LOCK BOX AGREEMENT
Exhibit
2.4
The
parties to this Agreement are Smart
Online, Inc., a
Delaware corporation (the “Buyer”), iMart
Incorporated, a
Michigan corporation (the “Company”), and the Shareholders
of the Company (the
“Sellers”).
The
Buyer, the Sellers, and the Company have entered into a Stock Purchase Agreement
dated October 17 , 2005 (the “Stock Purchase Agreement”). All terms not
otherwise defined herein shall have the meaning ascribed to them in the Stock
Purchase Agreement. Pursuant to Section 3.2 of the Stock Purchase Agreement,
the
Sellers are to have a security interest in all proceeds received by Company
from
the operation of the Business for a period of time. Further, pursuant to Section
3.2 of the Stock Purchase Agreement, the proceeds are to be subject to a lock
box arrangement. This Agreement sets forth the terms and procedures of the
lock
box arrangement.
The
Buyer, the Sellers, and the Company agree as follows:
1. Security
Interest in Proceeds.
The
Company hereby grants to the Sellers a security interest in all cash, checks,
drafts, and other instruments for the payment of money at any time received
by
the Company as proceeds from the operation of the Business (the “Proceeds”). The
Proceeds shall be held separate and apart from the Company’s other assets and
properties subject to the security interest of the Sellers pursuant to this
Agreement. The security interest shall continue until January 5, 2007, or such
later date until all of the Installment Payments and all Noncompetition Payments
due on or before January 5, 2007 have been made.
2. Lock
Box Account.
The
Company shall at its sole expense establish and maintain in its name a lock
box
account at the bank where the Company maintains its primary deposit accounts
(“Lock Box Account” and “Bank”) pursuant to the banking resolutions and account
agreement attached as exhibits to this Agreement.. The Company shall give
written notice to all of its present and future account debtors and other
persons now or in the future obligated to pay Proceeds to the Company (the
“Company’s Debtors”) directing them (a) to send directly to the Bank’s lock box
all payments other than payments by electronic funds transfers, and (b) to
make
all electronic funds transfer payments directly to the Lock Box Account. The
Company shall include this direction on all of its invoices and other demands
and payment notices that it at any time sends to the Company’s Debtors. All
withdrawals from the Lock Box Account shall be made only pursuant to Section
3
of this Agreement.
3. Disposition
of Proceeds.
(a) The
Proceeds shall be used only for payment of (i) the Projected Operating Expenses,
(ii) the Installment Payments, and (iii) the Noncompetition
Payments.
(b) All
withdrawals from the Lock Box Account only upon the written authorization of
both (i) Xxxx Xxxxxx, Xxxxxxxxx Xxxxxx, or other person designated from time
to
time by the Sellers to act on their behalf with respect to the account, and
(ii)
Xxxxxxx Xxxxx, Xxxxx Xxxxxxxx, or other person designated from time to time
by
the Buyer to act on the Buyer’s behalf with respect to the account The persons
described in this paragraph (b) shall promptly execute such written
authorizations as may be necessary or appropriate from time to time to authorize
withdrawals from the Lock Box Account for the purposes described in paragraph
(a),
and
shall not unreasonably withhold, condition, or delay such written
authorizations.
(c) Any
Lock
Box Excess, subject to Section 8.17(g) of the Stock Purchase Agreement, shall
be
released from the Lock Box Account and paid to the Buyer free and clear of
any
security interest of the Sellers.
(d) To
the
extent that collected funds remain on deposit in the Lock Box Account or any
payments remain in the Bank’s lock box after all of the Installment Payments
have been paid in full, and if at that time the Noncompetition Payments are
not
in default, the remaining funds and payments shall be released to the
Company.
4. Modifications.
No
provision of this Agreement may be modified, supplemented, or waived in any
manner other than by a writing signed by the Sellers.
5. Term.
This
Agreement and any security interest granted to Sellers pursuant hereto or under
the Stock Purchase Agreement shall terminate upon payment of the Installment
Payments and any Noncompetition Payments that are due and payable on or before
January 5, 2007.
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This
Agreement is dated October ____ , 2005.
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Buyer
Smart
Online, Inc., a Delaware corporation
By:
/s/
Xxxxxxx Xxxxx
Name:Xxxxxxx
Xxxxx
Title:
President
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Company
iMart
Incorporated, a Michigan corporation
By:
/s/
Xxxx Xxxxxx
Name:
Xxxx Xxxxxx
Title:
President
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Sellers
/s/
Xxxx Xxxxxx
Xxxx
Xxxxxx
/s/
Xxxxxxxxx Xxxxxx
Xxxxxxxxx
Xxxxxx
/s/
Xxx Xxx Xxxxxx Xxxxx
Xxx
Xxx Xxxxxx Xxxxx
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