as an insured under the D&O Insurance, and to reimburse him for
reasonable expenses incurred in connection with the performance of duties as a
director of the Company, including travel expenses.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding our common stock
beneficially owned on December 10, 2009, for (i) each stockholder known to be
the beneficial owner of 5% or more of our outstanding common stock, (ii) each
executive officer and director, and (iii) all executive officers and directors
as a group. In general, a person is deemed to be a “beneficial owner” of a
security if that person has or shares the power to vote or direct the voting of
such security, or the power to dispose or to direct the disposition of such
security. A person is also deemed to be a beneficial owner of any securities of
which the person has the right to acquire beneficial ownership within 60 days.
Shares of common stock subject to options, warrants or convertible securities
exercisable or convertible within 60 days of December 10, 2009 are deemed
outstanding for computing the percentage of the person or entity holding such
options, warrants or convertible securities but are not deemed outstanding for
computing the percentage of any other person. Percentages are determined based
on 6,982,420 common shares issued and outstanding as of December 10, 2009. To
the best of our knowledge, subject to community and marital property laws, all
persons named have sole voting and investment power with respect to such shares,
except as otherwise noted.
Title
of Class
|
|
Name
and Address
of
Beneficial Owners
(1)
|
|
Amount
of Beneficial
Ownership
(2)
|
|
|
Percent
of
Class
(2)
|
|
Common
Stock
|
|
Upform
Group Limited
(3)
|
|
|
939,126
|
|
|
|
13.45
|
%
|
Common
Stock
|
|
Weibing
Lu, Director and Chief Executive Officer
(3)
|
|
|
939,126
|
|
|
|
13.45
|
%
|
Common
Stock
|
|
Wei
Wen, Director
(4)
|
|
|
41,544
|
|
|
|
*
|
|
Common
Stock
|
|
Bennet
P. Tchaikovsky, Chief Financial Officer
(5)
|
|
|
17,658
|
|
|
|
*
|
|
Common
Stock
|
|
R.
Scott Cramer, Director
(6)
|
|
|
156,452
|
|
|
|
2.24
|
%
|
Common
Stock
|
|
Qiang
Fan, Director
(7)
|
|
|
-0-
|
|
|
|
0
|
%
|
Common
Stock
|
|
Chengtun
Qu, Director
(8)
|
|
|
-0-
|
|
|
|
0
|
%
|
Common
Stock
|
|
Mark
D. Chen, Director
(9)
|
|
|
5,556
|
|
|
|
*
|
|
Common
Stock
|
|
Shouguo
Zhao, Director
(10)
|
|
|
-0-
|
|
|
|
0
|
%
|
Common
Stock
|
|
Renaissance
US Growth Investment Trust PLC
(11)
|
|
|
583,376
|
|
|
|
8.35
|
%
|
Common
Stock
|
|
All
officers and directors as a group (8 total)
|
|
|
1,160,336
|
|
|
|
16.62
|
%
|
*
Less than 1%
(1)
|
Unless
otherwise noted, the address for each of the named beneficial owners is:
Rm. 10601, Jiezuo Plaza, No.4, Fenghui Road South, Gaoxin District, Xi’an,
Shaanxi Province, China.
|
(2)
|
Unless
otherwise noted, the number and percentage of outstanding shares of common
stock of Skystar is based upon 6,982,420 shares outstanding as of December
10, 2009.
|
(3)
|
Upform
Group Limited’s (“Upform Group”) address is Sea Meadow House, Blackburne
Highway, P.O. Box 116, Road Town, Tortola, British Virgin Islands. Weibing
Lu is a director of the Upform Group. Mr. Lu is the majority stockholder
and the Chairman of the Board of Directors of Upform Group, and thus Mr.
Lu indirectly owns the shares held by Upform Group, through his majority
ownership of Upform Group. Thus, the number of shares reported herein as
beneficially owned by Mr. Lu includes the shares held by Upform
Group.
|
(4)
|
The
number of shares reported herein as beneficially owned by Wei Wen are held
by Clever Mind International Limited, which address is: Sea Meadow House,
Blackburne Highway, P.O. Box 116, Road Town, Tortola, British Virgin
Islands. Mr. Wen is Chairman of the Board of Directors of Clever Mind and
owns approximately 2.3% of the issued and outstanding shares of Clever
Mind. Because Mr. Wen is a director of Clever Mind, he might be deemed to
have or share investment control over Clever Mind’s
portfolio.
|
(5)
|
Bennet
P. Tchaikovsky’s address is: 6571 Morningside Drive, Huntington Beach, CA
92648. Includes 7,220 shares that Mr. Tchaikovsky is entitled to receive
within 60 days of December 10,
2009.
|
(6)
|
R.
Scott Cramer’s address is: 1012 Lewis Dr., Winter Park, FL 32789. Includes
77,142 shares held by the Cramer Family Trust of which Mr. Cramer is the
sole trustee and sole primary beneficiary and 11,000 shares that Mr.
Cramer has the right to acquire beneficial ownership of within 60 days of
June 25, 2009.
|
(7)
|
Qiang
Fan’s address is: 9176 West Laguna Way, Elk Grove, CA
95758.
|
(8)
|
Chengtun
Qu’s address is: No. 18 Dian Zi 2nd Road, School of Chemistry &
Chemical Engineering, Xi'an Shiyou University, Xi'an,
China.
|
(9)
|
Mark
D. Chen’s address is: 10-64 #9 Jianguomenwai Avenue, Beijing, China
100600. Includes 5,556 shares that Mr. Chen is entitled to receive within
60 days of December 10, 2009.
|
(10)
|
Shouguo
Zhao’s address is: No. 229 North Tai Bai Road, School of Economics and
Management, Northwest University, Xi'an,
China.
|
(11)
|
Renaissance
US Growth Investment Trust PLC’s (“Renaissance”) address is: 8080 North
Central Expressway, Suite 210, Dallas, Texas 75206. Russell Cleveland is
the natural person who has voting power and the power to sell, transfer or
otherwise dispose of the common
stock.
|
Change
in Control
To the
knowledge of management, there are no present arrangements or pledges of
securities of our company that may result in a change of control of the
Company.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth
below are the related party receivables and payables between us and our officers
and/or directors as of the date set forth on the table.
|
|
September 30,
2009
|
|
|
December 30,
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
Short-term loans from
shareholders
|
|
|
|
|
|
|
Mr.
Weibing Lu – officer and shareholder
(1)
(2)
|
|
$
|
36,675
|
|
|
$
|
220,050
|
|
Mr.
Wei Wen – officer and shareholder
(2)
|
|
|
36,675
|
|
|
|
44,010
|
|
Ms.
Aixia Wang – shareholder
(2)
|
|
|
36,675
|
|
|
|
44,010
|
|
Total
|
|
$
|
110,025
|
|
|
$
|
308,070
|
|
|
|
|
|
|
|
|
|
|
Shares to be issued to related
party
|
|
|
|
|
|
|
|
|
Scott
Cramer – non-executive director
(3)
|
|
$
|
195,243
|
|
|
$
|
95,204
|
|
Mark
D Chen – non-executive director
(3)
|
|
|
25,002
|
|
|
|
—
|
|
Total
|
|
$
|
220,245
|
|
|
$
|
95,204
|
|
|
|
|
|
|
|
|
|
|
Amounts due (from) to related
parties
|
|
|
|
|
|
|
|
|
Bennet
P. Tchaikovsky – CFO
(4)
|
|
$
|
—
|
|
|
$
|
13,168
|
|
Scott
Cramer – non-executive director and shareholder
(4)
|
|
|
43,556
|
|
|
|
224,684
|
|
Shaanxi
Xingji Electronics Co. - owned by a director's wife
(4)
|
|
|
—
|
|
|
|
4,373
|
|
Officer
and shareholder
(4)
|
|
|
(55,612)
|
|
|
|
—
|
|
Total
|
|
$
|
(12,056)
|
|
|
$
|
242,225
|
|
(1)
|
In
2008, Weibing Lu obtained an unsecured personal loan in the amount of
$176,040 (RMB 1,500,000) from Huaxia Bank with annual interest rate
of 7.47% and advanced to Xian Tianxing to facilitate operations. Xian
Tianxing guaranteed the loan. The loan principal and related interest was
due on December 30, 2008. On January 4, 2009, Xian Tianxing paid the
full principal amount to the bank, with related interest of
$15,741.
|
(2)
|
On
May 29, 2008, Weibing Lu, Wei Wen and Aixia Wang obtained personal loans
from Yanta Credit Union and advanced cash to Xian Tianxing in the
total amount of $132,030 to facilitate operations. These loans, which were
due on May 29, 2009 with 8.436% interest per annum and guaranteed by Xian
Tianxing, were paid in full on May 29, 2009. On June 2, 2009, Mr. Lu,
Mr. Wen and Ms. Wang again obtained loans from the same bank and advanced
cash to Xian Tianxing in the total amount of $109,943. These loans are due
on June 1, 2010, with 10.11% interest per annum and are also guaranteed by
Xian Tianxing. For the three months and nine months ended September 30,
2009, Xian Tianxing paid interest of $ 0 and $5,630, respectively, for
these loans.
