LOCK-UP AGREEMENT REGARDING THE ISSUANCE OF PUBCO
MERGER SHARES
OF
DOBI MEDICAL SYSTEMS, INC. COMMON STOCK
DOBI Medical Systems, Inc. ("DOBI" or the "Company") plans to enter
into a reverse merger transaction (the "Reverse Merger") with a publicly-traded
company, concurrent with a private placement of equity securities (the "Funding
Transactions"). The public-traded company, which is called ("Pubco") for
purposes of this agreement, will then succeed to and operate the medical device
business of DOBI under the current management of DOBI. We expect to close these
Funding Transactions within the next several weeks. Pubco is not identified at
this time due to securities regulations regarding knowledge of upcoming
transactions involving public-traded securities.
Dynamics Imaging, Inc., a Delaware corporation ("DII"), is the current
holder of 4 million outstanding shares of Common Stock of DOBI ("Common Stock")
which will be converted into common stock of Pubco in connection with the
Funding Transactions. For the purposes of the lock-up agreements required by the
Funding Transactions, DII's Common Stock is included in the total of 20,076,855
shares currently held (and to be held as Pubco Merger Shares subsequent to the
Reverse Merger) by DII, Xxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxx and Xxxxxxx Xxxxxxxxx
(the "Founders' Common Stock"). If the Funding Transactions closes, DII will
receive Common Stock of Pubco ("Pubco Merger Shares") in exchange for its Common
Stock in DOBI. Pursuant to the Funding Transactions, the Founders' Common Stock,
with the exception applying only to DII as set forth in the following paragraph
and the exception applying to all Founders Common Stock as set forth in the
paragraph after that, shall be locked up for 24 months after closing of the
Reverse Merger.
The undersigned, Xxxx X. Xxxxxx, chairman of the board of DII, xxxxxx
agrees not to, directly or indirectly, (1) publicly sell, contract to sell or
otherwise transfer any of the Pubco Merger Shares beneficially owned by it or
(2) privately sell, contract to sell or otherwise transfer (unless the proposed
transferee agrees to be bound by the restrictions on transfer contained herein)
any of the Pubco Merger Shares beneficially owned by it; provided, however, that
(a) from six months through 12 months after the closing of the Funding
Transactions covering the Pubco Merger Shares, it may transfer its Pubco Merger
Shares, publicly or otherwise, at the rate of one percent (1%) of the initial
Pubco Merger Shares beneficially owned by it (calculated at the date of the
closing of the Reverse Merger) per month, and (b) from the thirteenth month
through the twenty-fourth month after closing of the Funding Transaction
covering the Pubco Merger Shares, it may transfer its Pubco Merger Shares,
publicly or otherwise, at a rate of one and 3/10 percent (1.3%) of the initial
Pubco Merger Shares beneficially owned by it (calculated at the date of the
closing of the Reverse Merger) per month.
Notwithstanding the lock-up provision above, all the Founders Common
Stock shall be released and DII and other holders of Founders' Common Stock will
be permitted to sell (i) 25% of their shares if the Company's 2004 total revenue
is at least $4.1 million and (ii) 25% of their shares upon the Company's receipt
of FDA approval to market the ComfortScan(TM) system in the United States,
subject to applicable securities laws.
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In addition, if the Company engages an underwriter or placement agent
during the 12 months after the Closing to raise a minimum of $5.0 million
through the sale of the Company's common stock and/or other equity securities,
in a public offering or private placement, upon commencing such public offering
or private placement, all holders of shares subject to lock-up agreements will,
if required by the underwriter or placement agent, refrain from making any
sales, transfers or other dispositions in the course of such offering, but, in
any event, for not more than 90 days.
Xxxxx, acting with the consent of the its financial advisor and any
underwriter, may waive in writing any provision of the lock-up agreements
executed by DII, if and only if (i) any such waiver is simultaneously applicable
to any or all other Pubco Merger Shares applicable to Founders' Common Stock,
and (ii) at least 5 business days' advance written notice of such waiver is
provided to all holders of Founders' Common Stock. In the event that a
particular waiver applies to only a percentage of any or all Founders' Common
Stock, then the percentage shall be identical for each such holder granted a
waiver. DII and the other Founders' Common Stock will no longer be bound by the
terms of this lock-up agreement following two years after the date of closing of
the Reverse Merger.
If DII does not execute and return this lock-up agreement to the
Company on or before 5:00 PM on December 5, 2003, the Company will not be able
to consummate the Funding Transactions. If the Funding Transactions are
consummated notwithstanding your failure to execute and return this lock-up
agreement to the Company, you will not be entitled to include any of your Pubco
Merger Shares in the registration statement which the Company will use its best
efforts to file within sixty (60) days after the closing of the Reverse Merger.
By signing and returning this agreement in the manner indicated below,
you further (i) represent and consent that you have full power and authority to
enter into this lock-up agreement on behalf of DII, and that, upon request, you
will execute any additional documents necessary or desirable in connection with
this lock-up agreement and its enforcement; and (ii) understand that this
lock-up agreement is irrevocable by DII, all authority herein conferred or
agreed to be conferred, and any obligations hereunder shall be binding on DII,
and its successors and assigns.
In order to enable the aforesaid covenant to be enforced, you hereby
consent to the placing of a legend and/or stop-transfer order with the transfer
agent of Pubco Common Stock with respect to any of the Pubco Merger Shares
registered in DII's name or beneficially owned by DII.
Whether or not the Funding Transactions actually occur depends on a
number of factors. Notwithstanding the foregoing, the terms of this lock-up
agreement will expire in the event that the Funding Transactions are not
consummated on or before December 31, 2003.
Accordingly, to evidence DII's agreement to the terms hereof, please
date, sign and return this lock-up agreement to the Company by courier, Federal
Express or fax no later than the close of business on December 3, 2003. If you
return your signed lock-up agreement to the Company by fax, please promptly mail
the executed copy of the lock-up agreement to the Company.
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Acknowledged and Agreed this December__, 2003.
DYNAMICS IMAGING, INC.
--------------------------------------
By: Xxxx X. Xxxxxx, Chairman
RETURN TO THE COMPANY BY FAX: AT (000) 000-0000
-AND-
BY FEDERAL EXPRESS OR COURIER TO:
DOBI Medical Systems, Inc.
0000 XxxXxxxxx Xxxxxxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.,
General Counsel and Secretary
Accepted:
DOBI MEDICAL SYSTEMS, INC.
By: ______________________________
Name: Xxxxxxx X. Xxxxxx
Title: Chief Executive Officer
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