LOCK-UP/LEAK-OUT AGREEMENT
THIS LOCK-UP/LEAK-OUT AGREEMENT (the "Agreement" is made and
entered into as of the ____ day of October, 2001, by and among Wizzard
Software Corporation, a Colorado corporation (the "Company"), and Xxxxx
Xxxxxxxxx ("Xxxxxxxxx"), as a shareholder of record of certain shares of
common stock of the Company, with an address of P. O. Xxx 00, Xxxxxxx, Xxx
Xxxx 00000.
RECITALS:
WHEREAS, Xxxxxxxxx is the record owner of 20,000 Warrants to
purchase 20,000 shares (the "Shares") of the Common Stock of the Company; and
WHEREAS, in order to facilitate an orderly market for the Common
Stock of the Company, the undersigned desire to enter into this Agreement and
restrict the sale, assignment, transfer, conveyance, hypothecation or
alienation of the Common Stock, all on the terms set forth below.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained herein, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Notwithstanding anything contained in this Agreement,
Xxxxxxxxx may transfer its shares of Common Stock to its affiliates, partners
in a partnership, subsidiaries and trusts, spouses or lineal descendants for
estate planning purposes provided that the transferee (or the legal
representative of the transferee) executes an agreement to be bound by all of
the terms of this Agreement.
2. Xxxxxxxxx may only sell Shares subject to the following
conditions:
2.1. Xxxxxxxxx shall be allowed to sell Shares in blocks of
5,000 Shares or less per transaction.
2.2. The Shares may only be sold at the "offer" or "ask"
price stated by the relevant market maker. Xxxxxxxxx agrees that it will not
sell Shares at the "bid" price.
2.3. After Xxxxxxxxx sells 5,000 Shares, Xxxxxxxxx may not
sell any other Shares unless the "offer" or "ask " price of the Common Stock
increases by .25 basis points above Xxxxxxxxx'x last sale price. The sale of
the next 5,000 Shares, however, may take place at a price less than the prior
sale price plus .25 basis points. (For example, Xxxxxxxxx sells 5,000 Shares
at a price of $10 1/2. If the "ask" price then increases to $10 3/4,
Xxxxxxxxx may sell an additional 5,000 Shares and such sale may occur at a
price less than $10 3/4).
2.4. Notwithstanding the foregoing, if, after Xxxxxxxxx
sells 5,000 Shares, a market maker in the Common Stock (other than the market
maker involved in the first transaction) continues to show an "offer" or "ask"
price at the same price as the first 5,000 Share transaction, Xxxxxxxxx may,
on one occasion only, sell an additional 5,000 Shares at that price.
2.5. The Shares may not be sold at a price below $1.00 per
share.
2.6. Xxxxxxxxx shall be allowed to sell up to fifteen (15%)
percent of its Shares held as of the date hereof during each three month
period; provided, however, that in the event Xxxxxxxxx does not sell its full
15% during any three-month period, Xxxxxxxxx may sell the difference between
15% of the Shares held as of the date hereof and the Shares actually sold
during such three-month period in the next successive three-month period.
2.7. Xxxxxxxxx agrees that it will not engage in any short
selling of the Shares.
3. All 20,000 of the Shares owned as outlined herein shall be
included in the next registration statement to be filed with the Securities
and Exchange Commission (the "Registration Statement") of Wizzard for the
benefit of Xxxxxxxxx, at no cost to him.
4. Upon the effective date of the Registration Statement (the
"Effective Date"), Xxxxxxxxx may commence the resale of the Shares as provided
herein, and these resale limitations shall continue with respect to all shares
for a period of twelve months from the Effective Date.
5. Xxxxxxxxx agrees that all of its Shares are covered by all
of the restrictions hereunder, whether such Shares are owned on the date
hereof or are hereafter acquired (whether by issuance, transfer, upon exercise
of any warrants or options currently held by Xxxxxxxxx or otherwise).
6. This Agreement shall terminate twelve months from the
Effective Date, and thereafter all provisions contained herein shall cease and
be of no further force or effect.
7. Notwithstanding anything to the contrary set forth herein,
the Company may, at any time and from time to time, waive any of the
conditions or restrictions contained herein to increase the liquidity of the
Common Stock or if such waiver would otherwise be in the best interests of the
development of the trading market for the Common Stock.
8. In the event of a tender offer to purchase all or
substantially all of the Company's issued and outstanding securities, or a
merger, consolidation or other reorganization with or into an unaffiliated
entity, this Agreement shall terminate and the Shares restricted pursuant
hereto shall be released from such restrictions if the requisite number of the
record and beneficial owners of the Company's securities then outstanding are
voted in favor of such tender offer, merger, consolidation or reorganization.
9. Except as otherwise provided in this Agreement or any other
agreements between the parties, Xxxxxxxxx shall be entitled to its respective
beneficial rights of ownership of the Shares, including the right to vote the
Shares for any and all purposes.
10. The Shares and per share price restrictions covered by this
Agreement shall be appropriately adjusted should the Company make a dividend
or distribution, undergo a forward split or a reverse split or otherwise
reclassify its shares of Common Stock.
11. This Agreement may be executed in any number of counterparts
with the same force and effect as if all parties had executed the same
document.
12. All notices, instructions or other communications required
or permitted to be given pursuant to this Agreement shall be given in writing
and delivered by certified mail, return receipt requested, overnight delivery
or hand-delivered to all parties to this Agreement at the addresses set forth
above. All notices shall be deemed to be given on the same day if delivered
by hand or on the following business day if sent by overnight delivery or the
second business day following the date of mailing.
13. This Agreement sets forth the entire understanding of the
parties hereto with respect to the subject matter hereof, and may not be
amended except by a written instrument executed by the parties hereto.
14. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado applicable to contracts
entered into and to be performed wholly within said State.
IN WITNESS WHEREOF, the undersigned have duly executed and
delivered this Agreement as of the day and year first above written.
WIZZARD SOFTWARE CORPORATION
By/s/Xxxxxxxxxxx X. Xxxxxxx
Xxxxxxxxxxx X. Xxxxxxx, President
/s/Xxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxx