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(3)
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As
of September 30, 2009 and December 31, 2008, the Company had
$195,243 (representing 19,500 common shares) and $95,204
balances (representing 11,000 common shares),
respectively, under agreement to issue shares to Scott Cramer,
respectively, as compensation for being a representative of the Company in
the United States for the periods from May 2008 to June 30, 2009, and
December 31, 2008, respectively. In addition, as of September 30,
2009, the Company had $25,002 balance (representing 5,556 common shares)
under agreement to issue shares to Mr. Mark D Chen as compensation at the
beginning of each term of his
directorship.
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(4)
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Shaanxi
Xinji Electronics Co., Ltd. is owned by the wife of Weibing Lu. The
amounts due to Shaanxi Xinji Electronics as of September 30, 2009 and
December 31, 2008 were short-term cash transfers for business operations,
non-interest bearing, unsecured, and payable upon demand. As of September
30, 2009, the Company also had $55,612 receivable from officers
and shareholders for advance for short-term financing purposes. As of
September 30, 2009 and December 31, 2008, the Company also had amounts due
to Scott Cramer for the expenses paid by them on behalf of the
Company.
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Our
Officers and Directors’ Relationship with Us, Our Subsidiaries and
VIE
Mr.
Weibing Lu, our chairman and chief executive officer, is a director of Upform
Group Limited which, as of December 10, 2009, owned approximately 13.45% of the
Company’s issued and outstanding common stock. Mr. Bennet P. Tchaikovsky, our
chief financial officer, owned or had the right to approximately 0.25% of the
Company’s issued and outstanding common stock. Mr. Wei Wen, who is one of our
directors, is director of Clever Mind International Limited which, as of
December 10, 2009, owned approximately 0.59% of the Company’s issued and
outstanding common stock. Mr. Scott Cramer, who is also one of our directors,
owned and/or controlled approximately 2.24% of the Company’s issued and
outstanding common stock as of December 10, 2009. Mr. Lu and Mr. Wen are both
directors of Skystar Bio-Pharmaceutical (Cayman) Holdings Co., Ltd. (“Skystar
Cayman”), our wholly owned subsidiary.
Mr.
Cramer is director of Fortunate Time International Ltd. (“Fortunate Time”),
wholly owned subsidiary of Skystar Cayman.
The
management of Sida Biotechnology (Xian) Co., Ltd. (“Sida”), the wholly owned
subsidiary of Fortunate Time, includes Mr. Wen as general manager.
The
management of Xian Tianxing Bio-Pharmaceutical Co., Ltd. (“Xian Tianxing”),
which we control through contractual arrangements between Sida and Xian
Tianxing, includes Mr. Lu as chairman and chief executive officer and Mr. Wen as
vice-general manager and director. Mr. Lu also owns approximately 41%, and Mr.
Wen approximately 5%, of the issued and outstanding stock of Xian
Tianxing.
Mr. Wen
is the general manager of Shanghai Siqiang Biotechnological Co., Ltd. (“Shanghai
Siqiang”), wholly owned subsidiary of Xian Tianxing.
Other
Related Party Transactions
On
January 1, 2007, we entered into a 5-year lease agreement with Mr. Weibing Lu,
our chief executive officer, to lease the premises at Rm. 10601, Jiezuo Plaza,
No.4, Fenghui Road South, Gaoxin District, Xi’an, Shaanxi Province, China, which
belongs to Mr. Lu and which has been serving as our headquarters. The annual
rent under the lease agreement is RMB 165,600 (approximately $24,000). Mr. Lu
previously provided the premises rent-free, in 2005 and 2006, for the use of our
administrative division.
