LOCK-UP, PROXY AND RELEASE AGREEMENT FOR COMMON STOCK
LOCK-UP,
PROXY AND RELEASE AGREEMENT FOR COMMON STOCK
This
Agreement (the “Agreement”) is
made and entered into as of January 1, 2004, by and between Smart Online, Inc.,
a Delaware corporation (the “Corporation”), and
the undersigned stockholder or option holder of the Corporation (“Stockholder”). As
used herein, the “Corporation” includes Smart Online, Inc. and any successor to
substantially all of its business, whether by way of merger, asset sale or
otherwise.
1. Reorganization.
Stockholder
hereby agrees that the proposed reorganization that would eliminate the
outstanding shares of Series A Preferred Stock will make Stockholder’s shares of
Common Stock and/or options to purchase shares of Common Stock more valuable by
eliminating certain rights of holders of Series A Preferred Stock, including
liquidation preferences and redemption rights. Stockholder is entering into this
Agreement because the holders of Series A Preferred Stock require the
Corporation to enter into this Agreement with holders of Common Stock as part of
the reorganization process. Sections 3 and 4 of this Agreement shall become
effective immediately the Corporation ceasing to have any shares of Series A
Preferred Stock issued or outstanding (the “Effective
Time”).
2. Appointment
of Proxy.
(a) The
undersigned Stockholder hereby irrevocably constitutes and appoints ▇▇▇▇▇▇▇
▇▇▇▇▇ attorney and proxy with full power of substitution to act and vote all the
shares of the Corporation held by the undersigned in connection with any meeting
or written consent of the stockholders of the Corporation to approve the matters
described below, and at any adjournment or adjournments thereof, provided such
stockholders meeting is held, or written consent is circulated, on or before
April 30, 2004. The undersigned hereby directs this proxy to be voted solely
with respect to the following matters:
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(i) |
For
approval of the Amendment to the Certificate of Incorporation in the form
attached on Schedule A to this Agreement (the “Amendment”).
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(ii) |
For
approval of the conversion of all shares of Series A Preferred Stock of
the Corporation into Common Stock as provided in the
Amendment. |
(b) This
proxy is given to induce the Corporation to enter into this Agreement, it being
agreed by the undersigned Stockholder that entering into this Agreement causes
the appointment of the named proxy to be coupled with an interest.
(c) In the
event that, as the result of a stock split or stock dividend or combination of
shares or any other change, or exchange for other securities, by
reclassification, reorganization, merger, consolidation, recapitalization or
otherwise, Stockholder should be entitled to new or additional or different
shares of stock or securities, such new or substitute shares or securities shall
be subject to this proxy.
3. Lockup
Agreement.
(a) Stockholder
hereby agrees that, except as permitted under subsection (b) of this Section 3,
during the Restricted Period, as defined herein, Stockholder will
not:
|
(i) |
Sell
any securities of the Corporation or Holding
Company. |
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(ii) |
Transfer,
assign or otherwise dispose of any securities of the Corporation or
Holding Company. |
|
(iii) |
Pledge,
hypothecate or otherwise create a lien on any securities of the
Corporation or the Holding Company. |
|
(iv) |
Loan
to any person or entity any securities of the Corporation or Holding
Company. |
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(v) |
Sell
short any securities of the Corporation or Holding
Company. |
|
(vi) |
Acquire
a put option or grant a call option with respect to any securities of the
Corporation or Holding Company. |
|
(vii) |
Enter
into any agreement concerning any of the foregoing transactions, or
otherwise facilitate any other person conducting any of the foregoing
transactions. |
(b) For
purposes of this Section 3, Holding Company shall mean any company whose stock
is publicly traded (i) with which the Corporation merges or consolidates or (ii)
of which the Corporation or its successor becomes a subsidiary. For purposes of
this Section 3, the Restricted Period shall mean the period beginning on the
Effective Time and ending on September 30, 2006. Commencing October, 1, 2005,
Stockholder may sell, during any calendar month until the end of the Restricted
Period, up to eight and one half percent (8.5%) of the shares of the Corporation
owned by Stockholder or any shares of Holding Company issued in respect of such
shares (or options) owned by Stockholder as of September 30, 2005.
(c) Notwithstanding
the foregoing, provided the transferee first signs a Lockup Agreement on
substantially the terms set forth in this Section 3 and reasonably acceptable to
the Corporation or Holding Company, Stockholder may transfer securities of the
Corporation or Holding Company without payment or other consideration: (i) if
Stockholder is an individual, to any family member, (ii) if Stockholder is a
corporation, to any direct or indirect parent or subsidiary or any shareholder
of Stockholder, (iii) if Stockholder is a partnership, to any partner of
Stockholder, (iv) if Stockholder is a limited liability company, to any member
of Stockholder, and (v) if Stockholder is a trust, to any beneficiary of such
trust.
(d) Stockholder
further agrees that before and after termination of the Restricted Period,
Stockholder will comply with all securities laws, rules and regulations when
purchasing or reselling securities of the Corporation or Holding Company,
including, without limitation, those prohibiting sales and purchases of
securities while in possession of material nonpublic
information.