On June
17, 2007, Shanghai Siqiang entered into a 10-year lease agreement with Mr. Lu to
lease the premises at 1715 Zhongchu Road, Building F, Unit 1001, Shanghai,
China, which belongs to Mr. Lu. The annual rent under the lease agreement is RMB
144,000 (approximately $21,000).
SHAREHOLDER
PROPOSALS
Proposals
of shareholders of the Company that are intended to be presented by such
shareholders at the Company’s 2010 annual meeting of shareholders and that
shareholders desire to have included in the Company’s proxy materials relating
to such meeting must be received by the Company at its corporate offices no
later than March 31, 2010. Upon timely receipt of any such proposal, the Company
will determine whether or not to include such proposal in the proxy statement
and proxy in accordance with applicable regulations governing the solicitation
of proxies.
If a
shareholder wishes to present a proposal at the Company’s 2009 annual meeting or
to nominate one or more directors and the proposal is not intended to be
included in the Company’s proxy statement relating to the meeting, the
shareholder must give advance written notice to the Company by December 21,
2009. Pursuant to SEC Rule 14a-4(c)(1), if proposals are received prior to the
meeting they may be voted upon with the discretionary authority granted to the
proxies in this proxy statement and attached proxy card.
Any
shareholder filing a written notice of nomination for director must describe
various matters regarding the nominee and the shareholder, including such
information as name, address, occupation, and shares held. Any
shareholder filing a notice to bring other business before a shareholder meeting
must include in such notice, among other things, a brief description of the
proposed business and the reasons for the business, and other specified matters.
Copies of those requirements will be forwarded to any shareholder upon written
request.
SOLICITATION
The
Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing, and mailing of this proxy statement, the proxy
card, and any additional information furnished to shareholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries, and custodians holding in their names shares of common stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of common stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram, or
personal solicitation by directors, officers, or other regular employees of the
Company. No additional compensation will be paid to directors, officers, or
other regular employees for such services.
FORM
10-K – ANNUAL REPORT
Enclosed
herewith is the Company’s Annual Report on Form 10-K for our fiscal year ended
December 31, 2008. Additional copies may be requested in writing. Such requests
should be submitted to Corporate Secretary, Skystar Bio-Pharmaceutical Company,
Room 10601, Jiezuo Plaza, No.4, Fenghui Road South, Gaoxin District, Xi’an,
Shaanxi Province, People’s Republic of China. Exhibits to the Form 10-K will
also be provided upon specific request. The materials will be provided without
charge.
AUDIT
COMMITTEE REPORT
The Audit
Committee oversees the Company’s financial reporting process on behalf of the
Board of Directors. The Audit Committee operates under a written charter
approved by the Board. The charter provides, among other things, that the
Audit Committee has full authority to engage the independent auditor. The Audit
Committee has, with regards to the following oversight responsibilities with
respect to the audited financial statements included in the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2008:
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·
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reviewed and discussed the
audited financial statements with
management;
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·
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discussed with the independent
auditors the matters required to be discussed by the statement on Auditing
Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU
section 380), as adopted by the Public Company Accounting Oversight Board
in Rule 3200T;
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·
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received the written disclosures
and the letter from the independent accountants required by Independence
Standards Board Standard No. 1 (Independence Standards Board Standard No.
1, Independence Discussions with Audit Committees), as adopted by the
Public Company Accounting Oversight Board in Rule 3200T, and discussed
with the independent accountant the independent accountant’s independence;
and
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·
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based on the review and
discussions referred to above, recommended to the Board that the audited
financial statements be included in the Company’s Annual Report on Form
10-K for the fiscal year ended December 31,
2008.
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Respectfully
submitted,
The
Audit Committee of the Board of Directors
Mark D.
Chen, Chairman of the Audit Committee
OTHER
MATTERS
The Board
of Directors does not know of any other matters that will be presented for
consideration at the 2009 annual meeting. If any other matters are properly
brought before the 2009 annual meeting, the persons appointed as proxies will
vote on such matters in accordance with their best judgment.
* * * *
*
APPENDIX
A
SKYSTAR
BIO-PHARMACEUTICAL COMPANY
2010 STOCK INCENTIVE
PLAN
1.
Purpose
The
purpose of this 2010 Stock Incentive Plan (the “Plan”) of Skystar
Bio-Pharmaceutical Company, a Nevada corporation (the “Company”), is to advance
the interests of the Company’s shareholders by enhancing the Company’s ability
to attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company’s
shareholders. Except where the context otherwise requires, the term
“Company” shall include any of the Company’s present or future parent or
subsidiary corporations as defined in Sections 424(e) or (f) of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated
thereunder (the “Code”) and any other business venture (including, without
limitation, joint venture or limited liability company) in which the Company has
a controlling interest, as determined by the Board of Directors of the Company
(the “Board”).
2.
Eligibility
All of
the Company’s employees, officers, and directors, and those Company’s
consultants and advisors (i) that are natural persons and (ii) who provides bona
fide services to the Company not connected to a capital raising transaction or
the promotion or creation of a market for the Company’s securities,
are
eligible to be granted options or restricted stock awards (each, an “Award”)
under the Plan. Each person who has been granted an Award under the
Plan shall be deemed a “Participant”.
3.
Administration and
Delegation
(a)
Administration by Board of
Directors
. The Plan will be administered by the
Board. The Board shall have authority to grant Awards and to adopt,
amend and repeal such administrative rules, guidelines and practices relating to
the Plan as it shall deem advisable. The Board may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or any
Award in the manner and to the extent it shall deem expedient to carry the Plan
into effect and it shall be the sole and final judge of such
expediency. All decisions by the Board shall be made in the Board’s
sole discretion and shall be final and binding on all persons having or claiming
any interest in the Plan or in any Award. No director or person
acting pursuant to the authority delegated by the Board shall be liable for any
action or determination relating to or under the Plan made in good
faith.
(b)
Appointment of
Committees
. To the extent permitted by applicable law, the
Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a “Committee”) Board so long as such
Committee consists of not less than two members, each member of which shall be
an “outside director” within the meaning of Section 162(m) of the Code and a
“non-employee director” as defined in Rule 16b-3 promulgated under the Exchange
Act.”.
4.
Stock Available for
Awards
(a)
Number of
Shares
. Subject to adjustment under Section 7, Awards may be
made under the Plan for up to Seven Hundred Thousand (700,000) shares of common
stock, $0.001 par value per share, of the Company (the “Common
Stock”). If any Award expires or is terminated, surrendered or
canceled without having been fully exercised or is forfeited in whole or in part
(including as the result of shares of Common Stock subject to such Award being
repurchased by the Company at the original issuance price pursuant to a
contractual repurchase right) or results in any Common Stock not being issued,
the unused Common Stock covered by such Award shall again be available for the
grant of Awards under the Plan, subject, however, in the case of ISOs (as
hereinafter defined), to any limitations under the Code. Shares
issued under the Plan may consist in whole or in part of authorized but unissued
shares or treasury shares.
(b)
Per-Participant
Limit
. Subject to adjustment under Section 7, the maximum
number of shares of Common Stock with respect to which Awards may be granted to
any Participant under the Plan shall be an amount no greater than 233,333 or an
amount permitted under Section 162(m) of the Code (“Section
162(m)”).
5.
Stock
Options
(a)
General
. The
Board may grant options to purchase Common Stock (each, an “Option”) and
determine the number of shares of Common Stock to be covered by each Option, the
exercise price of each Option and the conditions and limitations applicable to
the exercise of each Option, including conditions relating to applicable federal
or state securities laws, as it considers necessary or advisable. An
Option which is not intended to be an ISO (as hereinafter defined) shall be
designated a “Nonstatutory Stock Option”.
(b)
Incentive Stock
Options
. An Option that the Board intends to be an “incentive
stock option” as defined in Section 422 of the Code (an “ISO”) shall only be
granted to employees of the Company and shall be subject to and shall be
construed consistently with the requirements of Section 422 of the
Code. Without limiting the generality of the foregoing, this means
that the exercise price of an ISO must be at least 100% of the fair market value
of the Common Stock on the date of grant (or 110% in the case of a Participant
that owns more than 10% of the total combined voting power of all classes of
stock of the Company or its parent or subsidiary (a “10% Shareholder”)) for the
option to qualify as an ISO. The Final Exercise Date must be no more
than 10 years (or 5 years in the case of a 10% Shareholder) from the date of
grant for the option to qualify as an ISO.
(c)
Exercise Price
. The
Board shall establish the exercise price at the time each Option is granted and
specify it in the applicable option agreement.
(d)
Duration of
Options
. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
option agreement.