(e) The
securities of Stockholder shall have a legend in form and substance acceptable
to the Corporation and Holding Company referring to the restrictions of this
Agreement and the Corporation or Holding Company may instruct the transfer agent
of the Corporation Holding Company to stop any transfer of any securities in
violation of this Agreement and may take any other action required to avoid
violation of this Agreement, including, without limitation, obtaining an
injunction.
(f) This Section
3 covers all securities of the Corporation and Holding Company whether currently
owned or acquired after the date of this Agreement.
4. Releases.
(a) In
consideration of the release provided in subsection (b) below, Stockholder, for
himself/herself/itself and for each of Stockholder’s directors, officers,
employees, agents, attorneys, legal successors and assigns, hereby absolutely,
unconditionally and irrevocably releases and forever discharges the Corporation
and its directors, officers, employees, agents, attorneys, legal successors and
assigns, individually and jointly, from any and all causes of actions, suits,
promises, representations, contracts, obligations, claims, counterclaims,
defenses, demands, debts, accounts, reckonings, obligations, costs, rights of
set off, demands or liabilities whatsoever, in law or equity, whether the same
or whether the facts on which the same may be based are now known or unknown,
suspected or unsuspected, which he/she/it, has, may have, has ever had, or
hereafter can, shall or may have, for, upon or by reason of any matter, cause or
thing whatsoever occurring through the date of this Agreement arising out of
Stockholder’s purchase or ownership of any securities of the Corporation
(collectively, “Liabilities”).
(b) In
consideration of the release provided in subsection (a) above, the Corporation
hereby absolutely, unconditionally and irrevocably releases and forever
discharges Stockholder and, as applicable, its directors, officers, employees,
agents, attorneys, legal successors and assigns, individually and jointly, from
any and all causes of actions, suits, promises, representations, contracts,
obligations, claims, counterclaims, defenses, demands, debts, accounts,
reckonings, obligations, costs, rights of set off, demands or liabilities
whatsoever, in law or equity, whether the same or whether the facts on which the
same may be based are now known or unknown, suspected or unsuspected, which
he/she/it, has, may have, has ever had, or hereafter can, shall or may have,
for, upon or by reason of any matter, cause or thing whatsoever occurring
through the date of this Agreement arising out of Stockholder’s purchase or
ownership of any securities of the Corporation (collectively, “Liabilities”).
(c) It is the
parties’ intention in executing this Agreement and in giving and receiving the
consideration called for by this Agreement that this Agreement shall be
effective as a full and final accord and satisfaction and release of all
Liabilities released under subsections (a) or (b) (the “Released
Liabilities”). Each
party acknowledges that it is aware that it or its attorneys or its accountants
may hereafter discover Liabilities or facts in addition to or different from
those which it now knows or believes to exist with respect to the Released
Liabilities, but that it is its intention hereby to fully, finally, and forever
settle and release all disputes and differences with respect to the Released
Liabilities. In furtherance of this intention, the releases hereby given shall
be and remain in effect as a full and complete release notwithstanding the
discovery or existence of any such additional or different Liability or
fact.
(d) The above
releases shall not be effective for any claims arising from a breach of this
Agreement, for any claims relating to fraud or for any claims relating to any
untrue statement of a material fact or any failure to disclose a material fact
necessary in order to make the statements made with respect to the transactions
contemplated by this Agreement, in light of the circumstances under which they
were made, not misleading. Nothing contained herein shall be construed to
supercede or amend the terms of any confidentiality, noncompetitive or similar
agreement between Stockholder and the Corporation.
5. Termination
of Existing Agreements.
Stockholder and the Corporation hereby agree to terminate the Stock Rights
Agreement dated as of August 10, 1999, as amended to date, and the Amended and
Restated Stockholders’ Agreement, dated as of August 6, 1999, as amended to
date. Termination shall be effective upon the Effective Time.
6. Termination
of this Agreement. This
Agreement may be terminated by either Stockholder or the Corporation, if the
Effective Time does not occur on or before April 30, 2004. Upon termination
neither Stockholder nor the Corporation shall have any liability to the other
arising out of the Agreement. Termination shall be effective upon receipt of
written notice of termination provided by Stockholders to the principal office
of the Corporation or by the Corporation to the address of Stockholder set forth
below the signature of Stockholder.
7. This
Agreement shall be subject to the laws of the State of Delaware.
8. This
Agreement may be executed in one or more counterparts.
9. The
Corporation may assign this Agreement to any successor to substantially all of
its business.
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remainder of the page is intentionally left blank.]
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the date
first above written.
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SMART
ONLINE, INC. | |
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By:
/s/ ▇▇▇▇▇▇▇
▇▇▇▇▇
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▇▇▇▇▇▇▇
▇▇▇▇▇, Chief Executive Officer | |
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STOCKHOLDER: | |
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/s/ ▇▇▇▇▇
▇▇▇▇▇ | |
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Print
Name: ▇▇▇▇▇ ▇▇▇▇▇ | |
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American
Investment Holding Group, Inc. | |
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Address
▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ | |
2,841,984
Number
Shares of Common Stock of Stockholder Subject to this Agreement.