(e)
Exercise of
Option
. Options may be exercised by delivery to the Company of
a written notice of exercise signed by the proper person or by any other form of
notice (including electronic notice) approved by the Board together with payment
in full as specified in Section 5(f) for the number of shares for which the
Option is exercised.
(f)
Payment Upon
Exercise.
Common Stock purchased upon the exercise of an
Option granted under the Plan shall be paid for as follows:
(1) in
cash or by check, payable to the order of the Company;
(2) except
as the Board may, in its sole discretion, otherwise provide in an option
agreement, by (i) delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price and any required tax withholding or (ii) delivery by the
Participant to the Company of a copy of irrevocable and unconditional
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price and any required tax
withholding;
(3) when
the Common Stock is registered under the Securities Exchange Act of 1934 (the
“Exchange Act”), by delivery of shares of Common Stock owned by the Participant
valued at their fair market value as determined by (or in a manner approved by)
the Board in good faith (“Fair Market Value”), provided (i) such method of
payment is then permitted under applicable law and (ii) such Common Stock, if
acquired directly from the Company was owned by the Participant at least six
months prior to such delivery;
(4) to
the extent permitted by the Board, in its sole discretion in the applicable
option agreement by (i) delivery of a promissory note of the Participant to the
Company on terms determined by the Board, or (ii) payment of such other
lawful consideration as the Board may determine; or
(5) by
any combination of the above permitted forms of payment.
(g)
Substitute
Options
. In connection with a merger or consolidation of an
entity with the Company or the acquisition by the Company of property or stock
of an entity, the Board may grant Options in substitution for any options or
other stock or stock-based awards granted by such entity or an affiliate
thereof. Substitute Options may be granted on such terms as the Board
deems appropriate in the circumstances, notwithstanding any limitations on
Options contained in the other sections of this Section 5 or in Section
2.
6.
Restricted
Stock
.
(a)
Grants
. The
Board may grant Awards entitling recipients to acquire shares of Common Stock,
subject to the right of the Company to repurchase all or part of such shares at
their issue price or other stated or formula price (or to require forfeiture of
such shares if issued at no cost) from the recipient in the event that
conditions specified by the Board in the applicable Award are not satisfied
prior to the end of the applicable restriction period or periods established by
the Board for such Award (each, a “Restricted Stock Award”).
(b)
Terms and
Conditions
. The Board shall determine the terms and conditions
of any such Restricted Stock Award, including the conditions for repurchase (or
forfeiture) and the issue price, if any.
(c)
Stock
Certificates
. Any stock certificates issued in respect of a
Restricted Stock Award shall be registered in the name of the Participant and,
unless otherwise determined by the Board, deposited by the Participant, together
with a stock power endorsed in blank, with the Company (or its
designee). At the expiration of the applicable restriction periods,
the Company (or such designee) shall deliver the certificates no longer subject
to such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant’s death (the “Designated Beneficiary”). In the absence of
an effective designation by a Participant, Designated Beneficiary shall mean the
Participant’s estate.
7.
Adjustments for Changes in
Common Stock and Certain Other Events
(a)
Changes in
Capitalization
. In the event of any stock split, reverse stock
split, stock dividend, recapitalization, combination of shares, reclassification
of shares, spin-off or other similar change in capitalization or event, or any
distribution to holders of Common Stock other than a normal cash dividend, (i)
the number and class of securities available under this Plan, (ii) the
per-Participant limit set forth in Section 4(b), (iii) the number and class of
securities and exercise price per share subject to each outstanding Option, and
(iv) the repurchase price per share subject to each outstanding Restricted Stock
Award shall be appropriately adjusted by the Company (or substituted Awards may
be made, if applicable) to the extent the Board shall determine, in good faith,
that such an adjustment (or substitution) is necessary and
appropriate. If this Section 7(a) applies and Section 7(c) also
applies to any event, Section 7(c) shall be applicable to such event, and this
Section 7(a) shall not be applicable.
(b)
Liquidation or
Dissolution
. In the event of a proposed liquidation or
dissolution of the Company, the Board shall upon written notice to the
Participants provide that all then unexercised Options will (i) become
exercisable in full as of a specified time at least 10 business days prior to
the effective date of such liquidation or dissolution and (ii) terminate
effective upon such liquidation or dissolution, except to the extent exercised
before such effective date. The Board may specify the effect of a
liquidation or dissolution on any Restricted Stock Award granted under the Plan
at the time of the grant.
(c)
Reorganization
Events
(1)
Definition
. A
“Reorganization Event” shall mean: (a) any merger or consolidation of
the Company with or into another entity as a result of which all of the Common
Stock of the Company is converted into or exchanged for the right to receive
cash, securities or other property or (b) any exchange of all of the Common
Stock of the Company for cash, securities or other property pursuant to a share
exchange transaction.
(2)
Consequences of a
Reorganization Event on Options
. Upon the occurrence of a
Reorganization Event, or the execution by the Company of any agreement with
respect to a Reorganization Event, the Board shall provide that all outstanding
Options shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof). For
purposes hereof, an Option shall be considered to be assumed if, following
consummation of the Reorganization Event, the Option confers the right to
purchase, for each share of Common Stock subject to the Option immediately prior
to the consummation of the Reorganization Event, the consideration (whether
cash, securities or other property) received as a result of the Reorganization
Event by holders of Common Stock for each share of Common Stock held immediately
prior to the consummation of the Reorganization Event (and if holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided,
however, that if the consideration received as a result of the Reorganization
Event is not solely common stock of the acquiring or succeeding corporation (or
an affiliate thereof), the Company may, with the consent of the acquiring or
succeeding corporation, provide for the consideration to be received upon the
exercise of Options to consist solely of common stock of the acquiring or
succeeding corporation (or an affiliate thereof) equivalent in fair market value
to the per share consideration received by holders of outstanding shares of
Common Stock as a result of the Reorganization Event.
Notwithstanding
the foregoing, if the acquiring or succeeding corporation (or an affiliate
thereof) does not agree to assume, or substitute for, such Options, then the
Board shall, upon written notice to the Participants, provide that all then
unexercised Options will become exercisable in full as of a specified time prior
to the Reorganization Event and will terminate immediately prior to the
consummation of such Reorganization Event, except to the extent exercised by the
Participants before the consummation of such Reorganization Event; provided,
however, that in the event of a Reorganization Event under the terms of which
holders of Common Stock will receive upon consummation thereof a cash payment
for each share of Common Stock surrendered pursuant to such Reorganization Event
(the “Acquisition Price”), then the Board may instead provide that all
outstanding Options shall terminate upon consummation of such Reorganization
Event and that each Participant shall receive, in exchange therefor, a cash
payment equal to the amount (if any) by which (A) the Acquisition Price
multiplied by the number of shares of Common Stock subject to such outstanding
Options (whether or not then exercisable), exceeds (B) the aggregate exercise
price of such Options. To the extent all or any portion of an Option becomes
exercisable solely as a result of the first sentence of this paragraph, upon
exercise of such Option the Participant shall receive shares subject to a right
of repurchase by the Company or its successor at the Option exercise
price. Such repurchase right (1) shall lapse at the same rate as the
Option would have become exercisable under its terms and (2) shall not apply to
any shares subject to the Option that were exercisable under its terms without
regard to the first sentence of this paragraph.
(3)
Consequences of a
Reorganization Event on Restricted Stock Awards
. Upon the
occurrence of a Reorganization Event, the repurchase and other rights of the
Company under each outstanding Restricted Stock Award shall inure to the benefit
of the Company’s successor and shall apply to the cash, securities or other
property which the Common Stock was converted into or exchanged for pursuant to
such Reorganization Event in the same manner and to the same extent as they
applied to the Common Stock subject to such Restricted Stock Award.
8.
General Provisions
Applicable to Awards
(a)
Transferability of
Awards
. Except as the Board may otherwise determine or provide
in an Award, Awards shall not be sold, assigned, transferred, pledged or
otherwise encumbered by the person to whom they are granted, either voluntarily
or by operation of law, except by will or the laws of descent and distribution,
and, during the life of the Participant, shall be exercisable only by the
Participant. References to a Participant, to the extent relevant in
the context, shall include references to authorized transferees.
(b)
Documentation
. Each
Award shall be evidenced in such form (written, electronic or otherwise) as the
Board shall determine. Such written instrument may be in the form of
an agreement signed by the Company and the Participant or a written confirming
memorandum to the Participant from the Company. Each Award may
contain terms and conditions in addition to those set forth in the
Plan.
(c)
Board
Discretion
. Except as otherwise provided by the Plan, each
Award may be made alone or in addition or in relation to any other
Award. The terms of each Award need not be identical, and the Board
need not treat Participants uniformly.
(d)
Termination of
Status
. The Board shall determine the effect on an Award of
the disability, death, retirement, authorized leave of absence or other change
in the employment or other status of a Participant and the extent to which, and
the period during which, the Participant, the Participant’s legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.
(e)
Withholding
. Each
Participant shall pay to the Company, or make provision satisfactory to the
Board for payment of, any taxes required by law to be withheld in connection
with Awards to such Participant no later than the date of the event creating the
tax liability. Except as the Board may otherwise provide in an Award,
when the Common Stock is registered under the Exchange Act, Participants may
satisfy such tax obligations in whole or in part by delivery of shares of Common
Stock, including shares retained from the Award creating the tax obligation,
valued at their Fair Market Value; provided, however, that the total tax
withholding where stock is being used to satisfy such tax obligations cannot
exceed the Company’s minimum statutory withholding obligations (based on minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes, that are applicable to such supplemental taxable
income). The Company may, to the extent permitted by law, deduct any
such tax obligations from any payment of any kind otherwise due to a
Participant.
(f)
Amendment of
Award
. The Board may amend, modify or terminate any
outstanding Award, including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, and converting an ISO to a Nonstatutory Stock Option, provided that
the Participant’s consent to such action shall be required unless the Board
determines that the action, taking into account any related action, would not
materially and adversely affect the Participant.
(g)
Conditions on Delivery of
Stock
. The Company will not be obligated to deliver any shares
of Common Stock pursuant to the Plan or to remove restrictions from shares
previously delivered under the Plan until (i) all conditions of the Award have
been met or removed to the satisfaction of the Company, (ii) in the opinion
of the Company’s counsel, all other legal matters in connection with the
issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market
rules and regulations, and (iii) the Participant has executed and delivered to
the Company such representations or agreements as the Company may consider
appropriate to satisfy the requirements of any applicable laws, rules or
regulations.
(h)
Acceleration
. The
Board may at any time provide that any Award shall become immediately
exercisable in full or in part, free of some or all restrictions or conditions,
or otherwise realizable in full or in part, as the case may be.
9.
Miscellaneous
(a)
No Right To Employment or
Other Status
. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to continued employment or any other relationship with the
Company. The Company expressly reserves the right at any time to
dismiss or otherwise terminate its relationship with a Participant free from any
liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b)
No Rights As
Shareholder
. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
shareholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such
shares. Notwithstanding the foregoing, in the event the Company
effects a split of the Common Stock by means of a stock dividend and the
exercise price of and the number of shares subject to such Option are adjusted
as of the date of the distribution of the dividend (rather than as of the record
date for such dividend), then an optionee who exercises an Option between the
record date and the distribution date for such stock dividend shall be entitled
to receive, on the distribution date, the stock dividend with respect to the
shares of Common Stock acquired upon such Option exercise, notwithstanding the
fact that such shares were not outstanding as of the close of business on the
record date for such stock dividend.
(c)
Effective Date and Term of
Plan
. The Plan shall become effective on the date on which it
is adopted by the Board, but no Award granted to a Participant that is intended
to comply with Section 162(m) shall become exercisable, vested or realizable, as
applicable to such Award, unless and until the Plan has been approved by the
Company's shareholders to the extent shareholder approval is required by Section
162(m) in the manner required under Section 162(m) (including the vote required
under Section 162(m)). No Awards shall be granted under the Plan
after the completion of ten years from the earlier of (i) the date on which the
Plan was adopted by the Board or (ii) the date the Plan was approved by the
Company’s shareholders, but Awards previously granted may extend beyond that
date.
(d)
Amendment of
Plan
. The Board may amend, suspend or terminate the Plan or
any portion thereof at any time, provided that to the extent required by Section
162(m), no Award granted to a Participant that is intended to comply with
Section 162(m) after the date of such amendment shall become exercisable,
realizable or vested, as applicable to such Award, unless and until such
amendment shall have been approved by the Company’s shareholders if required by
Section 162(m) (including the vote required under Section 162(m)).
(e)
Governing
Law
. The provisions of the Plan and all Awards made hereunder
shall be governed by and interpreted in accordance with the laws of the State of
Nevada, without regard to any applicable conflicts of law.
Skystar Bio-Pharmaceutical Company (MM) (NASDAQ:SKBID)
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